diff --git a/.gitignore b/.gitignore
index cd6a7fc9e..ebeb552dd 100644
--- a/.gitignore
+++ b/.gitignore
@@ -28,6 +28,7 @@ dist/
 *.egg-info
 issue/
 env/
+.env/
 3rdparty/
 .tox
 .cache
diff --git a/CHANGELOG b/CHANGELOG
index fc2eb23bd..a95386a92 100644
--- a/CHANGELOG
+++ b/CHANGELOG
@@ -42,6 +42,7 @@
 - fix issue82: avoid loading conftest files from setup.cfg/pytest.ini/tox.ini
   files and upwards by default (--confcutdir can still be set to override this).
   Thanks Bruno Oliveira for the PR.
+- merge the pytest-cache extension into core
 
 - fix issue768: docstrings found in python modules were not setting up session
   fixtures. Thanks Jason R. Coombs for reporting and Bruno Oliveira for the PR.
diff --git a/_pytest/cacheprovider.py b/_pytest/cacheprovider.py
new file mode 100755
index 000000000..11023dc7c
--- /dev/null
+++ b/_pytest/cacheprovider.py
@@ -0,0 +1,214 @@
+"""
+merged implementation of the cache provider
+
+the name cache was not choosen to ensure pluggy automatically
+ignores the external pytest-cache
+"""
+
+import py
+import pytest
+import json
+from os.path import sep as _sep, altsep as _altsep
+
+
+class Cache:
+    def __init__(self, config):
+        self.config = config
+        self._cachedir = config.rootdir.join(".cache")
+        self.trace = config.trace.root.get("cache")
+        if config.getvalue("clearcache"):
+            self.trace("clearing cachedir")
+            if self._cachedir.check():
+                self._cachedir.remove()
+            self._cachedir.mkdir()
+
+    def makedir(self, name):
+        """ return a directory path object with the given name.  If the
+        directory does not yet exist, it will be created.  You can use it
+        to manage files likes e. g. store/retrieve database
+        dumps across test sessions.
+
+        :param name: must be a string not containing a ``/`` separator.
+             Make sure the name contains your plugin or application
+             identifiers to prevent clashes with other cache users.
+        """
+        if _sep in name or _altsep is not None and _altsep in name:
+            raise ValueError("name is not allowed to contain path separators")
+        return self._cachedir.ensure_dir("d", name)
+
+    def _getvaluepath(self, key):
+        return self._cachedir.join('v', *key.split('/'))
+
+    def get(self, key, default):
+        """ return cached value for the given key.  If no value
+        was yet cached or the value cannot be read, the specified
+        default is returned.
+
+        :param key: must be a ``/`` separated value. Usually the first
+             name is the name of your plugin or your application.
+        :param default: must be provided in case of a cache-miss or
+             invalid cache values.
+
+        """
+        path = self._getvaluepath(key)
+        if path.check():
+            try:
+                with path.open("r") as f:
+                    return json.load(f)
+            except ValueError:
+                self.trace("cache-invalid at %s" % (path,))
+        return default
+
+    def set(self, key, value):
+        """ save value for the given key.
+
+        :param key: must be a ``/`` separated value. Usually the first
+             name is the name of your plugin or your application.
+        :param value: must be of any combination of basic
+               python types, including nested types
+               like e. g. lists of dictionaries.
