diff --git a/packages/babel-core/src/config/build-config-chain.js b/packages/babel-core/src/config/build-config-chain.js
index ab253cf8dc..27d6ac99c0 100644
--- a/packages/babel-core/src/config/build-config-chain.js
+++ b/packages/babel-core/src/config/build-config-chain.js
@@ -39,16 +39,17 @@ type ConfigPart =
     };
 
 export default function buildConfigChain(
+  cwd: string,
   opts: ValidatedOptions,
   envName: string,
 ): Array<ConfigItem> | null {
-  const filename = opts.filename ? path.resolve(opts.filename) : null;
+  const filename = opts.filename ? path.resolve(cwd, opts.filename) : null;
   const builder = new ConfigChainBuilder(
     filename ? new LoadedFile(filename) : null,
   );
 
   try {
-    builder.mergeConfigArguments(opts, process.cwd(), envName);
+    builder.mergeConfigArguments(opts, cwd, envName);
 
     // resolve all .babelrc files
     if (opts.babelrc !== false && filename) {
diff --git a/packages/babel-core/src/config/option-manager.js b/packages/babel-core/src/config/option-manager.js
index d7c7c958c5..42c1ac4e1f 100644
--- a/packages/babel-core/src/config/option-manager.js
+++ b/packages/babel-core/src/config/option-manager.js
@@ -1,5 +1,6 @@
 // @flow
 
+import path from "path";
 import * as context from "../index";
 import Plugin, { validatePluginObject } from "./plugin";
 import merge from "lodash/merge";
@@ -45,36 +46,29 @@ class OptionManager {
    *  - `loc` is used to point to the original config.
    *  - `dirname` is used to resolve plugins relative to it.
    */
-
-  mergeOptions(config: MergeOptions, pass?: Array<Plugin>, envName: string) {
+  mergeOptions(config: MergeOptions, pass: Array<Plugin>, envName: string) {
     const result = loadConfig(config);
 
     const plugins = result.plugins.map(descriptor =>
       loadPluginDescriptor(descriptor, envName),
     );
-    const presets = result.presets.map(descriptor =>
-      loadPresetDescriptor(descriptor, envName),
-    );
-
-    const passPerPreset = config.options.passPerPreset;
-    pass = pass || this.passes[0];
+    const presets = result.presets.map(descriptor => ({
+      pass: descriptor.ownPass ? [] : pass,
+      preset: loadPresetDescriptor(descriptor, envName),
+    }));
 
     // resolve presets
     if (presets.length > 0) {
-      let presetPasses = null;
-      if (passPerPreset) {
-        presetPasses = presets.map(() => []);
-        // The passes are created in the same order as the preset list, but are inserted before any
-        // existing additional passes.
-        this.passes.splice(1, 0, ...presetPasses);
-      }
+      // The passes are created in the same order as the preset list, but are inserted before any
+      // existing additional passes.
+      this.passes.splice(
+        1,
+        0,
+        ...presets.map(o => o.pass).filter(p => p !== pass),
+      );
 
-      presets.forEach((presetConfig, i) => {
-        this.mergeOptions(
-          presetConfig,
-          presetPasses ? presetPasses[i] : pass,
-          envName,
-        );
+      presets.forEach(({ preset, pass }) => {
+        this.mergeOptions(preset, pass, envName);
       });
     }
 
@@ -103,14 +97,15 @@ class OptionManager {
   init(inputOpts: {}) {
     const args = validate("arguments", inputOpts);
 
-    const { envName = getEnv() } = args;
+    const { envName = getEnv(), cwd = "." } = args;
+    const absoluteCwd = path.resolve(cwd);
 
-    const configChain = buildConfigChain(args, envName);
+    const configChain = buildConfigChain(absoluteCwd, args, envName);
     if (!configChain) return null;
 
     try {
       for (const config of configChain) {
-        this.mergeOptions(config, undefined, envName);
+        this.mergeOptions(config, this.passes[0], envName);
       }
     } catch (e) {
       // There are a few case where thrown errors will try to annotate themselves multiple times, so
@@ -134,6 +129,7 @@ class OptionManager {
       .map(plugins => ({ plugins }));
     opts.passPerPreset = opts.presets.length > 0;
     opts.envName = envName;
+    opts.cwd = absoluteCwd;
 
     return {
       options: opts,
@@ -147,6 +143,7 @@ type BasicDescriptor = {
   options: {} | void,
   dirname: string,
   alias: string,
+  ownPass?: boolean,
 };
 
 type LoadedDescriptor = {
@@ -177,6 +174,7 @@ const loadConfig = makeWeakCache((config: MergeOptions): {
     createDescriptor(preset, loadPreset, config.dirname, {
       index,
       alias: config.alias,
+      ownPass: config.options.passPerPreset,
     }),
   );
 
