diff --git a/extensions/json/server/src/jsonSchemaService.ts b/extensions/json/server/src/jsonSchemaService.ts
index da1c2392dfe54b34dd4d7e5105bd3cbce2bbfb69..2dcfd5491ba89036f6f0f72853ae5089882b672d 100644
--- a/extensions/json/server/src/jsonSchemaService.ts
+++ b/extensions/json/server/src/jsonSchemaService.ts
@@ -206,7 +206,7 @@ export interface ITelemetryService {
 }
 
 export interface IWorkspaceContextService {
-	toResource(workspaceRelativePath: string): string;
+	resolveRelativePath(relativePath: string, resource: string): string;
 }
 
 export interface IRequestService {
@@ -473,13 +473,8 @@ export class JSONSchemaService implements IJSONSchemaService {
 			let schemaProperties = (<Parser.ObjectASTNode>document.root).properties.filter((p) => (p.key.value === '$schema') && !!p.value);
 			if (schemaProperties.length > 0) {
 				let schemeId = <string>schemaProperties[0].value.getValue();
-				if (!Strings.startsWith(schemeId, 'http://') && !Strings.startsWith(schemeId, 'https://') && !Strings.startsWith(schemeId, 'file://')) {
-					if (this.contextService) {
-						let resourceURL = this.contextService.toResource(schemeId);
-						if (resourceURL) {
-							schemeId = resourceURL.toString();
-						}
-					}
+				if (Strings.startsWith(schemeId, '.') && this.contextService) {
+					schemeId = this.contextService.resolveRelativePath(schemeId, resource);
 				}
 				if (schemeId) {
 					let id = this.normalizeId(schemeId);
diff --git a/extensions/json/server/src/server.ts b/extensions/json/server/src/server.ts
index da55236362c5070f28a899a98037de751addab0e..b91d4ca9e1210f312b0ecc50fb85f6e936bb82aa 100644
--- a/extensions/json/server/src/server.ts
+++ b/extensions/json/server/src/server.ts
@@ -78,11 +78,12 @@ connection.onInitialize((params: InitializeParams): InitializeResult => {
 });
 
 let workspaceContext = {
-	toResource: (workspaceRelativePath: string) => {
-		if (typeof workspaceRelativePath === 'string' && workspaceRoot) {
-			return URI.file(path.join(workspaceRoot.fsPath, workspaceRelativePath)).toString();
+	resolveRelativePath: (relativePath: string, resource: string) => {
+		if (typeof relativePath === 'string' && resource) {
+			let resourceURI = URI.parse(resource);
+			return URI.file(path.normalize(path.join(path.dirname(resourceURI.fsPath), relativePath))).toString();
 		}
-		return workspaceRelativePath;
+		return void 0;
 	}
 };
 
@@ -192,11 +193,9 @@ function updateConfiguration() {
 						url = 'vscode://schemas/custom/' + encodeURIComponent(schema.fileMatch.join('&'));
 					}
 				}
-				if (!Strings.startsWith(url, 'http://') && !Strings.startsWith(url, 'https://') && !Strings.startsWith(url, 'file://')) {
-					let resourceURL = workspaceContext.toResource(url);
-					if (resourceURL) {
-						url = resourceURL.toString();
-					}
+				if (Strings.startsWith(url, '.') && workspaceRoot) {
+					// workspace relative path
+					url = URI.file(path.normalize(path.join(workspaceRoot.fsPath, url))).toString();
 				}
 				if (url) {
 					jsonSchemaService.registerExternalSchema(url, schema.fileMatch, schema.schema);