diff --git a/cmake/macros/Private.cmake b/cmake/macros/Private.cmake
index ff389a1a66..791d450bde 100644
--- a/cmake/macros/Private.cmake
+++ b/cmake/macros/Private.cmake
@@ -98,6 +98,23 @@ function(_plugInfo_subst libTarget pluginToLibraryPath plugInfoPath)
     )
 endfunction() # _plugInfo_subst
 
+function(_replaceSublayer_schema NAME schemaSource)
+    set(infile "${CMAKE_CURRENT_SOURCE_DIR}/${schemaSource}")
+    set(outfile "${CMAKE_CURRENT_BINARY_DIR}/${schemaSource}")
+    add_custom_target(${NAME}_replaceSublayerSchema
+        COMMAND
+        "${PYTHON_EXECUTABLE}"
+        "${PROJECT_SOURCE_DIR}/cmake/macros/replaceSublayerSchemas.py"
+        "${infile}"
+        "${outfile}"
+        SOURCES "${infile}"
+        COMMENT "Replacing sublayer schemas ${f} ..."
+    )
+
+    # Make sure the sublayers are generated before the library.
+    add_dependencies(${NAME} ${NAME}_replaceSublayerSchema)
+endfunction()
+
 # Generate a doxygen config file
 function(_pxrDoxyConfig_subst)
     configure_file(${CMAKE_SOURCE_DIR}/pxr/usd/lib/usd/Doxyfile.in
@@ -196,6 +213,11 @@ function(_install_resource_files NAME pluginInstallPrefix pluginToLibraryPath)
         if (${resourceFile} STREQUAL "plugInfo.json")
             _plugInfo_subst(${NAME} "${pluginToLibraryPath}" ${resourceFile})
             list(APPEND resourceFiles "${CMAKE_CURRENT_BINARY_DIR}/${resourceFile}")
+        # Schema files from the source tree need their sublayers substituted
+        # so 3rd party plugins will have an easier time working with the installed schemas.
+        elseif (${resourceFile} STREQUAL "schema.usda")
+            _replaceSublayer_schema(${NAME} ${resourceFile})
+            list(APPEND resourceFiles "${CMAKE_CURRENT_BINARY_DIR}/${resourceFile}")
         else()
             list(APPEND resourceFiles ${resourceFile})
         endif()
diff --git a/cmake/macros/replaceSublayerSchemas.py b/cmake/macros/replaceSublayerSchemas.py
new file mode 100644
index 0000000000..3d6e6d069e
--- /dev/null
+++ b/cmake/macros/replaceSublayerSchemas.py
@@ -0,0 +1,50 @@
+#
+# Copyright 2017 Pixar
+#
+# Licensed under the Apache License, Version 2.0 (the "Apache License")
+# with the following modification; you may not use this file except in
+# compliance with the Apache License and the following modification to it:
+# Section 6. Trademarks. is deleted and replaced with:
+#
+# 6. Trademarks. This License does not grant permission to use the trade
+#    names, trademarks, service marks, or product names of the Licensor
+#    and its affiliates, except as required to comply with Section 4(c) of
+#    the License and to reproduce the content of the NOTICE file.
+#
+# You may obtain a copy of the Apache License at
+#
+#     http://www.apache.org/licenses/LICENSE-2.0
+#
+# Unless required by applicable law or agreed to in writing, software
+# distributed under the Apache License with the above modification is
+# distributed on an "AS IS" BASIS, WITHOUT WARRANTIES OR CONDITIONS OF ANY
+# KIND, either express or implied. See the Apache License for the specific
+# language governing permissions and limitations under the Apache License.
+#
+#
+# Usage:
+#   replaceSublayerSchemas source.py dest.py
+#
+# The command replaces the sublayer schema references so they will point
+# to the proper location once installed. We are not using the python bindings
+# on purpose, otherwise the script would require the libs that are just being built.
+#
+# Each sublayer of the format ../module_name/schema.usda is to be replaced with
+# module_name/resources/schema.usda .
+
+import sys
+
+if len(sys.argv) != 3:
+    print "Usage: %s {source.py dest.py}" % sys.argv[0]
+    sys.exit(1)
+
+with open(sys.argv[1], 'r') as s:
+    with open(sys.argv[2], 'w') as d:
+        import re
+        pattern = re.compile(r"@.*\/([^\/]*)\/schema.usda@")
+        for line in s:
+            m = pattern.search(line)
+            if m:
+                d.write(line.replace(m.group(0), "@%s/resources/schema.usda@" % m.group(1)))
+            else:
+                d.write(line)
diff --git a/pxr/base/lib/plug/registry.cpp b/pxr/base/lib/plug/registry.cpp
index b0e7034b1f..771724767e 100644
--- a/pxr/base/lib/plug/registry.cpp
+++ b/pxr/base/lib/plug/registry.cpp
@@ -250,6 +250,12 @@ Plug_GetPaths()
 