@@ -320,9 +318,11 @@ function createDescriptor(
   {
     index,
     alias,
+    ownPass,
   }: {
     index: number,
     alias: string,
+    ownPass?: boolean,
   },
 ): BasicDescriptor {
   let options;
@@ -363,18 +363,12 @@ function createDescriptor(
     );
   }
 
-  if (options != null && typeof options !== "object") {
-    throw new Error(
-      "Plugin/Preset options must be an object, null, or undefined",
-    );
-  }
-  options = options || undefined;
-
   return {
     alias: filepath || `${alias}$${index}`,
     value,
     options,
     dirname,
+    ownPass,
   };
 }
 
diff --git a/packages/babel-core/src/config/options.js b/packages/babel-core/src/config/options.js
index 5ca278b14b..9aec95dfa8 100644
--- a/packages/babel-core/src/config/options.js
+++ b/packages/babel-core/src/config/options.js
@@ -17,6 +17,7 @@ import {
 } from "./option-assertions";
 
 const ROOT_VALIDATORS: ValidatorSet = {
+  cwd: (assertString: Validator<$PropertyType<ValidatedOptions, "cwd">>),
   filename: (assertString: Validator<
     $PropertyType<ValidatedOptions, "filename">,
   >),
@@ -128,6 +129,7 @@ const COMMON_VALIDATORS: ValidatorSet = {
 export type InputOptions = ValidatedOptions;
 
 export type ValidatedOptions = {
+  cwd?: string,
   filename?: string,
   filenameRelative?: string,
   babelrc?: boolean,
@@ -206,6 +208,9 @@ export function validate(type: OptionsType, opts: {}): ValidatedOptions {
     if (type !== "arguments" && ROOT_VALIDATORS[key]) {
       throw new Error(`.${key} is only allowed in root programmatic options`);
     }
+    if (type === "env" && key === "env") {
+      throw new Error(`.${key} is not allowed inside another env block`);
+    }
 
     const validator =
       COMMON_VALIDATORS[key] ||
diff --git a/packages/babel-core/test/api.js b/packages/babel-core/test/api.js
index cad0308862..215a8960f1 100644
--- a/packages/babel-core/test/api.js
+++ b/packages/babel-core/test/api.js
@@ -296,12 +296,6 @@ describe("api", function() {
         development: {
           passPerPreset: true,
           presets: [pushPreset("argthree"), pushPreset("argfour")],
-          env: {
-            development: {
-              passPerPreset: true,
-              presets: [pushPreset("argfive"), pushPreset("argsix")],
-            },
-          },
         },
       },
     });
@@ -327,8 +321,6 @@ describe("api", function() {
         "fourteen;",
         "fifteen;",
         "sixteen;",
-        "argfive;",
-        "argsix;",
         "argthree;",
         "argfour;",
         "seven;",
diff --git a/packages/babel-core/test/config-chain.js b/packages/babel-core/test/config-chain.js
index d4bb482212..4b4ea20ff0 100644
--- a/packages/babel-core/test/config-chain.js
+++ b/packages/babel-core/test/config-chain.js
@@ -1,10 +1,14 @@
 import assert from "assert";
 import fs from "fs";
 import path from "path";
-import buildConfigChain from "../lib/config/build-config-chain";
+import buildConfigChainFn from "../lib/config/build-config-chain";
 
 const DEFAULT_ENV = "development";
 
+function buildConfigChain(opts, envName) {
+  return buildConfigChainFn(process.cwd(), opts, envName);
+}
+
 function fixture() {
   const args = [__dirname, "fixtures", "config"];
   for (let i = 0; i < arguments.length; i++) {
diff --git a/packages/babel-preset-es2015/test/fixtures/traceur/options.json b/packages/babel-preset-es2015/test/fixtures/traceur/options.json
index ea93819975..02c0b709d1 100644
--- a/packages/babel-preset-es2015/test/fixtures/traceur/options.json
+++ b/packages/babel-preset-es2015/test/fixtures/traceur/options.json
@@ -1,7 +1,6 @@
 {
   "plugins": [
     "transform-exponentiation-operator",
-    "transform-regenerator",
     "transform-template-literals",
     "transform-literals",
     "transform-arrow-functions",