Having a very similar problem with dmake I discovered that for me it was caused by an autorun command I configured a long time ago to default my working directory when I open a new cmd prompt. http://windowsxp.mvps.org/autoruncmd.htm Stupid me, the article above even indicates to use the feature at my own risk, and the result was two days of pulling my hair out thinking dmake didn't have permissions to create directories in my strawberry perl lib path. Turns out it forks to new shells, and with my autorun key set it was navigating away from the implied lib path to an unrelated directory (my development root) and creating the files there. Then the parent process attempts to access those files in the lib path and they're not there. Just in case someone else is pulling out their hair and ends up here, you may want to check the registry key HKCU\Software\Microsoft\Command Processor\autorun