diff --git a/tools/shared.py b/tools/shared.py
index dce947919ac85..d0af006f92d14 100644
--- a/tools/shared.py
+++ b/tools/shared.py
@@ -265,6 +265,12 @@ def generate_config(path, first_time=False):
 # 4. Fall back users home directory (~/.emscripten).
 
 embedded_config = path_from_root('.emscripten')
+# For compatability with emsdk --embedded mode also look two levels up.  This
+# could be removed in emsdk was use the emscripten directory itself for the
+# embedded config: https://github.com/emscripten-core/emsdk/pull/367
+emsdk_root = os.path.dirname(os.path.dirname(__rootpath__))
+emsdk_embedded_config = os.path.join(emsdk_root, '.emscripten')
+
 if '--em-config' in sys.argv:
   EM_CONFIG = sys.argv[sys.argv.index('--em-config') + 1]
   # And now remove it from sys.argv
@@ -289,6 +295,8 @@ def generate_config(path, first_time=False):
   EM_CONFIG = os.environ['EM_CONFIG']
 elif os.path.exists(embedded_config):
   EM_CONFIG = embedded_config
+elif os.path.exists(emsdk_embedded_config):
+  EM_CONFIG = emsdk_embedded_config
 else:
   EM_CONFIG = '~/.emscripten'