diff --git a/docs/source/release-notes/3.0.1.rst b/docs/source/release-notes/3.0.1.rst
index 0092dc8..20f6783 100644
--- a/docs/source/release-notes/3.0.1.rst
+++ b/docs/source/release-notes/3.0.1.rst
@@ -1,5 +1,5 @@
-3.0.1 -- 2016-07-25
--------------------
+3.0.1 -- 2016-07-25 (unreleased)
+--------------------------------
 
 - Fix regression in handling of ``# noqa`` for multiline strings.
   (See also `GitLab#177`_)
diff --git a/docs/source/release-notes/3.0.2.rst b/docs/source/release-notes/3.0.2.rst
new file mode 100644
index 0000000..8605ce9
--- /dev/null
+++ b/docs/source/release-notes/3.0.2.rst
@@ -0,0 +1,9 @@
+3.0.2 -- 2016-07-26
+-------------------
+
+- Fix local config file discovery.  (See also `GitLab#181`_)
+
+
+.. links
+.. _GitLab#181:
+    https://gitlab.com/pycqa/flake8/issues/181
diff --git a/docs/source/release-notes/index.rst b/docs/source/release-notes/index.rst
index 8056b76..440079b 100644
--- a/docs/source/release-notes/index.rst
+++ b/docs/source/release-notes/index.rst
@@ -6,6 +6,7 @@ All of the release notes that have been recorded for Flake8 are organized here
 with the newest releases first.
 
 .. toctree::
+    3.0.2
     3.0.1
     3.0.0
     2.6.2
diff --git a/src/flake8/options/config.py b/src/flake8/options/config.py
index ec5023b..d1408fe 100644
--- a/src/flake8/options/config.py
+++ b/src/flake8/options/config.py
@@ -43,8 +43,6 @@ 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.path.abspath(os.curdir)
-
         if not args:
             args = ['.']
         self.parent = self.tail = os.path.abspath(os.path.commonprefix(args))
@@ -72,14 +70,14 @@ class ConfigFileFinder(object):
         """Find and generate all local config files."""
         tail = self.tail
         parent = self.parent
-        local_dir = self.local_directory
-        while tail:
+        found_config_files = False
+        while tail and not found_config_files:
             for project_filename in self.project_filenames:
                 filename = os.path.abspath(os.path.join(parent,
                                                         project_filename))
-                yield filename
-            if parent == local_dir:
-                break
+                if os.path.exists(filename):
+                    yield filename
+                    found_config_files = True
             (parent, tail) = os.path.split(parent)
 
     def local_config_files(self):
@@ -99,7 +97,6 @@ class ConfigFileFinder(object):
         return [
             filename
             for filename in self.generate_possible_local_files()
-            if os.path.exists(filename)
         ] + [f for f in self.extra_config_files if exists(f)]
 
     def local_configs(self):
diff --git a/tests/unit/test_config_file_finder.py b/tests/unit/test_config_file_finder.py
index 2e1a1e5..3f321da 100644
--- a/tests/unit/test_config_file_finder.py
+++ b/tests/unit/test_config_file_finder.py
@@ -43,27 +43,15 @@ def test_cli_config():
     # No arguments, common prefix of abspath('.')
     ([],
         [os.path.abspath('setup.cfg'),
-            os.path.abspath('tox.ini'),
-            os.path.abspath('.flake8')]),
+            os.path.abspath('tox.ini')]),
     # Common prefix of "flake8/"
     (['flake8/options', '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')]),
+        [os.path.abspath('setup.cfg'),
+            os.path.abspath('tox.ini')]),
     # Common prefix of "flake8/options"
     (['flake8/options', 'flake8/options/sub'],
-        [os.path.abspath('flake8/options/setup.cfg'),
-            os.path.abspath('flake8/options/tox.ini'),
-            os.path.abspath('flake8/options/.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')]),
+        [os.path.abspath('setup.cfg'),
+            os.path.abspath('tox.ini')]),
 ])
 def test_generate_possible_local_files(args, expected):
     """Verify generation of all possible config paths."""