diff --git a/packages/babel-core/src/transformation/file/options/option-manager.js b/packages/babel-core/src/transformation/file/options/option-manager.js
index f1032a0e8d..67eb61b44b 100644
--- a/packages/babel-core/src/transformation/file/options/option-manager.js
+++ b/packages/babel-core/src/transformation/file/options/option-manager.js
@@ -1,4 +1,8 @@
-import { validateOption, normaliseOptions } from "./index";
+import Plugin from "../../plugin";
+import * as messages from "babel-messages";
+import * as context from "../../../api/node";
+import { normaliseOptions } from "./index";
+import resolve from "../../../helpers/resolve";
 import json5 from "json5";
 import isAbsolute from "path-is-absolute";
 import pathExists from "path-exists";
@@ -32,6 +36,27 @@ export default class OptionManager {
     this.log             = log;
   }
 
+  static memoisedPlugins = [];
+
+  static memoisePluginContainer(fn, loc, i) {
+    for (var cache of (OptionManager.memoisedPlugins: Array)) {
+      if (cache.container === fn) return cache.plugin;
+    }
+
+    var obj = fn(context);
+
+    if (typeof obj === "object") {
+      var plugin = new Plugin(obj);
+      OptionManager.memoisedPlugins.push({
+        container: fn,
+        plugin: plugin
+      });
+      return plugin;
+    } else {
+      throw new TypeError(messages.get("pluginNotObject", loc, i, typeof obj));
+    }
+  }
+
   static createBareOptions() {
     var opts = {};
 
@@ -43,6 +68,41 @@ export default class OptionManager {
     return opts;
   }
 
+  static normalisePlugins(loc, dirname, plugins) {
+    return plugins.map(function (val, i) {
+      var plugin, options;
+
+      // destructure plugins
+      if (Array.isArray(val)) {
+        [plugin, options] = val;
+      } else {
+        plugin = val;
+      }
+
+      // allow plugins to be specified as strings
+      if (typeof plugin === "string") {
+        var pluginLoc = resolve(`babel-plugin-${plugin}`, dirname) || resolve(plugin, dirname);
+        if (pluginLoc) {
+          plugin = require(pluginLoc);
+        } else {
+          throw new ReferenceError(messages.get("pluginUnknown", plugin, loc, i));
+        }
+      }
+
+      // allow plugin containers to be specified so they don't have to manually require
+      if (typeof plugin === "function") {
+        plugin = OptionManager.memoisePluginContainer(plugin, loc, i);
+      } else {
+        throw new TypeError(messages.get("pluginNotFunction", loc, i));
+      }
+
+      // validate
+      plugin.validate(loc, i);
+
+      return [plugin, options];
+    });
+  }
+
   addConfig(loc, key?, json=json5) {
     if (this.resolvedConfigs.indexOf(loc) >= 0) return;
 
@@ -61,23 +121,78 @@ export default class OptionManager {
     this.resolvedConfigs.push(loc);
   }
 
-  mergeOptions(opts, alias = "foreign") {
+  /**
+   * This is called when we want to merge the input `opts` into our
+   * base options.
+   *
+   *  - `alias` is used to output pretty traces back to the original source.
+   *  - `loc` is used to point to the original config.
+   *  - `dirname` is used to resolve plugins relative to it.
+   */
+
+  mergeOptions(opts, alias = "foreign", loc, dirname) {
     if (!opts) return;
 
-    for (let key in opts) {
-      if (key[0] === "_") continue;
+    dirname = dirname || process.cwd();
+    loc = loc || alias;
 
+    for (let key in opts) {
       let option = config[key];
 
       // check for an unknown option
-      if (!option) this.log.error(`Unknown option: ${alias}.${key}`, ReferenceError);
+      if (!option && this.log) this.log.error(`Unknown option: ${alias}.${key}`, ReferenceError);
     }
 
     // normalise options
     normaliseOptions(opts);
 
