diff --git a/README.md b/README.md
index 51bae82b..1144e315 100644
--- a/README.md
+++ b/README.md
@@ -27,7 +27,9 @@ Main features supported so far include:
 * **Package diagram generation**
     * Generation of package diagram based on C++ namespaces
     * Interactive links to online code to packages
-
+* **Include graph diagram generation**
+    * Show include graph for selected files
+  
 To see what `clang-uml` can do so far, checkout the diagrams generated for unit test cases [here](./docs/test_cases.md).
 
 ## Installation
diff --git a/src/common/model/diagram.cc b/src/common/model/diagram.cc
index 7330236c..4f29e739 100644
--- a/src/common/model/diagram.cc
+++ b/src/common/model/diagram.cc
@@ -85,4 +85,12 @@ bool diagram::should_include(
     return filter_->should_include(ns, name);
 }
 
+bool diagram::should_include(const common::model::source_file &f) const
+{
+    if (filter_.get() == nullptr)
+        return true;
+
+    return filter_->should_include(f);
+}
+
 }
\ No newline at end of file
diff --git a/src/common/model/diagram.h b/src/common/model/diagram.h
index dbcd9b52..579c2c1a 100644
--- a/src/common/model/diagram.h
+++ b/src/common/model/diagram.h
@@ -20,6 +20,7 @@
 #include "diagram_element.h"
 #include "enums.h"
 #include "namespace.h"
+#include "source_file.h"
 
 #include <type_safe/optional_ref.hpp>
 
@@ -58,9 +59,11 @@ public:
     // TODO: refactor to a template method
     bool should_include(const element &e) const;
     bool should_include(const std::string &e) const;
+    bool should_include(const source_file &path) const;
     bool should_include(const relationship r) const;
     bool should_include(const relationship_t r) const;
     bool should_include(const access_t s) const;
+
     bool should_include(const namespace_ &ns, const std::string &name) const;
 
 private:
diff --git a/src/common/model/diagram_filter.cc b/src/common/model/diagram_filter.cc
index 0d3d0d50..000a9cbb 100644
--- a/src/common/model/diagram_filter.cc
+++ b/src/common/model/diagram_filter.cc
@@ -49,6 +49,12 @@ tvl::value_t filter_visitor::match(
     return {};
 }
 
+tvl::value_t filter_visitor::match(
+    const diagram &d, const common::model::source_file &f) const
+{
+    return {};
+}
+
 bool filter_visitor::is_inclusive() const
 {
     return type_ == filter_t::kInclusive;
@@ -254,6 +260,40 @@ tvl::value_t context_filter::match(const diagram &d, const element &e) const
         });
 }
 
+paths_filter::paths_filter(filter_t type, const std::filesystem::path &root,
+    std::vector<std::filesystem::path> p)
+    : filter_visitor{type}
+    , root_{root}
+{
+    for (auto &&path : p) {
+        std::filesystem::path absolute_path;
+
+        if (path.is_relative())
+            absolute_path = root / path;
+
+        absolute_path = absolute_path.lexically_normal();
+
+        paths_.emplace_back(std::move(absolute_path));
+    }
+}
+
+tvl::value_t paths_filter::match(
+    const diagram &d, const common::model::source_file &p) const
+{
+
+    if (paths_.empty()) {
+        return {};
+    }
+
+    auto pp = p.fs_path(root_);
+    for (const auto &path : paths_) {
+        if (util::starts_with(pp, path))
+            return true;
+    }
+
+    return false;
+}
+
 diagram_filter::diagram_filter(
     const common::model::diagram &d, const config::diagram &c)
     : diagram_{d}
@@ -295,6 +335,8 @@ void diagram_filter::init_filters(const config::diagram &c)
             filter_t::kInclusive, c.include().relationships));
         inclusive_.emplace_back(std::make_unique<access_filter>(
             filter_t::kInclusive, c.include().access));
+        inclusive_.emplace_back(std::make_unique<paths_filter>(
+            filter_t::kInclusive, c.base_directory(), c.include().paths));
 
         // Include any of these matches even if one them does not match
         std::vector<std::unique_ptr<filter_visitor>> element_filters;
@@ -305,6 +347,7 @@ void diagram_filter::init_filters(const config::diagram &c)
         element_filters.emplace_back(std::make_unique<context_filter>(
             filter_t::kInclusive, c.include().context));
 