+        """
+        path = self._getvaluepath(key)
+        path.dirpath().ensure_dir()
+        with path.open("w") as f:
+            self.trace("cache-write %s: %r" % (key, value,))
+            json.dump(value, f, indent=2, sort_keys=True)
+
+
+class LFPlugin:
+    """ Plugin which implements the --lf (run last-failing) option """
+    def __init__(self, config):
+        self.config = config
+        active_keys = 'lf', 'failedfirst'
+        self.active = any(config.getvalue(key) for key in active_keys)
+        if self.active:
+            self.lastfailed = config.cache.get("cache/lastfailed", {})
+        else:
+            self.lastfailed = {}
+
+    def pytest_report_header(self):
+        if self.active:
+            if not self.lastfailed:
+                mode = "run all (no recorded failures)"
+            else:
+                mode = "rerun last %d failures%s" % (
+                    len(self.lastfailed),
+                    " first" if self.config.getvalue("failedfirst") else "")
+            return "run-last-failure: %s" % mode
+
+    def pytest_runtest_logreport(self, report):
+        if report.failed and "xfail" not in report.keywords:
+            self.lastfailed[report.nodeid] = True
+        elif not report.failed:
+            if report.when == "call":
+                self.lastfailed.pop(report.nodeid, None)
+
+    def pytest_collectreport(self, report):
+        passed = report.outcome in ('passed', 'skipped')
+        if passed:
+            if report.nodeid in self.lastfailed:
+                self.lastfailed.pop(report.nodeid)
+                self.lastfailed.update(
+                    (item.nodeid, True)
+                    for item in report.result)
+        else:
+            self.lastfailed[report.nodeid] = True
+
+    def pytest_collection_modifyitems(self, session, config, items):
+        if self.active and self.lastfailed:
+            previously_failed = []
+            previously_passed = []
+            for item in items:
+                if item.nodeid in self.lastfailed:
+                    previously_failed.append(item)
+                else:
+                    previously_passed.append(item)
+            if not previously_failed and previously_passed:
+                # running a subset of all tests with recorded failures outside
+                # of the set of tests currently executing
+                pass
+            elif self.config.getvalue("failedfirst"):
+                items[:] = previously_failed + previously_passed
+            else:
+                items[:] = previously_failed
+                config.hook.pytest_deselected(items=previously_passed)
+
+    def pytest_sessionfinish(self, session):
+        config = self.config
+        if config.getvalue("showcache") or hasattr(config, "slaveinput"):
+            return
+        config.cache.set("cache/lastfailed", self.lastfailed)
+
+
+def pytest_addoption(parser):
+    group = parser.getgroup("general")
+    group.addoption(
+        '--lf', action='store_true', dest="lf",
+        help="rerun only the tests that failed "
+             "at the last run (or all if none failed)")
+    group.addoption(
+        '--ff', action='store_true', dest="failedfirst",
+        help="run all tests but run the last failures first.  "
+             "This may re-order tests and thus lead to "
+             "repeated fixture setup/teardown")
+    group.addoption(
+        '--cache', action='store_true', dest="showcache",
+        help="show cache contents, don't perform collection or tests")
+    group.addoption(
+        '--clearcache', action='store_true', dest="clearcache",
+        help="remove all cache contents at start of test run.")
+
+
+def pytest_cmdline_main(config):
+    if config.option.showcache:
+        from _pytest.main import wrap_session
+        return wrap_session(config, showcache)
+
+
+@pytest.hookimpl(tryfirst=True)
+def pytest_configure(config):
+    config.cache = Cache(config)
+    config.pluginmanager.register(LFPlugin(config), "lfplugin")
+
+
+def pytest_report_header(config):
+    if config.option.verbose:
+        relpath = py.path.local().bestrelpath(config.cache._cachedir)
+        return "cachedir: %s" % relpath
+
+
+def showcache(config, session):
+    from pprint import pprint
+    tw = py.io.TerminalWriter()
+    tw.line("cachedir: " + str(config.cache._cachedir))
+    if not config.cache._cachedir.check():
+        tw.line("cache is empty")
+        return 0
+    dummy = object()
+    basedir = config.cache._cachedir
+    vdir = basedir.join("v")
+    tw.sep("-", "cache values")
+    for valpath in vdir.visit(lambda x: x.isfile()):
+        key = valpath.relto(vdir).replace(valpath.sep, "/")
+        val = config.cache.get(key, dummy)
+        if val is dummy:
+            tw.line("%s contains unreadable content, "
