diff --git a/dvc/command/init.py b/dvc/command/init.py
index d0ddeb2cf..73aee7603 100644
--- a/dvc/command/init.py
+++ b/dvc/command/init.py
@@ -16,8 +16,6 @@ class InitError(DvcException):
 
 class CmdInit(CmdBase):
     CONFIG_TEMPLATE = '''[Global]
-DataDir = {}
-
 # Default target
 Target = 
 
@@ -92,28 +90,23 @@ ProjectName =
             return 1
 
         config_dir_path = self.get_not_existing_path(Config.CONFIG_DIR)
-        data_dir_path = self.get_not_existing_path(self.parsed_args.data_dir)
         cache_dir_path = self.get_not_existing_path(Config.CONFIG_DIR, Config.CACHE_DIR)
         state_dir_path = self.get_not_existing_path(Config.CONFIG_DIR, Config.STATE_DIR)
 
-        self.settings.config.set(self.parsed_args.data_dir)
-
         conf_file_name = self.get_not_existing_conf_file_name()
 
         config_dir_path.mkdir()
-        data_dir_path.mkdir()
         cache_dir_path.mkdir()
         state_dir_path.mkdir()
-        Logger.info('Directories {}/, {}/, {}/, {}/ were created'.format(
+        Logger.info('Directories {}/, {}/, {}/ were created'.format(
             config_dir_path.name,
-            data_dir_path.name,
             os.path.join(config_dir_path.name, cache_dir_path.name),
             os.path.join(config_dir_path.name, state_dir_path.name)))
 
         self.create_empty_file()
 
         conf_file = open(conf_file_name, 'wt')
-        conf_file.write(self.CONFIG_TEMPLATE.format(data_dir_path.name))
+        conf_file.write(self.CONFIG_TEMPLATE)
         conf_file.close()
 
         self.git.modify_gitignore([os.path.join(config_dir_path.name, cache_dir_path.name),
@@ -123,7 +116,7 @@ ProjectName =
         return self.commit_if_needed(message)
 
     def create_empty_file(self):
-        empty_data_path = os.path.join(self.parsed_args.data_dir, self.EMPTY_FILE_NAME)
+        empty_data_path = os.path.join(self.settings.git.git_dir_abs, self.EMPTY_FILE_NAME)
 
         data_item = self.settings.path_factory.data_item(empty_data_path)
         open(empty_data_path, 'w').close()
diff --git a/dvc/command/merge.py b/dvc/command/merge.py
index 13afab86b..f730aa784 100644
--- a/dvc/command/merge.py
+++ b/dvc/command/merge.py
@@ -3,7 +3,6 @@ import json
 from dvc.command.base import CmdBase, DvcLock
 from dvc.logger import Logger
 from dvc.state_file import StateFile
-from dvc.path.data_item import NotInDataDirError
 
 class CmdMerge(CmdBase):
     def __init__(self, settings):
diff --git a/dvc/command/repro.py b/dvc/command/repro.py
index ba1cbdb1d..16b7f1763 100644
--- a/dvc/command/repro.py
+++ b/dvc/command/repro.py
@@ -6,7 +6,7 @@ from dvc.command.import_file import CmdImportFile
 from dvc.command.run import CmdRun
 from dvc.logger import Logger
 from dvc.exceptions import DvcException
-from dvc.path.data_item import NotInDataDirError
+from dvc.path.data_item import DataDirError
 from dvc.state_file import StateFile
 from dvc.system import System
 