+
         inclusive_.emplace_back(std::make_unique<anyof_filter>(
             filter_t::kInclusive, std::move(element_filters)));
     }
@@ -323,6 +366,8 @@ void diagram_filter::init_filters(const config::diagram &c)
             filter_t::kExclusive, c.exclude().subclasses));
         exclusive_.emplace_back(std::make_unique<context_filter>(
             filter_t::kExclusive, c.exclude().context));
+        exclusive_.emplace_back(std::make_unique<paths_filter>(
+            filter_t::kInclusive, c.base_directory(), c.exclude().paths));
     }
 }
 
diff --git a/src/common/model/diagram_filter.h b/src/common/model/diagram_filter.h
index dfbc8886..b3df613e 100644
--- a/src/common/model/diagram_filter.h
+++ b/src/common/model/diagram_filter.h
@@ -25,8 +25,11 @@
 #include "config/config.h"
 #include "cx/util.h"
 #include "diagram.h"
+#include "source_file.h"
 #include "tvl.h"
 
+#include <filesystem>
+
 namespace clanguml::common::model {
 
 enum filter_t { kInclusive, kExclusive };
@@ -47,6 +50,9 @@ public:
     virtual tvl::value_t match(
         const diagram &d, const common::model::namespace_ &ns) const;
 
+    virtual tvl::value_t match(
+        const diagram &d, const common::model::source_file &f) const;
+
     bool is_inclusive() const;
     bool is_exclusive() const;
 
@@ -125,6 +131,18 @@ private:
     std::vector<std::string> context_;
 };
 
+struct paths_filter : public filter_visitor {
+    paths_filter(filter_t type, const std::filesystem::path &root,
+        std::vector<std::filesystem::path> p);
+
+    tvl::value_t match(const diagram &d,
+        const common::model::source_file &r) const override;
+
+private:
+    std::vector<std::filesystem::path> paths_;
+    std::filesystem::path root_;
+};
+
 class diagram_filter {
 public:
     diagram_filter(const common::model::diagram &d, const config::diagram &c);
@@ -144,7 +162,9 @@ public:
             return false;
 
         auto inc = tvl::all_of(inclusive_.begin(), inclusive_.end(),
-            [this, &e](const auto &in) { return in->match(diagram_, e); });
+            [this, &e](const auto &in) {
+                return in->match(diagram_, e);
+            });
 
         if (tvl::is_undefined(inc) || tvl::is_true(inc))
             return true;
diff --git a/src/common/model/nested_trait.h b/src/common/model/nested_trait.h
index d79d04b3..8f083f39 100644
--- a/src/common/model/nested_trait.h
+++ b/src/common/model/nested_trait.h
@@ -52,7 +52,8 @@ public:
     }
 
     template <typename V = T>
-    void add_element(const Path &path, std::unique_ptr<V> p)
+    void add_element(
+        const Path &path, std::unique_ptr<V> p)
     {
         assert(p);
 
diff --git a/src/include_diagram/model/source_file.cc b/src/common/model/source_file.cc
similarity index 93%
rename from src/include_diagram/model/source_file.cc
rename to src/common/model/source_file.cc
index 3b596231..0a806652 100644
--- a/src/include_diagram/model/source_file.cc
+++ b/src/common/model/source_file.cc
@@ -1,5 +1,5 @@
 /**
- * src/include_diagram/model/source_file.cc
+ * src/common/model/source_file.cc
  *
  * Copyright (c) 2021-2022 Bartek Kryza <bkryza@gmail.com>
  *
diff --git a/src/include_diagram/model/source_file.h b/src/common/model/source_file.h
similarity index 69%
rename from src/include_diagram/model/source_file.h
rename to src/common/model/source_file.h
index 0e16835e..99a2f1c7 100644
--- a/src/include_diagram/model/source_file.h
+++ b/src/common/model/source_file.h
@@ -1,5 +1,5 @@
 /**
- * src/include_diagram/model/source_file.h
+ * src/common/model/source_file.h
  *
  * Copyright (c) 2021-2022 Bartek Kryza <bkryza@gmail.com>
  *
@@ -30,9 +30,9 @@
 #include <string>
 #include <vector>
 
-namespace clanguml::include_diagram::model {
+namespace clanguml::common::model {
 
