diff --git a/railties/lib/rails/application.rb b/railties/lib/rails/application.rb
index aabe86715c..4a7ed2d028 100644
--- a/railties/lib/rails/application.rb
+++ b/railties/lib/rails/application.rb
@@ -28,7 +28,7 @@ module Rails
   # Besides providing the same configuration as Rails::Engine and Rails::Railtie,
   # the application object has several specific configurations, for example
   # "allow_concurrency", "cache_classes", "consider_all_requests_local", "filter_parameters",
-  # "logger", "reload_engines", "reload_plugins" and so forth.
+  # "logger", "reload_plugins" and so forth.
   #
   # Check Rails::Application::Configuration to see them all.
   #
@@ -217,10 +217,5 @@ module Rails
     def initialize_generators
       require "rails/generators"
     end
-
-    # Application is always reloadable when config.cache_classes is false.
-    def reloadable?(app)
-      true
-    end
   end
 end
diff --git a/railties/lib/rails/application/configuration.rb b/railties/lib/rails/application/configuration.rb
index e3165b2d4c..465851c0e6 100644
--- a/railties/lib/rails/application/configuration.rb
+++ b/railties/lib/rails/application/configuration.rb
@@ -10,7 +10,7 @@ module Rails
       attr_accessor :allow_concurrency, :cache_classes, :cache_store,
                     :encoding, :consider_all_requests_local, :dependency_loading,
                     :filter_parameters,  :log_level, :logger, :middleware,
-                    :plugins, :preload_frameworks, :reload_engines, :reload_plugins,
+                    :plugins, :preload_frameworks, :reload_plugins,
                     :secret_token, :serve_static_assets, :session_options,
                     :time_zone, :whiny_nils
 
@@ -59,7 +59,7 @@ module Rails
           if File.exists?("#{root}/test/mocks/#{Rails.env}")
             ActiveSupport::Deprecation.warn "\"Rails.root/test/mocks/#{Rails.env}\" won't be added " <<
               "automatically to load paths anymore in future releases"
-            paths.mocks_path  "test/mocks", :load_path => true, :glob => Rails.env
+            paths.mocks_path  "test/mocks", :autoload => true, :glob => Rails.env
           end
 
           paths
diff --git a/railties/lib/rails/engine.rb b/railties/lib/rails/engine.rb
index 0a3f21fb1b..ee3e3ba040 100644
--- a/railties/lib/rails/engine.rb
+++ b/railties/lib/rails/engine.rb
@@ -142,7 +142,7 @@ module Rails
 
     # Add configured load paths to ruby load paths and remove duplicates.
     initializer :set_load_path, :before => :bootstrap_hook do
-      config.autoload_paths.reverse_each do |path|
+      _all_load_paths.reverse_each do |path|
         $LOAD_PATH.unshift(path) if File.directory?(path)
       end
       $LOAD_PATH.uniq!
@@ -154,16 +154,12 @@ module Rails
     # This needs to be an initializer, since it needs to run once
     # per engine and get the engine as a block parameter
     initializer :set_autoload_paths, :before => :bootstrap_hook do |app|
-      ActiveSupport::Dependencies.autoload_paths.unshift(*config.autoload_paths)
-
-      if reloadable?(app)
-        ActiveSupport::Dependencies.autoload_once_paths.unshift(*config.autoload_once_paths)
-      else
-        ActiveSupport::Dependencies.autoload_once_paths.unshift(*config.autoload_paths)
-      end
+      ActiveSupport::Dependencies.autoload_paths.unshift(*_all_autoload_paths)
+      ActiveSupport::Dependencies.autoload_once_paths.unshift(*config.autoload_once_paths)
 
       # Freeze so future modifications will fail rather than do nothing mysteriously
       config.autoload_paths.freeze
+      config.eager_load_paths.freeze
       config.autoload_once_paths.freeze
     end
 
@@ -195,7 +191,6 @@ module Rails
       ActiveSupport.on_load(:action_controller) do
         prepend_view_path(views)
       end
-
       ActiveSupport.on_load(:action_mailer) do
         prepend_view_path(views)
       end
@@ -214,8 +209,12 @@ module Rails
 
   protected
 
-    def reloadable?(app)
-      app.config.reload_engines
+    def _all_autoload_paths
+      @_all_autoload_paths ||= (config.autoload_paths + config.eager_load_paths + config.autoload_once_paths).uniq
+    end
+
+    def _all_load_paths
+      @_all_load_paths ||= (config.paths.load_paths + _all_autoload_paths).uniq
     end
   end
 end
diff --git a/railties/lib/rails/engine/configuration.rb b/railties/lib/rails/engine/configuration.rb
index 4e27180f1e..2f465670cf 100644
--- a/railties/lib/rails/engine/configuration.rb
+++ b/railties/lib/rails/engine/configuration.rb
@@ -42,11 +42,11 @@ module Rails
       end
 
