diff --git a/command/e2etest/init_test.go b/command/e2etest/init_test.go
index 9fcddbfb7..3031695a7 100644
--- a/command/e2etest/init_test.go
+++ b/command/e2etest/init_test.go
@@ -100,6 +100,16 @@ func TestInitProvidersVendored(t *testing.T) {
 	tf := e2e.NewBinary(terraformBin, fixturePath)
 	defer tf.Close()
 
+	// Our fixture dir has a generic os_arch dir, which we need to customize
+	// to the actual OS/arch where this test is running in order to get the
+	// desired result.
+	fixtMachineDir := tf.Path("terraform.d/plugins/registry.terraform.io/hashicorp/null/1.0.0+local/os_arch")
+	wantMachineDir := tf.Path("terraform.d/plugins/registry.terraform.io/hashicorp/null/1.0.0+local/", fmt.Sprintf("%s_%s", runtime.GOOS, runtime.GOARCH))
+	err := os.Rename(fixtMachineDir, wantMachineDir)
+	if err != nil {
+		t.Fatalf("unexpected error: %s", err)
+	}
+
 	stdout, stderr, err := tf.Run("init")
 	if err != nil {
 		t.Errorf("unexpected error: %s", err)
diff --git a/main.go b/main.go
index 762d566a5..f9a3b9cf8 100644
--- a/main.go
+++ b/main.go
@@ -17,7 +17,6 @@ import (
 	"github.com/hashicorp/terraform/command/format"
 	"github.com/hashicorp/terraform/helper/logging"
 	"github.com/hashicorp/terraform/httpclient"
-	"github.com/hashicorp/terraform/internal/getproviders"
 	"github.com/hashicorp/terraform/version"
 	"github.com/mattn/go-colorable"
 	"github.com/mattn/go-shellwords"
@@ -169,7 +168,7 @@ func wrappedMain() int {
 	// direct from a registry. In future there should be a mechanism to
 	// configure providers sources from the CLI config, which will then
 	// change how we construct this object.
-	providerSrc := getproviders.NewRegistrySource(services)
+	providerSrc := providerSource(services)
 
 	// Initialize the backends.
 	backendInit.Init(services)
diff --git a/provider_source.go b/provider_source.go
new file mode 100644
index 000000000..9524e0985
--- /dev/null
+++ b/provider_source.go
@@ -0,0 +1,89 @@
+package main
+
+import (
+	"log"
+	"os"
+	"path/filepath"
+
+	"github.com/apparentlymart/go-userdirs/userdirs"
+
+	"github.com/hashicorp/terraform-svchost/disco"
+	"github.com/hashicorp/terraform/command/cliconfig"
+	"github.com/hashicorp/terraform/internal/getproviders"
+)
+
+// providerSource constructs a provider source based on a combination of the
+// CLI configuration and some default search locations. This will be the
+// provider source used for provider installation in the "terraform init"
+// command, unless overridden by the special -plugin-dir option.
+func providerSource(services *disco.Disco) getproviders.Source {
+	// We're not yet using the CLI config here because we've not implemented
+	// yet the new configuration constructs to customize provider search
+	// locations. That'll come later.
+	// For now, we have a fixed set of search directories:
+	// - The "terraform.d/plugins" directory in the current working directory,
+	//   which we've historically documented as a place to put plugins as a
+	//   way to include them in bundles uploaded to Terraform Cloud, where
+	//   there has historically otherwise been no way to use custom providers.
+	// - The "plugins" subdirectory of the CLI config search directory.
+	//   (thats ~/.terraform.d/plugins on Unix systems, equivalents elsewhere)
+	// - The "plugins" subdirectory of any platform-specific search paths,
+	//   following e.g. the XDG base directory specification on Unix systems,
+	//   Apple's guidelines on OS X, and "known folders" on Windows.
+	//
+	// Those directories are checked in addition to the direct upstream
+	// registry specified in the provider's address.
+	var searchRules []getproviders.MultiSourceSelector
+
+	addLocalDir := func(dir string) {
+		// We'll make sure the directory actually exists before we add it,
+		// because otherwise installation would always fail trying to look
+		// in non-existent directories. (This is done here rather than in
+		// the source itself because explicitly-selected directories via the
+		// CLI config, once we have them, _should_ produce an error if they
+		// don't exist to help users get their configurations right.)
+		if info, err := os.Stat(dir); err == nil && info.IsDir() {
+			log.Printf("[DEBUG] will search for provider plugins in %s", dir)
+			searchRules = append(searchRules, getproviders.MultiSourceSelector{
+				Source: getproviders.NewFilesystemMirrorSource(dir),
+			})
+		} else {
+			log.Printf("[DEBUG] ignoring non-existing provider search directory %s", dir)
+		}
+	}
+
+	addLocalDir("terraform.d/plugins") // our "vendor" directory
+	cliConfigDir, err := cliconfig.ConfigDir()
+	if err != nil {
+		addLocalDir(filepath.Join(cliConfigDir, "plugins"))
+	}
+
+	// This "userdirs" library implements an appropriate user-specific and
+	// app-specific directory layout for the current platform, such as XDG Base
+	// Directory on Unix, using the following name strings to construct a
+	// suitable application-specific subdirectory name following the
+	// conventions for each platform:
+	//
+	//   XDG (Unix): lowercase of the first string, "terraform"
+	//   Windows:    two-level heirarchy of first two strings, "HashiCorp\Terraform"
+	//   OS X:       reverse-DNS unique identifier, "io.terraform".
+	sysSpecificDirs := userdirs.ForApp("Terraform", "HashiCorp", "io.terraform")
+	for _, dir := range sysSpecificDirs.DataSearchPaths("plugins") {
+		addLocalDir(dir)
+	}
+
+	// Last but not least, the main registry source! We'll wrap a caching
+	// layer around this one to help optimize the several network requests
+	// we'll end up making to it while treating it as one of several sources
+	// in a MultiSource (as recommended in the MultiSource docs).
+	// This one is listed last so that if a particular version is available
+	// both in one of the above directories _and_ in a remote registry, the
+	// local copy will take precedence.
+	searchRules = append(searchRules, getproviders.MultiSourceSelector{
+		Source: getproviders.NewMemoizeSource(
+			getproviders.NewRegistrySource(services),
+		),
+	})
+
+	return getproviders.MultiSource(searchRules)
+}