@@ -64,8 +64,8 @@ class CmdRepro(CmdRun):
 
         data_item_list, external_files_names = self.settings.path_factory.to_data_items(target)
         if external_files_names:
-            Logger.error('Files from outside of the data directory "{}" could not be reproduced: {}'.
-                         format(self.config.data_dir, ' '.join(external_files_names)))
+            Logger.error('Files from outside of the repo could not be reproduced: {}'.
+                         format(' '.join(external_files_names)))
             return 1
 
         if self.repro_data_items(data_item_list, recursive, force):
@@ -303,7 +303,7 @@ class ReproChange(object):
         for input_file in self.state.input_files:
             try:
                 data_item = self._settings.path_factory.data_item(input_file)
-            except NotInDataDirError:
+            except DataDirError:
                 raise ReproError(u'The dependency file "{}" is not a data item'.format(input_file))
             except Exception as ex:
                 raise ReproError(u'Unable to reproduced the dependency file "{}": {}'.format(
diff --git a/dvc/command/run.py b/dvc/command/run.py
index 51759977b..498d1b2a5 100644
--- a/dvc/command/run.py
+++ b/dvc/command/run.py
@@ -5,7 +5,7 @@ from dvc.command.base import CmdBase, DvcLock
 from dvc.exceptions import DvcException
 from dvc.git_wrapper import GitWrapper
 from dvc.logger import Logger
-from dvc.path.data_item import NotInDataDirError, NotInGitDirError
+from dvc.path.data_item import DataDirError, NotInGitDirError
 from dvc.repository_change import RepositoryChange
 from dvc.state_file import StateFile
 from dvc.utils import cached_property
diff --git a/dvc/command/show_pipeline.py b/dvc/command/show_pipeline.py
index 55f0c6e03..6f7d54b48 100644
--- a/dvc/command/show_pipeline.py
+++ b/dvc/command/show_pipeline.py
@@ -34,7 +34,7 @@ class CmdShowPipeline(Traverse):
 
     def draw_targets(self, target):
         if not target:
-            target = self.settings.config.data_dir
+            target = '.'
             return self.draw(self.g, target, target)
 
         for t in self.parsed_args.target:
@@ -49,7 +49,7 @@ class CmdShowPipeline(Traverse):
 
     def run(self):
         saved_targets = self.settings.parsed_args.target
-        self.settings.parsed_args.target = [self.settings.config.data_dir]
+        self.settings.parsed_args.target = ['.']
  
         ret = super(CmdShowPipeline, self).run()
 
@@ -70,7 +70,7 @@ class CmdShowPipeline(Traverse):
         name = data_item.data.relative
         state = StateFile.load(data_item, self.git)
 
-        if name == os.path.join(self.settings.config.data_dir, CmdInit.EMPTY_FILE_NAME):
+        if name == os.path.join('.', CmdInit.EMPTY_FILE_NAME):
             return
 
         self.g.add_node(name)
diff --git a/dvc/command/traverse.py b/dvc/command/traverse.py
index 6958d8241..2a29ab796 100644
--- a/dvc/command/traverse.py
+++ b/dvc/command/traverse.py
@@ -44,10 +44,6 @@ class Traverse(CmdBase):
                     msg = '[TraverseFileTree] Directory "%s" cannot be traversed. Use --recurcive flag.'
                     raise TraverseError(msg % target)
 
-                if self._do_not_start_from_root and self.settings.path_factory.data_item(target).data_dvc_short == '':
-                    # The entire data directory
-                    raise TraverseError('[Traverse] Root data directory "%s" cannot be traversed' % target)
-
                 self._traverse_dir(target)
             else:
                 self.process_file(target)
diff --git a/dvc/config.py b/dvc/config.py
index d2b890d93..cff3b41e0 100644
--- a/dvc/config.py
+++ b/dvc/config.py
@@ -22,23 +22,16 @@ class ConfigI(object):
     STATE_DIR = 'state'
     CACHE_DIR = 'cache'
 
-    def __init__(self, data_dir=None, cloud=None, conf_parser=None):
-        self._data_dir = None
+    def __init__(self, cloud=None, conf_parser=None):
         self._conf_parser = None
         self._cloud = None
-        self.set(data_dir, cloud, conf_parser)
+        self.set(cloud, conf_parser)
 