+    // resolve plugins
+    if (opts.plugins) {
+      opts.plugins = OptionManager.normalisePlugins(loc, dirname, opts.plugins);
+    }
+
+    // add extends clause
+    if (opts.extends) {
+      this.addConfig(resolve(opts.extends, dirname));
+      delete opts.extends;
+    }
+
+    // resolve presets
+    if (opts.presets) {
+      this.mergePresets(opts.presets, dirname);
+      delete opts.presets;
+    }
+
+    var envOpts;
+    var envKey = process.env.BABEL_ENV || process.env.NODE_ENV || "development";
+    if (opts.env) {
+      envOpts = opts.env[envKey];
+      delete opts.env;
+    }
+
     // merge them into this current files options
     merge(this.options, opts);
+
+    // merge in env options
+    this.mergeOptions(envOpts, `${alias}.env.${envKey}`);
+  }
+
+  mergePresets(presets: Array, dirname) {
+    for (var val of presets) {
+      if (typeof val === "string") {
+        var presetLoc = resolve(`babel-preset-${val}`, dirname) || resolve(val, dirname);
+        if (presetLoc) {
+          var presetOpts = require(presetLoc);
+          this.mergeOptions(presetOpts, presetLoc, presetLoc, path.dirname(presetLoc));
+        } else {
+          throw new Error("todo");
+        }
+      } else if (typeof val === "object") {
+        this.mergeOptions(val);
+      } else {
+        throw new Error("todo");
+      }
+    }
   }
 
   addIgnoreConfig(loc) {
@@ -91,10 +206,6 @@ export default class OptionManager {
     this.mergeOptions({ ignore: lines }, loc);
   }
 
-  /**
-   * Description
-   */
-
   findConfigs(loc) {
     if (!loc) return;
 
@@ -102,17 +213,33 @@ export default class OptionManager {
       loc = path.join(process.cwd(), loc);
     }
 
+    var foundConfig = false;
+    var foundIgnore = false;
+
     while (loc !== (loc = path.dirname(loc))) {
-      if (this.options.breakConfig) return;
+      if (!foundConfig) {
+        var configLoc = path.join(loc, BABELRC_FILENAME);
+        if (exists(configLoc)) {
+          this.addConfig(configLoc);
+          foundConfig = true;
+        }
 
-      var configLoc = path.join(loc, BABELRC_FILENAME);
-      if (exists(configLoc)) this.addConfig(configLoc);
+        var pkgLoc = path.join(loc, PACKAGE_FILENAME);
+        if (exists(pkgLoc)) {
+          this.addConfig(pkgLoc, "babel", JSON);
+          foundConfig = true;
+        }
+      }
 
-      var pkgLoc = path.join(loc, PACKAGE_FILENAME);
-      if (exists(pkgLoc)) this.addConfig(pkgLoc, "babel", JSON);
+      if (!foundIgnore) {
+        var ignoreLoc = path.join(loc, BABELIGNORE_FILENAME);
+        if (exists(ignoreLoc)) {
+          this.addIgnoreConfig(ignoreLoc);
+          foundIgnore = true;
+        }
+      }
 
-      var ignoreLoc = path.join(loc, BABELIGNORE_FILENAME);
-      if (exists(ignoreLoc)) this.addIgnoreConfig(ignoreLoc);
+      if (foundIgnore && foundConfig) return;
     }
   }
 
@@ -126,17 +253,7 @@ export default class OptionManager {
       // optional
       if (!val && option.optional) continue;
 
-      // deprecated
-      if (this.log && val && option.deprecated) {
-        this.log.deprecate(`Deprecated option ${key}: ${option.deprecated}`);
-      }
-
-      // validate
-      if (this.pipeline && val) {
-        val = validateOption(key, val, this.pipeline);
-      }
-
-      // aaliases
+      // aliases
       if (option.alias) {
         opts[option.alias] = opts[option.alias] || val;
       } else {
@@ -146,23 +263,13 @@ export default class OptionManager {
   }
 
   init(opts) {
-    this.mergeOptions(opts, "direct");
-
-    // babelrc option
-    if (opts.babelrc) {
-      for (var loc of (opts.babelrc: Array)) this.addConfig(loc);
-    }
-
     // resolve all .babelrc files
     if (opts.babelrc !== false) {
       this.findConfigs(opts.filename);
     }
 