+                  "will be ignored" % key)
+        else:
+            tw.line("%s contains:" % key)
+            stream = py.io.TextIO()
+            pprint(val, stream=stream)
+            for line in stream.getvalue().splitlines():
+                tw.line("  " + line)
+
+    ddir = basedir.join("d")
+    if ddir.isdir() and ddir.listdir():
+        tw.sep("-", "cache directories")
+        for p in basedir.join("d").visit():
+            #if p.check(dir=1):
+            #    print("%s/" % p.relto(basedir))
+            if p.isfile():
+                key = p.relto(basedir)
+                tw.line("%s is a file of length %d" % (
+                        key, p.size()))
+    return 0
diff --git a/_pytest/config.py b/_pytest/config.py
index 2a3c71201..e9888bdf6 100644
--- a/_pytest/config.py
+++ b/_pytest/config.py
@@ -64,7 +64,7 @@ _preinit = []
 default_plugins = (
      "mark main terminal runner python pdb unittest capture skipping "
      "tmpdir monkeypatch recwarn pastebin helpconfig nose assertion genscript "
-     "junitxml resultlog doctest").split()
+     "junitxml resultlog doctest cacheprovider").split()
 
 builtin_plugins = set(default_plugins)
 builtin_plugins.add("pytester")
diff --git a/doc/en/apiref.rst b/doc/en/apiref.rst
deleted file mode 100644
index 6b9a6a5e3..000000000
--- a/doc/en/apiref.rst
+++ /dev/null
@@ -1,27 +0,0 @@
-
-.. _apiref:
-
-pytest reference documentation
-================================================
-
-.. toctree::
-   :maxdepth: 2
-
-   builtin
-   customize
-   assert
-   fixture
-   yieldfixture
-   parametrize
-   xunit_setup
-   capture
-   monkeypatch
-   xdist
-   tmpdir
-   mark
-   skipping
-   recwarn
-   unittest
-   nose
-   doctest
-
diff --git a/doc/en/cache.txt b/doc/en/cache.txt
new file mode 100644
index 000000000..51437eb8e
--- /dev/null
+++ b/doc/en/cache.txt
@@ -0,0 +1,249 @@
+cache: working with cross-testrun state
+=======================================
+
+Usage
+---------
+
+plugins can access the `config.cache`_ object
+which helps sharing values between ``py.test`` invocations.
+
+The plugin provides two options to rerun failures, namely:
+
+* ``--lf`` (last failures) - to only re-run the failures.
+* ``--ff`` (failures first) - to run the failures first and then the rest of
+  the tests.
+
+For cleanup (usually not needed), a ``--clearcache`` option allows to remove
+all cross-session cache contents ahead of a test run.
+
+
+Rerunning only failures or failures first
+-----------------------------------------------
+
+First, let's create 50 test invocation of which only 2 fail::
+
+    # content of test_50.py
+    import pytest
+
+    @pytest.mark.parametrize("i", range(50))
+    def test_num(i):
+        if i in (17, 25):
+           pytest.fail("bad luck")
+
+If you run this for the first time you will see two failures::
+
+    $ py.test -q
+    .................F.......F........................
+    =================================== FAILURES ===================================
+    _________________________________ test_num[17] _________________________________
+
+    i = 17
+
+        @pytest.mark.parametrize("i", range(50))
+        def test_num(i):
+            if i in (17,25):
+    >          pytest.fail("bad luck")
+    E          Failed: bad luck
+
+    test_50.py:6: Failed
+    _________________________________ test_num[25] _________________________________
+
+    i = 25
+
+        @pytest.mark.parametrize("i", range(50))
+        def test_num(i):
+            if i in (17,25):
+    >          pytest.fail("bad luck")
+    E          Failed: bad luck
+
+    test_50.py:6: Failed
+
+If you then run it with ``--lf`` you will run only the two failing test
+from the last run::
+
+    $ py.test --lf
+    ============================= test session starts ==============================
+    platform linux2 -- Python 2.7.3 -- pytest-2.3.5
+    run-last-failure: rerun last 2 failures
+    plugins: cache
+    collected 50 items
+
+    test_50.py FF
+
+    =================================== FAILURES ===================================
+    _________________________________ test_num[17] _________________________________
+
+    i = 17
+
+        @pytest.mark.parametrize("i", range(50))
+        def test_num(i):
+            if i in (17,25):
+    >          pytest.fail("bad luck")
+    E          Failed: bad luck
+
+    test_50.py:6: Failed
+    _________________________________ test_num[25] _________________________________
+
+    i = 25
+
+        @pytest.mark.parametrize("i", range(50))
+        def test_num(i):
+            if i in (17,25):
+    >          pytest.fail("bad luck")
+    E          Failed: bad luck
+
+    test_50.py:6: Failed
+    =================== 2 failed, 48 deselected in 0.02 seconds ====================
+
+The last line indicates that 48 tests have not been run.