-enum class source_file_type { kDirectory, kHeader, kImplementation };
+enum class source_file_t { kDirectory, kHeader, kImplementation };
 
 struct fs_path_sep {
     static constexpr std::string_view value = "/";
@@ -43,13 +43,19 @@ using filesystem_path = common::model::path<fs_path_sep>;
 class source_file
     : public common::model::diagram_element,
       public common::model::stylable_element,
-      public common::model::nested_trait<common::model::diagram_element,
+      public common::model::nested_trait<common::model::source_file,
           filesystem_path> {
 public:
     source_file() = default;
 
     void set_path(const filesystem_path &p) { path_ = p; }
 
+    void set_absolute() { is_absolute_ = true; }
+
+    void set_type(source_file_t type) { type_ = type; }
+
+    source_file_t type() const { return type_; }
+
     source_file(const source_file &) = delete;
     source_file(source_file &&) = default;
     source_file &operator=(const source_file &) = delete;
@@ -62,23 +68,41 @@ public:
         return (path_ | name()).to_string();
     }
 
-    void add_file(std::unique_ptr<include_diagram::model::source_file> &&f)
+    void add_file(std::unique_ptr<source_file> &&f)
     {
         LOG_DBG("Adding source file: {}, {}", f->name(), f->full_name(true));
 
         add_element(f->path(), std::move(f));
     }
 
+    std::filesystem::path fs_path(const std::filesystem::path &base = {}) const
+    {
+        std::filesystem::path res;
+
+        for (const auto &pe : path_) {
+            res /= pe;
+        }
+
+        if (is_absolute_)
+            res = "/" / res;
+        else
+            res = base / res;
+
+        return res.lexically_normal();
+    }
+
 private:
     filesystem_path path_;
+    source_file_t type_{source_file_t::kDirectory};
+    bool is_absolute_{false};
 };
 }
 
 namespace std {
 
-template <> struct hash<clanguml::include_diagram::model::filesystem_path> {
+template <> struct hash<clanguml::common::model::filesystem_path> {
     std::size_t operator()(
-        const clanguml::include_diagram::model::filesystem_path &key) const
+        const clanguml::common::model::filesystem_path &key) const
     {
         using clanguml::common::model::path;
 
diff --git a/src/config/config.cc b/src/config/config.cc
index 3138cc00..6764d069 100644
--- a/src/config/config.cc
+++ b/src/config/config.cc
@@ -15,7 +15,9 @@
  * See the License for the specific language governing permissions and
  * limitations under the License.
  */
+
 #include "config.h"
+
 #include <filesystem>
 
 namespace clanguml {
@@ -28,12 +30,13 @@ config load(const std::string &config_file)
 
         // Store the parent path of the config_file to properly resolve
         // the include files paths
-        auto config_file_path = std::filesystem::path{config_file};
+        auto config_file_path =
+            std::filesystem::absolute(std::filesystem::path{config_file});
         doc.force_insert(
             "__parent_path", config_file_path.parent_path().string());
 
         // If the current directory is also a git repository,
-        // load some config values which can be included in the
+        // load some config values, which can be included in the
         // generated diagrams
         if (util::is_git_repository() && !doc["git"]) {
             YAML::Node git_config{YAML::NodeType::Map};
@@ -108,6 +111,8 @@ void inheritable_diagram_options::inherit(
     generate_method_arguments.override(parent.generate_method_arguments);
     generate_links.override(parent.generate_links);
     git.override(parent.git);
+    base_directory.override(parent.base_directory);
+    relative_to.override(parent.relative_to);
 }
 
 diagram_type class_diagram::type() const { return diagram_type::class_diagram; }
@@ -245,6 +250,21 @@ std::shared_ptr<clanguml::config::diagram> parse_diagram_config(const Node &d)
     return {};
 }
 
+//
+// config std::filesystem::path decoder
+//
+template <> struct convert<std::filesystem::path> {
+    static bool decode(const Node &node, std::filesystem::path &rhs)
+    {
+        if (!node.IsScalar())
+            return false;
+
+        rhs = std::filesystem::path{node.as<std::string>()};
+
+        return true;
+    }
+};
+
 //
 // config access_t decoder
 //
@@ -391,6 +411,9 @@ template <> struct convert<filter> {
         if (node["context"])
             rhs.context = node["context"].as<decltype(rhs.context)>();
 
