diff --git a/flake8/options/config.py b/flake8/options/config.py
index 666f9d9..e82cb62 100644
--- a/flake8/options/config.py
+++ b/flake8/options/config.py
@@ -43,7 +43,7 @@ class ConfigFileFinder(object):
         # List of filenames to find in the local/project directory
         self.project_filenames = ('setup.cfg', 'tox.ini', self.program_config)
 
-        self.local_directory = os.curdir
+        self.local_directory = os.path.abspath(os.curdir)
 
         if not args:
             args = ['.']
@@ -66,11 +66,14 @@ class ConfigFileFinder(object):
         """Find and generate all local config files."""
         tail = self.tail
         parent = self.parent
+        local_dir = self.local_directory
         while tail:
             for project_filename in self.project_filenames:
                 filename = os.path.abspath(os.path.join(parent,
                                                         project_filename))
                 yield filename
+            if parent == local_dir:
+                break
             (parent, tail) = os.path.split(parent)
 
     def local_config_files(self):
diff --git a/tests/unit/test_config_file_finder.py b/tests/unit/test_config_file_finder.py
index 8ed940d..8904316 100644
--- a/tests/unit/test_config_file_finder.py
+++ b/tests/unit/test_config_file_finder.py
@@ -3,6 +3,7 @@ import os
 import sys
 
 import mock
+import pytest
 
 from flake8.options import config
 
@@ -21,8 +22,30 @@ def test_windows_detection():
 
 
 def test_cli_config():
+    """Verify opening and reading the file specified via the cli."""
     cli_filepath = 'tests/fixtures/config_files/cli-specified.ini'
     finder = config.ConfigFileFinder('flake8', None, [])
 
     parsed_config = finder.cli_config(cli_filepath)
     assert parsed_config.has_section('flake8')
+
+
+@pytest.mark.parametrize('args,expected', [
+    ([],  # No arguments
+        [os.path.abspath('setup.cfg'),
+            os.path.abspath('tox.ini'),
+            os.path.abspath('.flake8')]),
+    (['flake8/options', 'flake8/'],  # Common prefix of "flake8/"
+        [os.path.abspath('flake8/setup.cfg'),
+            os.path.abspath('flake8/tox.ini'),
+            os.path.abspath('flake8/.flake8'),
+            os.path.abspath('setup.cfg'),
+            os.path.abspath('tox.ini'),
+            os.path.abspath('.flake8')]),
+])
+def test_generate_possible_local_config_files(args, expected):
+    """Verify generation of all possible config paths."""
+    finder = config.ConfigFileFinder('flake8', args, [])
+
+    assert (list(finder.generate_possible_local_config_files()) ==
+            expected)