+
+If you run with the ``--ff`` option, all tests will be run but the first
+failures will be executed first (as can be seen from the series of ``FF`` and
+dots)::
+
+    $ py.test --ff
+    ============================= test session starts ==============================
+    platform linux2 -- Python 2.7.3 -- pytest-2.3.5
+    run-last-failure: rerun last 2 failures first
+    plugins: cache
+    collected 50 items
+
+    test_50.py FF................................................
+
+    =================================== FAILURES ===================================
+    _________________________________ test_num[17] _________________________________
+
+    i = 17
+
+        @pytest.mark.parametrize("i", range(50))
+        def test_num(i):
+            if i in (17,25):
+    >          pytest.fail("bad luck")
+    E          Failed: bad luck
+
+    test_50.py:6: Failed
+    _________________________________ test_num[25] _________________________________
+
+    i = 25
+
+        @pytest.mark.parametrize("i", range(50))
+        def test_num(i):
+            if i in (17,25):
+    >          pytest.fail("bad luck")
+    E          Failed: bad luck
+
+    test_50.py:6: Failed
+    ===================== 2 failed, 48 passed in 0.07 seconds ======================
+
+.. _`config.cache`:
+
+The new config.cache object
+--------------------------------
+
+.. regendoc:wipe
+
+Plugins or conftest.py support code can get a cached value
+using the pytest ``config`` object.  Here is a basic example
+plugin which implements a `funcarg <http://pytest.org/latest/funcargs.html>`_
+which re-uses previously created state across py.test invocations::
+
+    # content of test_caching.py
+    import time
+
+    def pytest_funcarg__mydata(request):
+        val = request.config.cache.get("example/value", None)
+        if val is None:
+            time.sleep(9*0.6) # expensive computation :)
+            val = 42
+            request.config.cache.set("example/value", val)
+        return val
+
+    def test_function(mydata):
+        assert mydata == 23
+
+If you run this command once, it will take a while because
+of the sleep::
+
+    $ py.test -q
+    F
+    =================================== FAILURES ===================================
+    ________________________________ test_function _________________________________
+
+    mydata = 42
+
+        def test_function(mydata):
+    >       assert mydata == 23
+    E       assert 42 == 23
+
+    test_caching.py:12: AssertionError
+
+If you run it a second time the value will be retrieved from
+the cache and this will be quick::
+
+    $ py.test -q
+    F
+    =================================== FAILURES ===================================
+    ________________________________ test_function _________________________________
+
+    mydata = 42
+
+        def test_function(mydata):
+    >       assert mydata == 23
+    E       assert 42 == 23
+
+    test_caching.py:12: AssertionError
+
+Consult the `pytest-cache API <http://packages.python.org/pytest-cache/api.html>`_
+for more details.
+
+
+Inspecting Cache content
+-------------------------------
+
+You can always peek at the content of the cache using the
+``--cache`` command line option::
+
+    $ py.test --cache
+    ============================= test session starts ==============================
+    platform linux2 -- Python 2.7.3 -- pytest-2.3.5
+    plugins: cache
+    cachedir: /tmp/doc-exec-6/.cache
+    --------------------------------- cache values ---------------------------------
+    example/value contains:
+      42
+    cache/lastfailed contains:
+      set(['test_caching.py::test_function'])
+
+    ===============================  in 0.01 seconds ===============================
+
+Clearing Cache content
+-------------------------------
+
+You can instruct pytest to clear all cache files and values
+by adding the ``--clearcache`` option like this::
+
+    py.test --clearcache
+
+This is recommended for invocations from Continous Integration
+servers where isolation and correctness is more important
+than speed.