+        if (node["paths"])
+            rhs.paths = node["paths"].as<decltype(rhs.paths)>();
+
         return true;
     }
 };
@@ -505,6 +528,16 @@ template <> struct convert<include_diagram> {
             return false;
 
         get_option(node, rhs.layout);
+        get_option(node, rhs.relative_to);
+
+        // Convert the path in relative_to to an absolute path, with respect
+        // to the directory where the `.clang-uml` configuration file is located
+        if (rhs.relative_to) {
+            auto absolute_relative_to =
+                std::filesystem::path{node["__parent_path"].as<std::string>()} /
+                rhs.relative_to();
+            rhs.relative_to.set(absolute_relative_to.lexically_normal());
+        }
 
         return true;
     }
@@ -558,25 +591,29 @@ template <> struct convert<config> {
         get_option(node, rhs.generate_packages);
         get_option(node, rhs.generate_links);
         get_option(node, rhs.git);
+        rhs.base_directory.set(node["__parent_path"].as<std::string>());
+        get_option(node, rhs.relative_to);
 
         auto diagrams = node["diagrams"];
 
         assert(diagrams.Type() == NodeType::Map);
 
-        for (const auto &d : diagrams) {
+        for (auto d : diagrams) {
             auto name = d.first.as<std::string>();
             std::shared_ptr<clanguml::config::diagram> diagram_config{};
+            auto parent_path = node["__parent_path"].as<std::string>();
 
             if (has_key(d.second, "include!")) {
-                auto parent_path = node["__parent_path"].as<std::string>();
                 auto include_path = std::filesystem::path{parent_path};
                 include_path /= d.second["include!"].as<std::string>();
 
                 YAML::Node node = YAML::LoadFile(include_path.string());
+                node.force_insert("__parent_path", parent_path);
 
                 diagram_config = parse_diagram_config(node);
             }
             else {
+                d.second.force_insert("__parent_path", parent_path);
                 diagram_config = parse_diagram_config(d.second);
             }
 
@@ -585,6 +622,9 @@ template <> struct convert<config> {
                 diagram_config->inherit(rhs);
                 rhs.diagrams[name] = diagram_config;
             }
+            else {
+                return false;
+            }
         }
 
         return true;
diff --git a/src/config/config.h b/src/config/config.h
index c598d774..ce744e86 100644
--- a/src/config/config.h
+++ b/src/config/config.h
@@ -71,6 +71,8 @@ struct filter {
     std::vector<std::string> subclasses;
 
     std::vector<std::string> context;
+
+    std::vector<std::filesystem::path> paths;
 };
 
 enum class hint_t { up, down, left, right };
@@ -110,6 +112,8 @@ struct inheritable_diagram_options {
     option<bool> generate_packages{"generate_packages", false};
     option<generate_links_config> generate_links{"generate_links"};
     option<git_config> git{"git"};
+    option<std::filesystem::path> base_directory{"__parent_path"};
+    option<std::filesystem::path> relative_to{"relative_to"};
 
     void inherit(const inheritable_diagram_options &parent);
 };
diff --git a/src/include_diagram/generators/plantuml/include_diagram_generator.cc b/src/include_diagram/generators/plantuml/include_diagram_generator.cc
index 58ed09e4..cf696df9 100644
--- a/src/include_diagram/generators/plantuml/include_diagram_generator.cc
+++ b/src/include_diagram/generators/plantuml/include_diagram_generator.cc
@@ -31,11 +31,41 @@ void generator::generate_relationships(
     const source_file &f, std::ostream &ostr) const
 {
     LOG_DBG("Generating relationships for file {}", f.full_name(true));
+
+    namespace plantuml_common = clanguml::common::generators::plantuml;
+
+    if (f.type() == common::model::source_file_t::kDirectory) {
+        for (const auto &file : f) {
+            generate_relationships(
+                dynamic_cast<const source_file &>(*file), ostr);
+        }
+    }
+    else {
+        for (const auto &r : f.relationships()) {
+            if (m_model.should_include(r.type())) {
+                ostr << f.alias() << " "
+                     << plantuml_common::to_plantuml(r.type(), r.style()) << " "
+                     << r.destination() << '\n';
+            }
+        }
+    }
 }
 
 void generator::generate(const source_file &f, std::ostream &ostr) const
 {
     LOG_DBG("Generating source_file {}", f.name());
+
+    if (f.type() == common::model::source_file_t::kDirectory) {
+        ostr << "folder " << f.name();
+        ostr << " as " << f.alias() << " {\n";
+        for (const auto &file : f) {
+            generate(dynamic_cast<const source_file &>(*file), ostr);
+        }
+        ostr << "}" << '\n';
+    }
+    else {
+        ostr << "file " << f.name() << " as " << f.alias() << '\n';
+    }
 }
 
 void generator::generate(std::ostream &ostr) const
@@ -44,15 +74,14 @@ void generator::generate(std::ostream &ostr) const
 
     generate_plantuml_directives(ostr, m_config.puml().before);
 