       def autoload_once_paths
-        @autoload_once_paths ||= paths.load_once
+        @autoload_once_paths ||= paths.autoload_once
       end
 
       def autoload_paths
-        @autoload_paths ||= paths.load_paths
+        @autoload_paths ||= paths.autoload_paths
       end
     end
   end
diff --git a/railties/lib/rails/paths.rb b/railties/lib/rails/paths.rb
index 1c9e308631..7a65188a9a 100644
--- a/railties/lib/rails/paths.rb
+++ b/railties/lib/rails/paths.rb
@@ -25,9 +25,7 @@ module Rails
 
       def initialize(path)
         raise if path.is_a?(Array)
-
         @children = {}
-
         @path = path
         @root = self
         @all_paths = []
@@ -38,14 +36,18 @@ module Rails
         @all_paths
       end
 
-      def load_once
-        filter_by(:load_once?)
+      def autoload_once
+        filter_by(:autoload_once?)
       end
 
       def eager_load
         filter_by(:eager_load?)
       end
 
+      def autoload_paths
+        filter_by(:autoload?)
+      end
+
       def load_paths
         filter_by(:load_path?)
       end
@@ -61,15 +63,17 @@ module Rails
     protected
 
       def filter_by(constraint)
-        all_paths.map do |path|
+        all = []
+        all_paths.each do |path|
           if path.send(constraint)
             paths  = path.paths
             paths -= path.children.values.map { |p| p.send(constraint) ? [] : p.paths }.flatten
-            paths
-          else
-            []
+            all.concat(paths)
           end
-        end.flatten.uniq.select { |p| File.exists?(p) }
+        end
+        all.uniq!
+        all.reject! { |p| !File.exists?(p) }
+        all
       end
     end
 
@@ -80,15 +84,16 @@ module Rails
       attr_accessor :glob
 
       def initialize(root, *paths)
-        @options  = paths.last.is_a?(::Hash) ? paths.pop : {}
+        options   = paths.last.is_a?(::Hash) ? paths.pop : {}
         @children = {}
         @root     = root
         @paths    = paths.flatten
-        @glob     = @options.delete(:glob)
+        @glob     = options[:glob]
 
-        @load_once  = @options[:load_once]
-        @eager_load = @options[:eager_load]
-        @load_path  = @options[:load_path] || @eager_load || @load_once
+        autoload_once! if options[:autoload_once]
+        eager_load!    if options[:eager_load]
+        autoload!      if options[:autoload]
+        load_path!     if options[:load_path]
 
         @root.all_paths << self
       end
@@ -111,24 +116,30 @@ module Rails
         @paths.concat paths
       end
 
-      def load_once!
-        @load_once = true
-        @load_path = true
+      def autoload_once!
+        @autoload_once = true
       end
 
-      def load_once?
-        @load_once
+      def autoload_once?
+        @autoload_once
       end
 
       def eager_load!
         @eager_load = true
-        @load_path  = true
       end
 
       def eager_load?
         @eager_load
       end
 
+      def autoload!
+        @autoload = true
+      end
+
+      def autoload?
+        @autoload
+      end
+
       def load_path!
         @load_path = true
       end
diff --git a/railties/lib/rails/plugin.rb b/railties/lib/rails/plugin.rb
index fcdd099135..be229cc9a2 100644
--- a/railties/lib/rails/plugin.rb
+++ b/railties/lib/rails/plugin.rb
@@ -61,6 +61,16 @@ module Rails
       @config ||= Engine::Configuration.new
     end
 
+    initializer :handle_lib_autoload, :before => :set_load_path do |app|
+      paths = if app.config.reload_plugins
+        config.autoload_paths
+      else
+        config.autoload_once_paths
+      end
+
+      paths.concat config.paths.lib.to_a
+    end
+
     initializer :load_init_rb, :before => :load_config_initializers do |app|
       files = %w(rails/init.rb init.rb).map { |path| File.expand_path path, root }
       if initrb = files.find { |path| File.file? path }
@@ -77,11 +87,5 @@ module Rails
         raise "\"#{name}\" is a Railtie/Engine and cannot be installed as plugin"
       end
     end
-
-  protected
-
-    def reloadable?(app)
-      app.config.reload_plugins
-    end
   end
 end
diff --git a/railties/test/paths_test.rb b/railties/test/paths_test.rb
index 92c7b2ba0e..008247cb1a 100644
--- a/railties/test/paths_test.rb
+++ b/railties/test/paths_test.rb
@@ -120,36 +120,36 @@ class PathsTest < ActiveSupport::TestCase
 