+
+
+config.cache API
+========================================
+
+The `config.cache`` object allows other plugins,
+including ``conftest.py`` files,
+to safely and flexibly store and retrieve values across
+test runs because the ``config`` object is available
+in many places.
+
+Under the hood, the cache plugin uses the simple
+dumps/loads API of the json stdlib module
+
+.. currentmodule:: pytest_cache
+
+.. automethod:: Cache.get
+.. automethod:: Cache.set
+.. automethod:: Cache.makedir
+
diff --git a/testing/test_cache.py b/testing/test_cache.py
new file mode 100755
index 000000000..142d676a8
--- /dev/null
+++ b/testing/test_cache.py
@@ -0,0 +1,96 @@
+import os
+import pytest
+import shutil
+import py
+
+pytest_plugins = "pytester",
+
+class TestNewAPI:
+    def test_config_cache_makedir(self, testdir):
+        testdir.makeini("[pytest]")
+        config = testdir.parseconfigure()
+        with pytest.raises(ValueError):
+            config.cache.makedir("key/name")
+
+        p = config.cache.makedir("name")
+        assert p.check()
+
+    def test_config_cache_dataerror(self, testdir):
+        testdir.makeini("[pytest]")
+        config = testdir.parseconfigure()
+        cache = config.cache
+        pytest.raises(TypeError, lambda: cache.set("key/name", cache))
+        config.cache.set("key/name", 0)
+        config.cache._getvaluepath("key/name").write("123invalid")
+        val = config.cache.get("key/name", -2)
+        assert val == -2
+
+    def test_config_cache(self, testdir):
+        testdir.makeconftest("""
+            def pytest_configure(config):
+                # see that we get cache information early on
+                assert hasattr(config, "cache")
+        """)
+        testdir.makepyfile("""
+            def test_session(pytestconfig):
+                assert hasattr(pytestconfig, "cache")
+        """)
+        result = testdir.runpytest()
+        assert result.ret == 0
+        result.stdout.fnmatch_lines(["*1 passed*"])
+
+    def XXX_test_cachefuncarg(self, testdir):
+        testdir.makepyfile("""
+            import pytest
+            def test_cachefuncarg(cache):
+                val = cache.get("some/thing", None)
+                assert val is None
+                cache.set("some/thing", [1])
+                pytest.raises(TypeError, lambda: cache.get("some/thing"))
+                val = cache.get("some/thing", [])
+                assert val == [1]
+        """)
+        result = testdir.runpytest()
+        assert result.ret == 0
+        result.stdout.fnmatch_lines(["*1 passed*"])
+
+
+
+def test_cache_reportheader(testdir):
+    p = testdir.makepyfile("""
+        def test_hello():
+            pass
+    """)
+    result = testdir.runpytest("-v")
+    result.stdout.fnmatch_lines([
+        "cachedir: .cache"
+    ])
+
+def test_cache_show(testdir):
+    result = testdir.runpytest("--cache")
+    assert result.ret == 0
+    result.stdout.fnmatch_lines([
+        "*cache is empty*"
+    ])
+    p = testdir.makeconftest("""
+        def pytest_configure(config):
+            config.cache.set("my/name", [1,2,3])
+            config.cache.set("other/some", {1:2})
+            dp = config.cache.makedir("mydb")
+            dp.ensure("hello")
+            dp.ensure("world")
+    """)
+    result = testdir.runpytest()
+    assert result.ret == 0
+    result = testdir.runpytest("--cache")
+    result.stdout.fnmatch_lines_random([
+        "*cachedir:*",
+        "-*cache values*-",
+        "*my/name contains:",
+        "  [1, 2, 3]",
+        "*other/some contains*",
+        "  {*1*: 2}",
+        "-*cache directories*-",
+        "*mydb/hello*length 0*",
+        "*mydb/world*length 0*",
+    ])
diff --git a/testing/test_lastfailed.py b/testing/test_lastfailed.py
new file mode 100755
index 000000000..35ecd9a13