+    // Generate files and folders
     for (const auto &p : m_model) {
         generate(dynamic_cast<source_file &>(*p), ostr);
-        ostr << '\n';
     }
 
-    // Process package relationships
+    // Process file include relationships
     for (const auto &p : m_model) {
         generate_relationships(dynamic_cast<source_file &>(*p), ostr);
-        ostr << '\n';
     }
 
     generate_config_layout_hints(ostr);
diff --git a/src/include_diagram/generators/plantuml/include_diagram_generator.h b/src/include_diagram/generators/plantuml/include_diagram_generator.h
index 8b2967c3..314bde18 100644
--- a/src/include_diagram/generators/plantuml/include_diagram_generator.h
+++ b/src/include_diagram/generators/plantuml/include_diagram_generator.h
@@ -20,10 +20,10 @@
 #include "common/generators/plantuml/generator.h"
 #include "common/model/package.h"
 #include "common/model/relationship.h"
+#include "common/model/source_file.h"
 #include "config/config.h"
 #include "cx/compilation_database.h"
 #include "include_diagram/model/diagram.h"
-#include "include_diagram/model/source_file.h"
 #include "include_diagram/visitor/translation_unit_visitor.h"
 #include "util/util.h"
 
@@ -50,7 +50,7 @@ using common_generator =
 using clanguml::common::model::access_t;
 using clanguml::common::model::package;
 using clanguml::common::model::relationship_t;
-using clanguml::include_diagram::model::source_file;
+using clanguml::common::model::source_file;
 using namespace clanguml::util;
 
 class generator : public common_generator<diagram_config, diagram_model> {
diff --git a/src/include_diagram/model/diagram.cc b/src/include_diagram/model/diagram.cc
index 3ad181f0..58023d60 100644
--- a/src/include_diagram/model/diagram.cc
+++ b/src/include_diagram/model/diagram.cc
@@ -34,16 +34,18 @@ type_safe::optional_ref<const common::model::diagram_element> diagram::get(
     return get_file(full_name);
 }
 
-void diagram::add_file(std::unique_ptr<include_diagram::model::source_file> &&f)
+void diagram::add_file(std::unique_ptr<common::model::source_file> &&f)
 {
     LOG_DBG("Adding source file: {}, {}", f->name(), f->full_name(true));
 
     files_.emplace_back(*f);
 
-    add_element(f->path(), std::move(f));
+    auto p = f->path();
+
+    add_element(p, std::move(f));
 }
 
-type_safe::optional_ref<const include_diagram::model::source_file>
+type_safe::optional_ref<const common::model::source_file>
 diagram::get_file(const std::string &name) const
 {
     for (const auto &p : files_) {
diff --git a/src/include_diagram/model/diagram.h b/src/include_diagram/model/diagram.h
index 8c71bcd7..58ed1581 100644
--- a/src/include_diagram/model/diagram.h
+++ b/src/include_diagram/model/diagram.h
@@ -19,7 +19,7 @@
 
 #include "common/model/diagram.h"
 #include "common/model/package.h"
-#include "source_file.h"
+#include "common/model/source_file.h"
 
 #include <type_safe/optional_ref.hpp>
 
@@ -29,8 +29,9 @@
 namespace clanguml::include_diagram::model {
 
 class diagram : public clanguml::common::model::diagram,
-                public clanguml::common::model::nested_trait<source_file,
-                    filesystem_path> {
+                public clanguml::common::model::nested_trait<
+                    clanguml::common::model::source_file,
+                    clanguml::common::model::filesystem_path> {
 public:
     diagram() = default;
 
@@ -44,16 +45,15 @@ public:
     type_safe::optional_ref<const common::model::diagram_element> get(
         const std::string &full_name) const;
 
-    void add_file(std::unique_ptr<include_diagram::model::source_file> &&f);
+    void add_file(std::unique_ptr<common::model::source_file> &&f);
 
