diff --git a/compiler/src/dotty/tools/backend/jvm/GenBCode.scala b/compiler/src/dotty/tools/backend/jvm/GenBCode.scala
index 36a72abe911a..53bb55118e24 100644
--- a/compiler/src/dotty/tools/backend/jvm/GenBCode.scala
+++ b/compiler/src/dotty/tools/backend/jvm/GenBCode.scala
@@ -47,7 +47,7 @@ class GenBCode extends Phase {
   }
 
   def outputDir(implicit ctx: Context): AbstractFile =
-    new PlainDirectory(new Directory(new JFile(ctx.settings.d.value)))
+    new PlainDirectory(ctx.settings.outputDir.value)
 
   def run(implicit ctx: Context): Unit = {
     new GenBCodePipeline(entryPoints.toList,
diff --git a/compiler/src/dotty/tools/dotc/config/ScalaSettings.scala b/compiler/src/dotty/tools/dotc/config/ScalaSettings.scala
index b96bdb47f160..a6048b568a41 100644
--- a/compiler/src/dotty/tools/dotc/config/ScalaSettings.scala
+++ b/compiler/src/dotty/tools/dotc/config/ScalaSettings.scala
@@ -2,6 +2,7 @@ package dotty.tools.dotc
 package config
 
 import java.io.File
+import dotty.tools.io.{ Directory, Path }
 
 import PathResolver.Defaults
 import rewrite.Rewrites
@@ -17,7 +18,7 @@ class ScalaSettings extends Settings.SettingGroup {
   val javaextdirs = PathSetting("-javaextdirs", "Override java extdirs classpath.", Defaults.javaExtDirs)
   val sourcepath = PathSetting("-sourcepath", "Specify location(s) of source files.", "") // Defaults.scalaSourcePath
   val classpath = PathSetting("-classpath", "Specify where to find user class files.", defaultClasspath) withAbbreviation "-cp"
-  val d = StringSetting("-d", "directory|jar", "destination for generated classfiles.", ".")
+  val outputDir = DirectorySetting("-d", "directory|jar", "destination for generated classfiles.", Directory(Path(".")))
   val priorityclasspath = PathSetting("-priorityclasspath", "class path that takes precedence over all other paths (or testing only)", "")
 
   /** Other settings */
diff --git a/compiler/src/dotty/tools/dotc/config/Settings.scala b/compiler/src/dotty/tools/dotc/config/Settings.scala
index eccf6cfd1d65..6b6c4d15391a 100644
--- a/compiler/src/dotty/tools/dotc/config/Settings.scala
+++ b/compiler/src/dotty/tools/dotc/config/Settings.scala
@@ -6,6 +6,8 @@ import scala.util.{ Try, Success, Failure }
 import reflect.ClassTag
 import core.Contexts._
 import scala.annotation.tailrec
+import dotty.tools.io.{ Directory, Path }
+
 // import annotation.unchecked
   // Dotty deviation: Imports take precedence over definitions in enclosing package
   // (Note that @unchecked is in scala, not annotation, so annotation.unchecked gives
@@ -20,6 +22,7 @@ object Settings {
   val ListTag = ClassTag(classOf[List[_]])
   val VersionTag = ClassTag(classOf[ScalaVersion])
   val OptionTag = ClassTag(classOf[Option[_]])
+  val DirectoryTag = ClassTag(classOf[Directory])
 
   class SettingsState(initialValues: Seq[Any]) {
     private var values = ArrayBuffer(initialValues: _*)
@@ -158,6 +161,10 @@ object Settings {
             case Success(v) => update(v, args)
             case Failure(ex) => fail(ex.getMessage, args)
           }
+        case (DirectoryTag, arg :: args) =>
+          val path = Path(arg)
+          if (path.isDirectory) update(Directory(path), args)
+          else fail(s"'$arg' does not exist or is not a directory", args)
         case (_, Nil) =>
           missingArg
       }
@@ -278,5 +285,8 @@ object Settings {
 
     def OptionSetting[T: ClassTag](name: String, descr: String): Setting[Option[T]] =
       publish(Setting(name, descr, None, propertyClass = Some(implicitly[ClassTag[T]].runtimeClass)))
+
+    def DirectorySetting(name: String, helpArg: String, descr: String, default: Directory): Setting[Directory] =
+      publish(Setting(name, descr, default, helpArg))
   }
 }
diff --git a/compiler/src/dotty/tools/repl/ReplDriver.scala b/compiler/src/dotty/tools/repl/ReplDriver.scala
index e0ba8f9d78ee..b2f0f834434a 100644
--- a/compiler/src/dotty/tools/repl/ReplDriver.scala
+++ b/compiler/src/dotty/tools/repl/ReplDriver.scala
@@ -106,10 +106,10 @@ class ReplDriver(settings: Array[String],
   protected[this] def resetToInitial(): Unit = {
     rootCtx = initialCtx
     val outDir: AbstractFile = {
-      if (rootCtx.settings.d.isDefault(rootCtx))
+      if (rootCtx.settings.outputDir.isDefault(rootCtx))
         new VirtualDirectory("(memory)", None)
       else
-        new PlainDirectory(new Directory(new JFile(rootCtx.settings.d.value(rootCtx))))
+        new PlainDirectory(rootCtx.settings.outputDir.value(rootCtx))
     }
     compiler = new ReplCompiler(outDir)
     rendering = new Rendering(compiler, classLoader)
diff --git a/compiler/test/dotc/tests.scala b/compiler/test/dotc/tests.scala
index a7af432610bd..052bdd3a98a6 100644
--- a/compiler/test/dotc/tests.scala
+++ b/compiler/test/dotc/tests.scala
@@ -111,6 +111,7 @@ class tests extends CompilerTest {
     // remove class files from stdlib and tests compilation
     Directory(defaultOutputDir + "scala").deleteRecursively()
     Directory(defaultOutputDir + "java").deleteRecursively()
+    Directory(defaultOutputDir).createDirectory()
   }
 
   @Test def pickle_pickleOK = compileFiles(testsDir + "pickling/", testPickling)
diff --git a/compiler/test/dotty/tools/dotc/SettingsTests.scala b/compiler/test/dotty/tools/dotc/SettingsTests.scala
new file mode 100644
index 000000000000..98603b39fb36
--- /dev/null
+++ b/compiler/test/dotty/tools/dotc/SettingsTests.scala
@@ -0,0 +1,14 @@
+package dotty.tools.dotc
+
+import org.junit.Test
+import org.junit.Assert._
+
+class SettingsTests {
+
+  @Test def missingOutputDir: Unit = {
+    val options = Array("-d", "not_here")
+    val reporter = Main.process(options)
+    assertEquals(1, reporter.errorCount)
+    assertEquals("'not_here' does not exist or is not a directory", reporter.allErrors.head.message)
+  }
+}