 }
 
+std::vector<std::string>
+PlugRegistry::GetAllRegisteredPluginPaths() const {
+    PlugPlugin::_RegisterAllPlugins();
+    return Plug_GetPaths();
+}
+
 void
 Plug_SetPaths(const std::vector<std::string>& paths)
 {
diff --git a/pxr/base/lib/plug/registry.h b/pxr/base/lib/plug/registry.h
index 19539885f6..ee7c6b419a 100644
--- a/pxr/base/lib/plug/registry.h
+++ b/pxr/base/lib/plug/registry.h
@@ -435,6 +435,9 @@ class PlugRegistry : public TfWeakBase, boost::noncopyable {
     JsValue GetDataFromPluginMetaData(TfType type,
                                       const std::string &key) const;
 
+    /// Returns all the registered plugin paths.
+    PLUG_API
+    std::vector<std::string> GetAllRegisteredPluginPaths() const;
 private:
     // Private ctor and dtor since this is a constructed as a singleton.
     PLUG_LOCAL
diff --git a/pxr/base/lib/plug/wrapRegistry.cpp b/pxr/base/lib/plug/wrapRegistry.cpp
index 35aaec26b0..1a9356b460 100644
--- a/pxr/base/lib/plug/wrapRegistry.cpp
+++ b/pxr/base/lib/plug/wrapRegistry.cpp
@@ -214,6 +214,8 @@ void wrapRegistry()
         .def("GetPluginForType", &_GetPluginForType)
         .def("GetAllPlugins", &This::GetAllPlugins,
              return_value_policy<TfPySequenceToList>())
+        .def("GetAllRegisteredPluginPaths", &This::GetAllRegisteredPluginPaths,
+             return_value_policy<TfPySequenceToList>())
 
         .def("FindTypeByName", This::FindTypeByName,
              return_value_policy<return_by_value>())
diff --git a/pxr/usd/lib/usd/CMakeLists.txt b/pxr/usd/lib/usd/CMakeLists.txt
index 209cca17e5..368dee32d3 100644
--- a/pxr/usd/lib/usd/CMakeLists.txt
+++ b/pxr/usd/lib/usd/CMakeLists.txt
@@ -120,6 +120,7 @@ pxr_library(usd
     RESOURCE_FILES
         plugInfo.json
         generatedSchema.usda
+        schema.usda
 )
 
 if (NOT JINJA2_FOUND)
diff --git a/pxr/usd/lib/usd/usdGenSchema.py b/pxr/usd/lib/usd/usdGenSchema.py
index d52adaef53..ecbe6ea6e5 100644
--- a/pxr/usd/lib/usd/usdGenSchema.py
+++ b/pxr/usd/lib/usd/usdGenSchema.py
@@ -43,7 +43,7 @@
 from jinja2 import Environment, FileSystemLoader
 from jinja2.exceptions import TemplateSyntaxError
 
-from pxr import Sdf, Usd, Tf
+from pxr import Sdf, Usd, Tf, Plug, Ar
 
 #------------------------------------------------------------------------------#
 # Parsed Objects                                                               #
@@ -700,7 +700,7 @@ def demangle(typeName):
     
 
 def GenerateRegistry(codeGenPath, filePath, classes, validate, env):
-
+    
     # Get the flattened layer to work with.
     flatLayer = _MakeFlattenedRegistryLayer(filePath)
 