-    type_safe::optional_ref<const include_diagram::model::source_file> get_file(
+    type_safe::optional_ref<const common::model::source_file> get_file(
         const std::string &name) const;
 
     std::string to_alias(const std::string &full_name) const;
 
 private:
-    std::vector<
-        type_safe::object_ref<const include_diagram::model::source_file, false>>
+    std::vector<type_safe::object_ref<const common::model::source_file, false>>
         files_;
 };
 }
diff --git a/src/include_diagram/visitor/translation_unit_context.cc b/src/include_diagram/visitor/translation_unit_context.cc
index a77e46aa..4cff5297 100644
--- a/src/include_diagram/visitor/translation_unit_context.cc
+++ b/src/include_diagram/visitor/translation_unit_context.cc
@@ -49,12 +49,12 @@ clanguml::include_diagram::model::diagram &translation_unit_context::diagram()
 }
 
 void translation_unit_context::set_current_file(
-    type_safe::optional_ref<include_diagram::model::source_file> f)
+    type_safe::optional_ref<common::model::source_file> f)
 {
     current_file_ = f;
 }
 
-type_safe::optional_ref<include_diagram::model::source_file>
+type_safe::optional_ref<common::model::source_file>
 translation_unit_context::get_current_file() const
 {
     return current_file_;
diff --git a/src/include_diagram/visitor/translation_unit_context.h b/src/include_diagram/visitor/translation_unit_context.h
index fe7cac41..5d72912a 100644
--- a/src/include_diagram/visitor/translation_unit_context.h
+++ b/src/include_diagram/visitor/translation_unit_context.h
@@ -41,9 +41,9 @@ public:
     clanguml::include_diagram::model::diagram &diagram();
 
     void set_current_file(
-        type_safe::optional_ref<include_diagram::model::source_file> p);
+        type_safe::optional_ref<common::model::source_file> p);
 
-    type_safe::optional_ref<include_diagram::model::source_file>
+    type_safe::optional_ref<common::model::source_file>
     get_current_file() const;
 
 private:
@@ -56,7 +56,7 @@ private:
     // Reference to class diagram config
     const clanguml::config::include_diagram &config_;
 
-    type_safe::optional_ref<include_diagram::model::source_file> current_file_;
+    type_safe::optional_ref<common::model::source_file> current_file_;
 };
 
 }
diff --git a/src/include_diagram/visitor/translation_unit_visitor.cc b/src/include_diagram/visitor/translation_unit_visitor.cc
index d8c9ff2f..c453b309 100644
--- a/src/include_diagram/visitor/translation_unit_visitor.cc
+++ b/src/include_diagram/visitor/translation_unit_visitor.cc
@@ -21,9 +21,9 @@
 #include <cppast/cpp_entity_kind.hpp>
 #include <cppast/cpp_preprocessor.hpp>
 
-namespace clanguml::include_diagram::visitor {
+#include <filesystem>
 
-using clanguml::include_diagram::model::diagram;
+namespace clanguml::include_diagram::visitor {
 
 translation_unit_visitor::translation_unit_visitor(
     cppast::cpp_entity_index &idx,
@@ -35,19 +35,116 @@ translation_unit_visitor::translation_unit_visitor(
 
 void translation_unit_visitor::operator()(const cppast::cpp_entity &file)
 {
+    assert(file.kind() == cppast::cpp_entity_kind::file_t);
+
+    const auto &f = static_cast<const cppast::cpp_file &>(file);
+
+    auto file_path = f.name();
+
+    LOG_DBG("Processing source file {}", file_path);
+
+    process_file(file_path, true);
+
     cppast::visit(file,
         [&, this](const cppast::cpp_entity &e, cppast::visitor_info info) {
             if (e.kind() == cppast::cpp_entity_kind::include_directive_t) {
+                assert(ctx.get_current_file().has_value());
+
+                auto file_path_cpy = file.name();
 
                 const auto &inc =
                     static_cast<const cppast::cpp_include_directive &>(e);
 
-                auto file_name = std::filesystem::path(inc.full_path());
+                LOG_DBG("Processing include directive {} in file {}",
+                    inc.full_path(), ctx.get_current_file().value().name());
 