--- /dev/null
+++ b/testing/test_lastfailed.py
@@ -0,0 +1,235 @@
+import os
+import pytest
+import shutil
+import py
+
+pytest_plugins = "pytester",
+
+
+class TestLastFailed:
+    @pytest.mark.skipif("sys.version_info < (2,6)")
+    def test_lastfailed_usecase(self, testdir, monkeypatch):
+        monkeypatch.setenv("PYTHONDONTWRITEBYTECODE", 1)
+        p = testdir.makepyfile("""
+            def test_1():
+                assert 0
+            def test_2():
+                assert 0
+            def test_3():
+                assert 1
+        """)
+        result = testdir.runpytest()
+        result.stdout.fnmatch_lines([
+            "*2 failed*",
+        ])
+        p.write(py.code.Source("""
+            def test_1():
+                assert 1
+
+            def test_2():
+                assert 1
+
+            def test_3():
+                assert 0
+        """))
+        result = testdir.runpytest("--lf")
+        result.stdout.fnmatch_lines([
+            "*2 passed*1 desel*",
+        ])
+        result = testdir.runpytest("--lf")
+        result.stdout.fnmatch_lines([
+            "*1 failed*2 passed*",
+        ])
+        result = testdir.runpytest("--lf", "--clearcache")
+        result.stdout.fnmatch_lines([
+            "*1 failed*2 passed*",
+        ])
+
+        # Run this again to make sure clearcache is robust
+        if os.path.isdir('.cache'):
+            shutil.rmtree('.cache')
+        result = testdir.runpytest("--lf", "--clearcache")
+        result.stdout.fnmatch_lines([
+            "*1 failed*2 passed*",
+        ])
+
+    def test_failedfirst_order(self, testdir):
+        always_pass = testdir.tmpdir.join('test_a.py').write(py.code.Source("""
+            def test_always_passes():
+                assert 1
+        """))
+        always_fail = testdir.tmpdir.join('test_b.py').write(py.code.Source("""
+            def test_always_fails():
+                assert 0
+        """))
+        result = testdir.runpytest()
+        # Test order will be collection order; alphabetical
+        result.stdout.fnmatch_lines([
+            "test_a.py*",
+            "test_b.py*",
+        ])
+        result = testdir.runpytest("--lf", "--ff")
+        # Test order will be failing tests firs
+        result.stdout.fnmatch_lines([
+            "test_b.py*",
+            "test_a.py*",
+        ])
+
+    @pytest.mark.skipif("sys.version_info < (2,6)")
+    def test_lastfailed_difference_invocations(self, testdir, monkeypatch):
+        monkeypatch.setenv("PYTHONDONTWRITEBYTECODE", 1)
+        testdir.makepyfile(test_a="""
+            def test_a1():
+                assert 0
+            def test_a2():
+                assert 1
+        """, test_b="""
+            def test_b1():
+                assert 0
+        """)
+        p = testdir.tmpdir.join("test_a.py")
+        p2 = testdir.tmpdir.join("test_b.py")
+
+        result = testdir.runpytest()
+        result.stdout.fnmatch_lines([
+            "*2 failed*",
+        ])
+        result = testdir.runpytest("--lf", p2)
+        result.stdout.fnmatch_lines([
+            "*1 failed*",
+        ])
+        p2.write(py.code.Source("""
+            def test_b1():
+                assert 1
+        """))
+        result = testdir.runpytest("--lf", p2)
+        result.stdout.fnmatch_lines([
+            "*1 passed*",
+        ])
+        result = testdir.runpytest("--lf", p)
+        result.stdout.fnmatch_lines([
+            "*1 failed*1 desel*",
+        ])
+
+    @pytest.mark.skipif("sys.version_info < (2,6)")
+    def test_lastfailed_usecase_splice(self, testdir, monkeypatch):
+        monkeypatch.setenv("PYTHONDONTWRITEBYTECODE", 1)
+        p1 = testdir.makepyfile("""
+            def test_1():
+                assert 0
+        """)
+        p2 = testdir.tmpdir.join("test_something.py")