   test "it is possible to add a path that should be loaded only once" do
     @root.app = "/app"
-    @root.app.load_once!
-    assert @root.app.load_once?
-    assert @root.load_once.include?(@root.app.paths.first)
+    @root.app.autoload_once!
+    assert @root.app.autoload_once?
+    assert @root.autoload_once.include?(@root.app.paths.first)
   end
 
   test "it is possible to add a path without assignment and specify it should be loaded only once" do
-    @root.app "/app", :load_once => true
-    assert @root.app.load_once?
-    assert @root.load_once.include?("/app")
+    @root.app "/app", :autoload_once => true
+    assert @root.app.autoload_once?
+    assert @root.autoload_once.include?("/app")
   end
 
   test "it is possible to add multiple paths without assignment and specify it should be loaded only once" do
-    @root.app "/app", "/app2", :load_once => true
-    assert @root.app.load_once?
-    assert @root.load_once.include?("/app")
-    assert @root.load_once.include?("/app2")
+    @root.app "/app", "/app2", :autoload_once => true
+    assert @root.app.autoload_once?
+    assert @root.autoload_once.include?("/app")
+    assert @root.autoload_once.include?("/app2")
   end
 
-  test "making a path load_once more than once only includes it once in @root.load_once" do
+  test "making a path autoload_once more than once only includes it once in @root.load_once" do
     @root.app = "/app"
-    @root.app.load_once!
-    @root.app.load_once!
-    assert_equal 1, @root.load_once.select {|p| p == @root.app.paths.first }.size
+    @root.app.autoload_once!
+    @root.app.autoload_once!
+    assert_equal 1, @root.autoload_once.select {|p| p == @root.app.paths.first }.size
   end
 
-  test "paths added to a load_once path should be added to the load_once collection" do
+  test "paths added to a load_once path should be added to the autoload_once collection" do
     @root.app = "/app"
-    @root.app.load_once!
+    @root.app.autoload_once!
     @root.app << "/app2"
-    assert_equal 2, @root.load_once.size
+    assert_equal 2, @root.autoload_once.size
   end
 
   test "it is possible to mark a path as eager" do
@@ -173,11 +173,11 @@ class PathsTest < ActiveSupport::TestCase
   end
 
   test "it is possible to create a path without assignment and mark it both as eager and load once" do
-    @root.app "/app", :eager_load => true, :load_once => true
+    @root.app "/app", :eager_load => true, :autoload_once => true
     assert @root.app.eager_load?
-    assert @root.app.load_once?
+    assert @root.app.autoload_once?
     assert @root.eager_load.include?("/app")
-    assert @root.load_once.include?("/app")
+    assert @root.autoload_once.include?("/app")
   end
 
   test "making a path eager more than once only includes it once in @root.eager_paths" do
@@ -218,16 +218,16 @@ class PathsTest < ActiveSupport::TestCase
     assert_equal ["/app"], @root.load_paths
   end
 
-  test "adding a path to the eager paths also adds it to the load path" do
+  test "a path can be marked as autoload path" do
     @root.app = "app"
-    @root.app.eager_load!
-    assert_equal ["/foo/bar/app"], @root.load_paths
+    @root.app.autoload!
+    @root.app.models = "app/models"
+    assert_equal ["/foo/bar/app"], @root.autoload_paths
   end
 
-  test "adding a path to the load once paths also adds it to the load path" do
-    @root.app = "app"
-    @root.app.load_once!
-    assert_equal ["/foo/bar/app"], @root.load_paths
+  test "a path can be marked as autoload on creation" do
+    @root.app "/app", :autoload => true
+    assert @root.app.autoload?
+    assert_equal ["/app"], @root.autoload_paths
   end
-
 end
diff --git a/railties/test/railties/engine_test.rb b/railties/test/railties/engine_test.rb
index 3fe01e543c..7410a10712 100644
--- a/railties/test/railties/engine_test.rb
+++ b/railties/test/railties/engine_test.rb
@@ -20,10 +20,6 @@ module RailtiesTest
       end
     end
 
-    def reload_config
-      :reload_engines
-    end
-
     test "Rails::Engine itself does not respond to config" do
       boot_rails
       assert !Rails::Engine.respond_to?(:config)
diff --git a/railties/test/railties/plugin_test.rb b/railties/test/railties/plugin_test.rb
index 0f5f29468c..b143f56484 100644
--- a/railties/test/railties/plugin_test.rb
+++ b/railties/test/railties/plugin_test.rb
@@ -15,10 +15,6 @@ module RailtiesTest
       end
     end
 
-    def reload_config
-      :reload_plugins
-    end
-
     test "Rails::Plugin itself does not respond to config" do
       boot_rails
       assert !Rails::Plugin.respond_to?(:config)
@@ -37,6 +33,32 @@ module RailtiesTest
       assert_equal "Bukkits", Bukkits.name
     end
 