-                auto f = std::make_unique<model::source_file>();
-                f->set_path(file_name.parent_path().string());
-                f->set_name(file_name.filename().string());
+                process_file(inc.full_path(), false, inc.include_kind());
             }
         });
 }
+
+void translation_unit_visitor::process_file(const std::string &file,
+    bool register_as_current,
+    std::optional<cppast::cpp_include_kind> include_kind)
+{
+    auto include_path = std::filesystem::path(file);
+
+    const std::filesystem::path base_directory{ctx.config().base_directory()};
+
+    if (include_path.is_relative()) {
+        include_path = ctx.config().base_directory() / include_path;
+    }
+
+    include_path = include_path.lexically_normal();
+
+    auto f_abs = std::make_unique<common::model::source_file>();
+
+    if (include_path.is_absolute())
+        f_abs->set_absolute();
+
+    f_abs->set_path(include_path.parent_path().string());
+    f_abs->set_name(include_path.filename().string());
+
+    if (ctx.diagram().should_include(*f_abs)) {
+        if (ctx.config().relative_to) {
+            const std::filesystem::path relative_to{ctx.config().relative_to()};
+
+            include_path = std::filesystem::relative(include_path, relative_to);
+        }
+
+        auto f = std::make_unique<common::model::source_file>();
+
+        auto parent_path_str = include_path.parent_path().string();
+        if (!parent_path_str.empty())
+            f->set_path(parent_path_str);
+        f->set_name(include_path.filename().string());
+        f->set_type(common::model::source_file_t::kHeader);
+
+        if (register_as_current &&
+            ctx.diagram().get_element(f->path() | f->name()).has_value()) {
+            // This file is already in the diagram (e.g. it was added through an
+            // include directive before it was visited by the parser)
+            ctx.set_current_file(
+                ctx.diagram().get_element(f->path() | f->name()));
+            return;
+        }
+
+        if (!f->path().is_empty()) {
+            // Ensure parent path directories source_files
+            // are in the diagram
+            common::model::filesystem_path parent_path_so_far;
+            for (const auto &directory : f->path()) {
+                auto dir = std::make_unique<common::model::source_file>();
+                if (!parent_path_so_far.is_empty())
+                    dir->set_path(parent_path_so_far);
+                dir->set_name(directory);
+                dir->set_type(common::model::source_file_t::kDirectory);
+
+                if (!ctx.diagram()
+                         .get_element(parent_path_so_far | directory)
+                         .has_value())
+                    ctx.diagram().add_file(std::move(dir));
+
+                parent_path_so_far.append(directory);
+            }
+        }
+
+        if (!register_as_current) {
+            auto relationship_type =
+                common::model::relationship_t::kAssociation;
+            if (include_kind.has_value() &&
+                include_kind.value() == cppast::cpp_include_kind::system)
+                relationship_type = common::model::relationship_t::kDependency;
+
+            ctx.get_current_file().value().add_relationship(
+                common::model::relationship{relationship_type, f->alias()});
+        }
+
+        if (!ctx.diagram().get_element(f->path() | f->name()).has_value()) {
+            ctx.set_current_file(type_safe::opt_ref(*f));
+            ctx.diagram().add_file(std::move(f));
+        }
+    }
+
+}
 }
diff --git a/src/include_diagram/visitor/translation_unit_visitor.h b/src/include_diagram/visitor/translation_unit_visitor.h
index f0b1318f..b9347a6f 100644
--- a/src/include_diagram/visitor/translation_unit_visitor.h
+++ b/src/include_diagram/visitor/translation_unit_visitor.h
@@ -21,14 +21,15 @@
 #include "cx/cursor.h"
 #include "include_diagram/model/diagram.h"
 #include "include_diagram/visitor/translation_unit_context.h"
+#include "common/model/enums.h"
+#include "common/model/package.h"
 
 #include <clang-c/CXCompilationDatabase.h>
 #include <clang-c/Index.h>
 #include <cppast/visitor.hpp>
+#include <cppast/cpp_preprocessor.hpp>
 #include <type_safe/reference.hpp>
 
-#include <common/model/enums.h>
-#include <common/model/package.h>
 #include <functional>
 #include <map>
 #include <memory>
@@ -45,6 +46,9 @@ public:
     void operator()(const cppast::cpp_entity &file);
 
 private:
+    void process_file(const std::string &file, bool register_as_current = false,
+        std::optional<cppast::cpp_include_kind> include_kind = {});
+
     // ctx allows to track current visitor context, e.g. current namespace
     translation_unit_context ctx;
 };
diff --git a/src/util/util.cc b/src/util/util.cc
index 55991c13..08fc0415 100644
--- a/src/util/util.cc
+++ b/src/util/util.cc
@@ -198,5 +198,37 @@ bool replace_all(
     return replaced;
 }
 