-    def set(self, data_dir, cloud=None, conf_parser=None):
+    def set(self, cloud=None, conf_parser=None):
         """ Set config params """
-        self._data_dir = data_dir
         self._cloud = cloud
         self._conf_parser = conf_parser
 
-    @property
-    def data_dir(self):
-        """ Directory with data files """
-        return self._data_dir
-
     @property
     def cache_dir(self):
         """ Directory with cached data files """
@@ -82,8 +75,7 @@ class Config(ConfigI):
         level = self._config['Global']['LogLevel']
         Logger.set_level(level)
 
-        super(Config, self).__init__(self._config['Global']['DataDir'],
-                                     self._config['Global']['Cloud'],
+        super(Config, self).__init__(self._config['Global']['Cloud'],
                                      self._config)
 
     @property
diff --git a/dvc/path/data_item.py b/dvc/path/data_item.py
index e5478f7a5..1620868ed 100644
--- a/dvc/path/data_item.py
+++ b/dvc/path/data_item.py
@@ -13,22 +13,21 @@ class DataItemError(DvcException):
         super(DataItemError, self).__init__('Data item error: {}'.format(msg))
 
 
-class NotInDataDirError(DvcException):
-    def __init__(self, file, data_dir, pattern='the file "{}" is not in the data directory "{}"'):
-        msg = pattern.format(file, data_dir)
-        super(NotInDataDirError, self).__init__(msg)
+class DataDirError(DvcException):
+    def __init__(self, msg):
+        super(DataDirError, self).__init__(msg)
 
 
-class DataItemInStatusDirError(NotInDataDirError):
-    def __init__(self, file, data_dir):
-        pattern = 'the file "{}" is in state directory, not in the data directory "{}"'
-        super(DataItemInStatusDirError, self).__init__(file, data_dir, pattern)
+class DataItemInStatusDirError(DataDirError):
+    def __init__(self, file):
+        msg = 'File "{}" is in state directory'.format(file)
+        super(DataItemInStatusDirError, self).__init__(msg)
 
 
-class NotInGitDirError(NotInDataDirError):
+class NotInGitDirError(DataDirError):
     def __init__(self, file, git_dir):
-        pattern = 'the file "{}" is not in git directory "{}"'
-        super(NotInGitDirError, self).__init__(file, git_dir, pattern)
+        msg = 'File "{}" is not in git directory "{}"'.format(file, git_dir)
+        super(NotInGitDirError, self).__init__(msg)
 
 
 class DataItem(object):
@@ -46,11 +45,8 @@ class DataItem(object):
             raise NotInGitDirError(data_file, self._git.git_dir_abs)
 
         if self._data.abs.startswith(self.state_dir_abs):
-            raise DataItemInStatusDirError(data_file, self._config.data_dir)
+            raise DataItemInStatusDirError(data_file)
 
-        if not self._data.abs.startswith(self.data_dir_abs) or \
-                not self._data.dvc.startswith(self._config.data_dir):
-            raise NotInDataDirError(data_file, self._config.data_dir)
         pass
 
     def copy(self, cache_file=None):
@@ -72,14 +68,10 @@ class DataItem(object):
     def data(self):
         return self._data
 
-    @property
-    def data_dvc_short(self):
-        return self._data.dvc[len(self._config.data_dir)+1:]
-
     @cached_property
     def state(self):
         state_dir = os.path.join(self._git.git_dir_abs, self._config.state_dir)
-        state_file = os.path.join(state_dir, self.data_dvc_short + self.STATE_FILE_SUFFIX)
+        state_file = os.path.join(state_dir, self.data.dvc + self.STATE_FILE_SUFFIX)
         return Path(state_file, self._git)
 
     @cached_property
@@ -117,10 +109,6 @@ class DataItem(object):
         resolved_cache = os.path.realpath(self._data.relative)
         return Path(resolved_cache, self._git)
 