+    test "plugin gets added to dependency list" do
+      boot_rails
+      assert_equal "Another", Another.name
+    end
+
+    test "plugin constants get reloaded if config.reload_plugins is set to true" do
+      add_to_config <<-RUBY
+        config.reload_plugins = true
+      RUBY
+
+      boot_rails
+
+      assert_equal "Another", Another.name
+      ActiveSupport::Dependencies.clear
+      @plugin.delete("lib/another.rb")
+      assert_raises(NameError) { Another }
+    end
+
+    test "plugin constants are not reloaded by default" do
+      boot_rails
+      assert_equal "Another", Another.name
+      ActiveSupport::Dependencies.clear
+      @plugin.delete("lib/another.rb")
+      assert_nothing_raised { Another }
+    end
+
     test "it loads the plugin's init.rb file" do
       boot_rails
       assert_equal "loaded", BUKKITS
diff --git a/railties/test/railties/shared_tests.rb b/railties/test/railties/shared_tests.rb
index 3f78d7d3fe..ce7c55c11c 100644
--- a/railties/test/railties/shared_tests.rb
+++ b/railties/test/railties/shared_tests.rb
@@ -10,51 +10,25 @@ module RailtiesTest
       @app ||= Rails.application
     end
 
-    def test_plugin_puts_its_lib_directory_on_load_path
+    def test_puts_its_lib_directory_on_load_path
       boot_rails
       require "another"
       assert_equal "Another", Another.name
     end
 
-    def test_plugin_paths_get_added_to_as_dependency_list
-      boot_rails
-      assert_equal "Another", Another.name
-    end
-
-    def test_plugins_constants_are_not_reloaded_by_default
-      boot_rails
-      assert_equal "Another", Another.name
-      ActiveSupport::Dependencies.clear
-      @plugin.delete("lib/another.rb")
-      assert_nothing_raised { Another }
-    end
-
-    def test_plugin_constants_get_reloaded_if_config_reload_plugins
-      add_to_config <<-RUBY
-        config.#{reload_config} = true
-      RUBY
-
-      boot_rails
-
-      assert_equal "Another", Another.name
-      ActiveSupport::Dependencies.clear
-      @plugin.delete("lib/another.rb")
-      assert_raises(NameError) { Another }
-    end
-
-    def test_plugin_puts_its_models_directory_on_load_path
+    def test_puts_its_models_directory_on_autoload_path
       @plugin.write "app/models/my_bukkit.rb", "class MyBukkit ; end"
       boot_rails
       assert_nothing_raised { MyBukkit }
     end
 
-    def test_plugin_puts_its_controllers_directory_on_the_load_path
+    def test_puts_its_controllers_directory_on_autoload_path
       @plugin.write "app/controllers/bukkit_controller.rb", "class BukkitController ; end"
       boot_rails
       assert_nothing_raised { BukkitController }
     end
 
-    def test_plugin_adds_its_views_to_view_paths
+    def test_adds_its_views_to_view_paths
       @plugin.write "app/controllers/bukkit_controller.rb", <<-RUBY
         class BukkitController < ActionController::Base
           def index
@@ -72,7 +46,7 @@ module RailtiesTest
       assert_equal "Hello bukkits\n", response[2].body
     end
 
-    def test_plugin_adds_its_views_to_view_paths_with_lower_proriority
+    def test_adds_its_views_to_view_paths_with_lower_proriority_than_app_ones
       @plugin.write "app/controllers/bukkit_controller.rb", <<-RUBY
         class BukkitController < ActionController::Base
           def index
@@ -91,7 +65,7 @@ module RailtiesTest
       assert_equal "Hi bukkits\n", response[2].body
     end
 
-    def test_plugin_adds_helpers_to_controller_views
+    def test_adds_helpers_to_controller_views
       @plugin.write "app/controllers/bukkit_controller.rb", <<-RUBY
         class BukkitController < ActionController::Base
           def index
@@ -116,11 +90,10 @@ module RailtiesTest
       assert_equal "Hello bukkits\n", response[2].body
     end
 
-    def test_plugin_eager_load_any_path_under_app
+    def test_autoload_any_path_under_app
       @plugin.write "app/anything/foo.rb", <<-RUBY
         module Foo; end
       RUBY
-
       boot_rails
       assert Foo
     end
@@ -269,7 +242,7 @@ YAML
       assert_equal "Rendered from namespace", last_response.body
     end
 
-    def test_plugin_initializers
+    def test_initializers
       $plugin_initializer = false
       @plugin.write "config/initializers/foo.rb", <<-RUBY
         $plugin_initializer = true
@@ -279,7 +252,7 @@ YAML
       assert $plugin_initializer
     end
 
-    def test_plugin_midleware_referenced_in_configuration
+    def test_midleware_referenced_in_configuration
       @plugin.write "lib/bukkits.rb", <<-RUBY
         class Bukkits
           def initialize(app)