+template <>
+bool starts_with(
+    const std::filesystem::path &path, const std::filesystem::path &prefix)
+{
+    if(path == prefix)
+        return true;
+
+    const int path_length = std::distance(std::begin(path), std::end(path));
+
+    auto last_nonempty_prefix_element = std::prev(std::find_if(
+        prefix.begin(), prefix.end(), [](auto &&n) { return n.empty(); }));
+
+    int prefix_length =
+        std::distance(std::begin(prefix), last_nonempty_prefix_element);
+
+    // Empty prefix always matches
+    if (prefix_length == 0)
+        return true;
+
+    // Prefix longer then path never matches
+    if (prefix_length >= path_length)
+        return false;
+
+    auto path_compare_end = path.begin();
+    std::advance(path_compare_end, prefix_length);
+
+    std::vector<std::string> pref(prefix.begin(), last_nonempty_prefix_element);
+    std::vector<std::string> pat(path.begin(), path_compare_end);
+
+    return pref == pat;
+}
+
 }
 }
diff --git a/src/util/util.h b/src/util/util.h
index 4208c5c4..d12ad9af 100644
--- a/src/util/util.h
+++ b/src/util/util.h
@@ -21,6 +21,7 @@
 #include <spdlog/spdlog.h>
 
 #include <algorithm>
+#include <filesystem>
 #include <string.h>
 #include <string>
 #include <type_traits>
@@ -143,23 +144,26 @@ template <typename T> void append(std::vector<T> &l, const std::vector<T> &r)
 }
 
 /**
- * @brief Checks if vector starts with a prefix.
+ * @brief Checks if container starts with a prefix.
  *
- * @tparam T
- * @param col
- * @param prefix
- * @return
+ * @tparam T e.g. std::vector<std::string>
+ * @param con Container to be checked against prefix
+ * @param prefix Container, which specifies the prefix
+ * @return true if first prefix.size() elements of con are equal to prefix
  */
-template <typename T>
-bool starts_with(const std::vector<T> &col, const std::vector<T> &prefix)
+template <typename T> bool starts_with(const T &con, const T &prefix)
 {
-    if (prefix.size() > col.size())
+    if (prefix.size() > con.size())
         return false;
 
-    return std::vector<std::string>(prefix.begin(), prefix.end()) ==
-        std::vector<std::string>(col.begin(), col.begin() + prefix.size());
+    return T(prefix.begin(), prefix.end()) ==
+        T(con.begin(), con.begin() + prefix.size());
 }
 
+template <>
+bool starts_with(
+    const std::filesystem::path &path, const std::filesystem::path &prefix);
+
 template <typename T>
 bool ends_with(const std::vector<T> &col, const std::vector<T> &suffix)
 {
diff --git a/tests/t40001/include/t40001_include1.h b/tests/t40001/include/t40001_include1.h
new file mode 100644
index 00000000..734f33d2
--- /dev/null
+++ b/tests/t40001/include/t40001_include1.h
@@ -0,0 +1,9 @@
+#pragma once
+
+#include "lib1/lib1.h"
+
+namespace clanguml::t40001 {
+
+int foo() { return lib1::foo2(); }
+
+}
\ No newline at end of file
diff --git a/tests/t40001/t40001.cc b/tests/t40001/src/t40001.cc
similarity index 77%
rename from tests/t40001/t40001.cc
rename to tests/t40001/src/t40001.cc
index fe07ee65..9c227217 100644
--- a/tests/t40001/t40001.cc
+++ b/tests/t40001/src/t40001.cc
@@ -1,7 +1,7 @@
 #include <string>
 #include <vector>
 
-#include "t40001_include1.h"
+#include "include/t40001_include1.h"
 
 namespace clanguml {
 namespace t40001 {
diff --git a/tests/t40001/t40001_include1.h b/tests/t40001/t40001_include1.h
deleted file mode 100644
index 94dcfa4a..00000000
--- a/tests/t40001/t40001_include1.h
+++ /dev/null
@@ -1,7 +0,0 @@
-#pragma once
-
-namespace clanguml::t40001 {
-
-int foo() { return 0; }
-
-}
\ No newline at end of file