+        p2.write(py.code.Source("""
+            def test_2():
+                assert 0
+        """))
+        result = testdir.runpytest()
+        result.stdout.fnmatch_lines([
+            "*2 failed*",
+        ])
+        result = testdir.runpytest("--lf", p2)
+        result.stdout.fnmatch_lines([
+            "*1 failed*",
+        ])
+        result = testdir.runpytest("--lf")
+        result.stdout.fnmatch_lines([
+            "*2 failed*",
+        ])
+
+    def test_lastfailed_xpass(self, testdir):
+        rep = testdir.inline_runsource("""
+            import pytest
+            @pytest.mark.xfail
+            def test_hello():
+                assert 1
+        """)
+        config = testdir.parseconfigure()
+        lastfailed = config.cache.get("cache/lastfailed", -1)
+        assert not lastfailed
+
+    def test_lastfailed_collectfailure(self, testdir, monkeypatch):
+
+        testdir.makepyfile(test_maybe="""
+            import py
+            env = py.std.os.environ
+            if '1' == env['FAILIMPORT']:
+                raise ImportError('fail')
+            def test_hello():
+                assert '0' == env['FAILTEST']
+        """)
+
+        def rlf(fail_import, fail_run):
+            monkeypatch.setenv('FAILIMPORT', fail_import)
+            monkeypatch.setenv('FAILTEST', fail_run)
+
+            testdir.runpytest('-q')
+            config = testdir.parseconfigure()
+            lastfailed = config.cache.get("cache/lastfailed", -1)
+            return lastfailed
+
+        lastfailed = rlf(fail_import=0, fail_run=0)
+        assert not lastfailed
+
+        lastfailed = rlf(fail_import=1, fail_run=0)
+        assert list(lastfailed) == ['test_maybe.py']
+
+        lastfailed = rlf(fail_import=0, fail_run=1)
+        assert list(lastfailed) == ['test_maybe.py::test_hello']
+
+
+    def test_lastfailed_failure_subset(self, testdir, monkeypatch):
+
+        testdir.makepyfile(test_maybe="""
+            import py
+            env = py.std.os.environ
+            if '1' == env['FAILIMPORT']:
+                raise ImportError('fail')
+            def test_hello():
+                assert '0' == env['FAILTEST']
+        """)
+
+        testdir.makepyfile(test_maybe2="""
+            import py
+            env = py.std.os.environ
+            if '1' == env['FAILIMPORT']:
+                raise ImportError('fail')
+            def test_hello():
+                assert '0' == env['FAILTEST']
+
+            def test_pass():
+                pass
+        """)
+
+        def rlf(fail_import, fail_run, args=()):
+            monkeypatch.setenv('FAILIMPORT', fail_import)
+            monkeypatch.setenv('FAILTEST', fail_run)
+
+            result = testdir.runpytest('-q', '--lf', *args)
+            config = testdir.parseconfigure()
+            lastfailed = config.cache.get("cache/lastfailed", -1)
+            return result, lastfailed
+
+        result, lastfailed = rlf(fail_import=0, fail_run=0)
+        assert not lastfailed
+        result.stdout.fnmatch_lines([
+            '*3 passed*',
+        ])
+
+        result, lastfailed = rlf(fail_import=1, fail_run=0)
+        assert sorted(list(lastfailed)) == ['test_maybe.py', 'test_maybe2.py']
+
+
+        result, lastfailed = rlf(fail_import=0, fail_run=0,
+                                 args=('test_maybe2.py',))
+        assert list(lastfailed) == ['test_maybe.py']
+
+
+        # edge case of test selection - even if we remember failures
+        # from other tests we still need to run all tests if no test
+        # matches the failures
+        result, lastfailed = rlf(fail_import=0, fail_run=0,
+                                 args=('test_maybe2.py',))
+        assert list(lastfailed) == ['test_maybe.py']
+        result.stdout.fnmatch_lines([
+            '*2 passed*',
+        ])