-    // merge in env
-    var envKey = process.env.BABEL_ENV || process.env.NODE_ENV || "development";
-    if (this.options.env) {
-      this.mergeOptions(this.options.env[envKey], `direct.env.${envKey}`);
-    }
+    // merge in base options
+    this.mergeOptions(opts, "base");
 
     // normalise
     this.normaliseOptions(opts);
diff --git a/packages/babel-core/src/transformation/file/plugin-manager.js b/packages/babel-core/src/transformation/file/plugin-manager.js
deleted file mode 100644
index 585e3280d6..0000000000
--- a/packages/babel-core/src/transformation/file/plugin-manager.js
+++ /dev/null
@@ -1,120 +0,0 @@
-import Plugin from "../plugin";
-import * as types from "babel-types";
-import * as messages from "babel-messages";
-import resolve from "try-resolve";
-import traverse from "babel-traverse";
-import parse from "../../helpers/parse";
-
-var context = {
-  messages,
-  Plugin,
-  types,
-  parse,
-  traverse
-};
-
-export default class PluginManager {
-  static memoisedPlugins = [];
-
-  static memoisePluginContainer(fn) {
-    for (var i = 0; i < PluginManager.memoisedPlugins.length; i++) {
-      var plugin = PluginManager.memoisedPlugins[i];
-      if (plugin.container === fn) return plugin.transformer;
-    }
-
-    var transformer = fn(context);
-    PluginManager.memoisedPlugins.push({
-      container: fn,
-      transformer: transformer
-    });
-    return transformer;
-  }
-
-  static positions = ["before", "after"];
-
-  constructor({ file, transformers, before, after } = { transformers: {}, before: [], after: [] }) {
-    this.transformers = transformers;
-    this.file         = file;
-    this.before       = before;
-    this.after        = after;
-  }
-
-  subnormaliseString(name, position) {
-    // this is a plugin in the form of "foobar" or "foobar:after"
-    // where the optional colon is the delimiter for plugin position in the transformer stack
-
-    var match = name.match(/^(.*?):(after|before)$/);
-    if (match) [, name, position] = match;
-
-    var loc = resolve.relative(`babel-plugin-${name}`) || resolve.relative(name);
-    if (loc) {
-      var plugin = require(loc);
-      return {
-        position: position,
-        plugin:   plugin.default || plugin
-      };
-    } else {
-      throw new ReferenceError(messages.get("pluginUnknown", name));
-    }
-  }
-
-  validate(name, plugin) {
-    // validate transformer key
-    var key = plugin.key;
-    if (this.transformers[key]) {
-      throw new ReferenceError(messages.get("pluginKeyCollision", key));
-    }
-
-    // validate Transformer instance
-    if (!plugin.buildPass || plugin.constructor.name !== "Plugin") {
-      throw new TypeError(messages.get("pluginNotTransformer", name));
-    }
-
-    // register as a plugin
-    plugin.metadata.plugin = true;
-  }
-
-  add(name) {
-    var position;
-    var plugin;
-
-    if (name) {
-      if (typeof name === "object" && name.transformer) {
-        ({ transformer: plugin, position } = name);
-      } else if (typeof name !== "string") {
-        // not a string so we'll just assume that it's a direct Transformer instance, if not then
-        // the checks later on will complain
-        plugin = name;
-      }
-
-      if (typeof name === "string") {
-        ({ plugin, position } = this.subnormaliseString(name, position));
-      }
-    } else {
-      throw new TypeError(messages.get("pluginIllegalKind", typeof name, name));
-    }
-
-    // default position
-    position = position || "before";
-
-    // validate position
-    if (PluginManager.positions.indexOf(position) < 0) {
-      throw new TypeError(messages.get("pluginIllegalPosition", position, name));
-    }
-
-    // allow plugin containers to be specified so they don't have to manually require
-    if (typeof plugin === "function") {
-      plugin = PluginManager.memoisePluginContainer(plugin);
-    }
-
-    //
-    this.validate(name, plugin);
-
-    // build!
-    var pass = this.transformers[plugin.key] = plugin.buildPass(this.file);
-    if (pass.canTransform()) {
-      var stack = position === "before" ? this.before : this.after;
-      stack.push(pass);
-    }
-  }
-}