@@ -813,6 +813,9 @@ def GenerateRegistry(codeGenPath, filePath, classes, validate, env):
         sys.exit(1)
 
     try:
+        # Setting up the default search path for plugins
+        os.environ['PXR_AR_DEFAULT_SEARCH_PATH'] = os.pathsep.join(
+            Plug.Registry().GetAllRegisteredPluginPaths() + [os.getenv('PXR_AR_DEFAULT_SEARCH_PATH', '')])
         
         #
         # Gather Schema Class information
diff --git a/pxr/usd/lib/usdGeom/CMakeLists.txt b/pxr/usd/lib/usdGeom/CMakeLists.txt
index e54b24dfe1..db6001aaea 100644
--- a/pxr/usd/lib/usdGeom/CMakeLists.txt
+++ b/pxr/usd/lib/usdGeom/CMakeLists.txt
@@ -97,6 +97,7 @@ pxr_library(usdGeom
     RESOURCE_FILES
         plugInfo.json
         generatedSchema.usda
+        schema.usda
 )
 
 pxr_test_scripts(
diff --git a/pxr/usd/lib/usdHydra/CMakeLists.txt b/pxr/usd/lib/usdHydra/CMakeLists.txt
index 9570ebbd55..51aa7fd662 100644
--- a/pxr/usd/lib/usdHydra/CMakeLists.txt
+++ b/pxr/usd/lib/usdHydra/CMakeLists.txt
@@ -38,5 +38,7 @@ pxr_library(usdHydra
 
     RESOURCE_FILES
         plugInfo.json
+        generatedSchema.usda
+        schema.usda
 )
 
diff --git a/pxr/usd/lib/usdLux/CMakeLists.txt b/pxr/usd/lib/usdLux/CMakeLists.txt
index 100bb76c63..502db91730 100644
--- a/pxr/usd/lib/usdLux/CMakeLists.txt
+++ b/pxr/usd/lib/usdLux/CMakeLists.txt
@@ -55,5 +55,6 @@ pxr_library(usdLux
     RESOURCE_FILES
         plugInfo.json
         generatedSchema.usda
+        schema.usda
 )
 
diff --git a/pxr/usd/lib/usdRi/CMakeLists.txt b/pxr/usd/lib/usdRi/CMakeLists.txt
index 1a96f869ce..f8a1670093 100644
--- a/pxr/usd/lib/usdRi/CMakeLists.txt
+++ b/pxr/usd/lib/usdRi/CMakeLists.txt
@@ -77,6 +77,7 @@ pxr_library(usdRi
     RESOURCE_FILES
         plugInfo.json
         generatedSchema.usda
+        schema.usda
 )
 
 pxr_test_scripts(
diff --git a/pxr/usd/lib/usdShade/CMakeLists.txt b/pxr/usd/lib/usdShade/CMakeLists.txt
index 863e6f9c33..215008f153 100644
--- a/pxr/usd/lib/usdShade/CMakeLists.txt
+++ b/pxr/usd/lib/usdShade/CMakeLists.txt
@@ -48,6 +48,7 @@ pxr_library(usdShade
     RESOURCE_FILES
         plugInfo.json
         generatedSchema.usda
+        schema.usda
 )
 
 pxr_test_scripts(
diff --git a/pxr/usd/lib/usdUI/CMakeLists.txt b/pxr/usd/lib/usdUI/CMakeLists.txt
index 4dab7a0898..bfdc55695f 100644
--- a/pxr/usd/lib/usdUI/CMakeLists.txt
+++ b/pxr/usd/lib/usdUI/CMakeLists.txt
@@ -33,6 +33,7 @@ pxr_library(usdUI
     RESOURCE_FILES
         plugInfo.json
         generatedSchema.usda
+        schema.usda
 )
 
 pxr_test_scripts(
diff --git a/third_party/katana/lib/usdKatana/CMakeLists.txt b/third_party/katana/lib/usdKatana/CMakeLists.txt
index 991772b194..6f2ac0893c 100644
--- a/third_party/katana/lib/usdKatana/CMakeLists.txt
+++ b/third_party/katana/lib/usdKatana/CMakeLists.txt
@@ -68,5 +68,6 @@ pxr_shared_library(${PXR_PACKAGE}
     RESOURCE_FILES
         plugInfo.json
         generatedSchema.usda
+        schema.usda
 )