diff --git a/src/Stack/Config.hs b/src/Stack/Config.hs
index 1e01a1efc8..25ac4cadf4 100644
--- a/src/Stack/Config.hs
+++ b/src/Stack/Config.hs
@@ -275,7 +275,7 @@ loadBuildConfig menv mproject config stackRoot mresolver noConfigStrat = do
       Nothing -> case noConfigStrat of
         ThrowException -> do
             currDir <- getWorkingDir
-            cabalFiles <- findCabalFiles currDir
+            cabalFiles <- findCabalFiles True currDir
             throwM $ NoProjectConfigFound currDir
                 $ Just $ if null cabalFiles then "new" else "init"
         ExecStrategy -> do
diff --git a/src/Stack/Init.hs b/src/Stack/Init.hs
index f2e1787aa6..2284ab6ad5 100644
--- a/src/Stack/Init.hs
+++ b/src/Stack/Init.hs
@@ -43,9 +43,9 @@ import           Stack.Solver
 import           Stack.Types
 import           System.Directory                (getDirectoryContents)
 
-findCabalFiles :: MonadIO m => Path Abs Dir -> m [Path Abs File]
-findCabalFiles dir =
-    liftIO $ findFiles dir isCabal (not . isIgnored)
+findCabalFiles :: MonadIO m => Bool -> Path Abs Dir -> m [Path Abs File]
+findCabalFiles recurse dir =
+    liftIO $ findFiles dir isCabal (\subdir -> recurse && not (isIgnored subdir))
   where
     isCabal path = ".cabal" `isSuffixOf` toFilePath path
 
@@ -68,12 +68,12 @@ initProject initOpts = do
     let dest = currDir </> stackDotYaml
         dest' = toFilePath dest
     exists <- fileExists dest
-    when ((not $ forceOverwrite initOpts) && exists) $
+    when (not (forceOverwrite initOpts) && exists) $
       error ("Refusing to overwrite existing stack.yaml, " <>
              "please delete before running stack init " <>
              "or if you are sure use \"--force\"")
 
-    cabalfps <- findCabalFiles currDir
+    cabalfps <- findCabalFiles (includeSubDirs initOpts) currDir
     $logInfo $ "Writing default config file to: " <> T.pack dest'
     $logInfo $ "Basing on cabal files:"
     mapM_ (\path -> $logInfo $ "- " <> T.pack (toFilePath path)) cabalfps
@@ -131,7 +131,7 @@ getDefaultResolver :: (MonadIO m, MonadMask m, MonadReader env m, HasConfig env,
                    -> [C.GenericPackageDescription] -- ^ cabal descriptions
                    -> InitOpts
                    -> m (Resolver, Map PackageName (Map FlagName Bool), Map PackageName Version)
-getDefaultResolver cabalfps gpds initOpts = do
+getDefaultResolver cabalfps gpds initOpts =
     case ioMethod initOpts of
         MethodSnapshot snapPref -> do
             msnapshots <- getSnapshots'
@@ -199,6 +199,9 @@ data InitOpts = InitOpts
     { ioMethod :: !Method
     -- ^ Preferred snapshots
     , forceOverwrite :: Bool
+    -- ^ Force overwrite of existing stack.yaml
+    , includeSubDirs :: Bool
+    -- ^ If True, include all .cabal files found in any sub directories
     }
 
 data SnapPref = PrefNone | PrefLTS | PrefNightly
@@ -208,8 +211,12 @@ data Method = MethodSnapshot SnapPref | MethodResolver Resolver | MethodSolver
 
 initOptsParser :: Parser InitOpts
 initOptsParser =
-    InitOpts <$> method <*> overwrite
+    InitOpts <$> method <*> overwrite <*> fmap not ignoreSubDirs
   where
+    ignoreSubDirs = flag False
+                         True
+                         (long "ignore-subdirs" <>
+                         help "Do not search for .cabal files in sub directories")
     overwrite = flag False
                      True
                      (long "force" <>