diff --git a/app/src/processing/app/Sketch.java b/app/src/processing/app/Sketch.java
index 1d540c374..5f8a09b5d 100644
--- a/app/src/processing/app/Sketch.java
+++ b/app/src/processing/app/Sketch.java
@@ -1373,6 +1373,9 @@ public class Sketch {
     for (SketchCode sc : code) {
       if (sc.isExtension("ino") || sc.isExtension("pde")) {
         sc.setPreprocOffset(bigCount);
+        // These #line directives help the compiler report errors with
+        // correct the filename and line number (issue 281 & 907)
+        bigCode.append("#line 1 \"" + sc.getFileName() + "\"\n");
         bigCode.append(sc.getProgram());
         bigCode.append('\n');
         bigCount += sc.getLineCount();
@@ -1542,54 +1545,16 @@ public class Sketch {
   public RunnerException placeException(String message, 
                                         String dotJavaFilename, 
                                         int dotJavaLine) {
-    int codeIndex = 0; //-1;
-    int codeLine = -1;
-
-//    System.out.println("placing " + dotJavaFilename + " " + dotJavaLine);
-//    System.out.println("code count is " + getCodeCount());
-
-    // first check to see if it's a .java file
-    for (int i = 0; i < getCodeCount(); i++) {
-      SketchCode code = getCode(i);
-      if (!code.isExtension(getDefaultExtension())) {
-        if (dotJavaFilename.equals(code.getFileName())) {
-          codeIndex = i;
-          codeLine = dotJavaLine;
-          return new RunnerException(message, codeIndex, codeLine);
-        }
-      }
-    }
-
-    // If not the preprocessed file at this point, then need to get out
-    if (!dotJavaFilename.equals(name + ".cpp")) {
-      return null;
-    }
-
-    // if it's not a .java file, codeIndex will still be 0
-    // this section searches through the list of .pde files
-    codeIndex = 0;
-    for (int i = 0; i < getCodeCount(); i++) {
-      SketchCode code = getCode(i);
-
-      if (code.isExtension(getDefaultExtension())) {
-//        System.out.println("preproc offset is " + code.getPreprocOffset());
-//        System.out.println("looking for line " + dotJavaLine);
-        if (code.getPreprocOffset() <= dotJavaLine) {
-          codeIndex = i;
-//          System.out.println("i'm thinkin file " + i);
-          codeLine = dotJavaLine - code.getPreprocOffset();
-        }
-      }
-    }
-    // could not find a proper line number, so deal with this differently.
-    // but if it was in fact the .java file we're looking for, though, 
-    // send the error message through.
-    // this is necessary because 'import' statements will be at a line
-    // that has a lower number than the preproc offset, for instance.
-//    if (codeLine == -1 && !dotJavaFilename.equals(name + ".java")) {
-//      return null;
-//    }
-    return new RunnerException(message, codeIndex, codeLine);
+     // Placing errors is simple, because we inserted #line directives
+     // into the preprocessed source.  The compiler gives us correct
+     // the file name and line number.  :-)
+     for (int codeIndex = 0; codeIndex < getCodeCount(); codeIndex++) {
+       SketchCode code = getCode(codeIndex);
+       if (dotJavaFilename.equals(code.getFileName())) {
+         return new RunnerException(message, codeIndex, dotJavaLine);
+       }
+     }
+     return null;
   }
 
 
diff --git a/app/src/processing/app/debug/Compiler.java b/app/src/processing/app/debug/Compiler.java
index 20fa361b4..80122ec6a 100644
--- a/app/src/processing/app/debug/Compiler.java
+++ b/app/src/processing/app/debug/Compiler.java
@@ -46,6 +46,7 @@ public class Compiler implements MessageConsumer {
   String buildPath;
   String primaryClassName;
   boolean verbose;
+  boolean sketchIsCompiled;
 
   RunnerException exception;
 
@@ -68,6 +69,7 @@ public class Compiler implements MessageConsumer {
     this.buildPath = buildPath;
     this.primaryClassName = primaryClassName;
     this.verbose = verbose;
+    this.sketchIsCompiled = false;
 
     // the pms object isn't used for anything but storage
     MessageStream pms = new MessageStream(this);
@@ -130,6 +132,7 @@ public class Compiler implements MessageConsumer {
                findFilesInPath(buildPath, "c", false),
                findFilesInPath(buildPath, "cpp", false),
                boardPreferences));
+   sketchIsCompiled = true;
 
    // 2. compile the libraries, outputting .o files to: <buildPath>/<library>/
 
@@ -513,14 +516,20 @@ public class Compiler implements MessageConsumer {
         //msg = _("\nThe 'Keyboard' class is only supported on the Arduino Leonardo.\n\n");
       }
       
-      RunnerException e = sketch.placeException(error, pieces[1], PApplet.parseInt(pieces[2]) - 1);
+      RunnerException e = null;
+      if (!sketchIsCompiled) {
+        // Place errors when compiling the sketch, but never while compiling libraries
+        // or the core.  The user's sketch might contain the same filename!
+        e = sketch.placeException(error, pieces[1], PApplet.parseInt(pieces[2]) - 1);
+      }
 
       // replace full file path with the name of the sketch tab (unless we're
       // in verbose mode, in which case don't modify the compiler output)
       if (e != null && !verbose) {
         SketchCode code = sketch.getCode(e.getCodeIndex());
-        String fileName = code.isExtension(sketch.getDefaultExtension()) ? code.getPrettyName() : code.getFileName();
-        s = fileName + ":" + e.getCodeLine() + ": error: " + pieces[3] + msg;        
+        String fileName = (code.isExtension("ino") || code.isExtension("pde")) ? code.getPrettyName() : code.getFileName();
+        int lineNum = e.getCodeLine() + 1;
+        s = fileName + ":" + lineNum + ": error: " + pieces[3] + msg;        
       }
             
       if (exception == null && e != null) {
diff --git a/app/src/processing/app/preproc/PdePreprocessor.java b/app/src/processing/app/preproc/PdePreprocessor.java
index 2b4f03e85..4f848c922 100644
--- a/app/src/processing/app/preproc/PdePreprocessor.java
+++ b/app/src/processing/app/preproc/PdePreprocessor.java
@@ -205,7 +205,7 @@ public class PdePreprocessor {
     for (int i = 0; i < prototypes.size(); i++) {
       out.print(prototypes.get(i) + "\n");
     }
-    
+    out.println("#line 1");
     out.print(program.substring(prototypeInsertionPoint));
   }