-    @cached_property
-    def data_dir_abs(self):
-        return os.path.join(self._git.git_dir_abs, self._config.data_dir)
-
     @cached_property
     def state_dir_abs(self):
         return os.path.join(self._git.git_dir_abs, self._config.state_dir)
diff --git a/dvc/path/factory.py b/dvc/path/factory.py
index 68078f74a..1ca938cc5 100644
--- a/dvc/path/factory.py
+++ b/dvc/path/factory.py
@@ -1,6 +1,6 @@
 import os
 
-from dvc.path.data_item import DataItem, DataItemError, NotInDataDirError
+from dvc.path.data_item import DataItem, DataItemError, DataDirError
 from dvc.path.path import Path
 from dvc.path.stated_data_item import StatedDataItem
 from dvc.system import System
@@ -26,7 +26,7 @@ class PathFactory(object):
         return self.existing_data_item(path.relative)
 
     def is_data_item(self, fname):
-        data = os.path.relpath(os.path.realpath(fname), self._config.data_dir)
+        data = os.path.relpath(os.path.realpath(fname), self._git.git_dir_abs)
         state = os.path.join(self._config.state_dir, data + DataItem.STATE_FILE_SUFFIX)
         return os.path.isfile(state)
 
@@ -44,7 +44,7 @@ class PathFactory(object):
             try:
                 data_item = DataItem(file, self._git, self._config)
                 result.append(data_item)
-            except NotInDataDirError:
+            except DataDirError:
                 externally_created_files.append(file)
 
         return result, externally_created_files
diff --git a/dvc/path/stated_data_item.py b/dvc/path/stated_data_item.py
index 01fef1532..15feb3ba6 100644
--- a/dvc/path/stated_data_item.py
+++ b/dvc/path/stated_data_item.py
@@ -36,4 +36,4 @@ class StatedDataItem(DataItem):
         return self.is_new or self.is_modified or self.is_removed
 
     def __repr__(self):
-        return u'({}, {})'.format(self.state, self.data_dvc_short)
+        return u'({}, {})'.format(self.state, self.data.dvc)
diff --git a/dvc/repository_change.py b/dvc/repository_change.py
index 10aad3d25..c34916a92 100644
--- a/dvc/repository_change.py
+++ b/dvc/repository_change.py
@@ -4,7 +4,7 @@ from dvc.exceptions import DvcException
 from dvc.git_wrapper import GitWrapper
 from dvc.executor import Executor
 from dvc.logger import Logger
-from dvc.path.data_item import NotInDataDirError, DataItemInStatusDirError
+from dvc.path.data_item import DataDirError, DataItemInStatusDirError
 from dvc.path.stated_data_item import StatedDataItem
 from dvc.utils import cached_property
 
@@ -76,7 +76,7 @@ class RepositoryChange(object):
                          item.data.dvc))
         except DataItemInStatusDirError:
             self._created_status_files.append(file)
-        except NotInDataDirError:
+        except DataDirError:
             self._externally_created_files.append(file)
         pass
 
@@ -116,7 +116,7 @@ class RepositoryChange(object):
 
     def data_file_timesteps(self):
         res = set()
-        for root, dirs, files in os.walk(self._settings.config.data_dir):
+        for root, dirs, files in os.walk('.'):
             for file in files:
                 filename = os.path.join(root, file)
                 if os.path.exists(filename):
diff --git a/dvc/state_file.py b/dvc/state_file.py
index 22004fb52..2e1bed6b5 100644
--- a/dvc/state_file.py
+++ b/dvc/state_file.py
@@ -5,7 +5,7 @@ import json
 import re
 
 from dvc.exceptions import DvcException
-from dvc.path.data_item import NotInDataDirError
+from dvc.path.data_item import DataDirError
 from dvc.system import System
 
 
@@ -248,7 +248,7 @@ class StateFile(object):
             try:
                 data_item = self.settings.path_factory.data_item(arg)
                 result.append(data_item.data.dvc)
-            except NotInDataDirError:
+            except DataDirError:
                 result.append(arg)
 
         return result