diff --git a/refpolicy/Changelog b/refpolicy/Changelog
index cde6128a6..b2c5bf344 100644
--- a/refpolicy/Changelog
+++ b/refpolicy/Changelog
@@ -1,3 +1,4 @@
+- Move policy build options out of Makefile into build.conf.
 - Add yppasswd to nis module.
 - Change optional_policy() to refer to the module name
   rather than modulename.te.
diff --git a/refpolicy/INSTALL b/refpolicy/INSTALL
index fa58eca3b..1038bae54 100644
--- a/refpolicy/INSTALL
+++ b/refpolicy/INSTALL
@@ -9,7 +9,8 @@ If you do not have a modules.conf, one can be generated:
 
 	make conf
 
-This will create a default modules.conf.  After installing the policy sources,
+This will create a default modules.conf.  Options for the policy
+build process can be found in build.conf.  After installing the policy sources,
 the old Make targets have been maintained for the monolithic policy:
 
 Local policy development:
diff --git a/refpolicy/Makefile b/refpolicy/Makefile
index 433d80fee..f9ce2b64b 100644
--- a/refpolicy/Makefile
+++ b/refpolicy/Makefile
@@ -14,59 +14,17 @@
 #
 # The default target is 'policy'.
 #
-
-########################################
 #
-# Configurable portions of the Makefile
+# Please see build.conf for policy build options.
 #
 
-# Policy version
-# By default, checkpolicy will create the highest
-# version policy it supports.  Setting this will
-# override the version.  This only affects
-# monolithic policies.
-#OUTPUT_POLICY = 18
-
-# Policy Type
-# strict, targeted,
-# strict-mls, targeted-mls,
-# strict-mcs, targeted-mcs
-TYPE = targeted-mcs
-
-# Policy Name
-# If set, this will be used as the policy
-# name.  Otherwise the policy type will be
-# used for the name.
-NAME = refpolicy
-
-# Distribution
-# Some distributions have portions of policy
-# for programs or configurations specific to the
-# distribution.  Setting this will enable options
-# for the distribution.
-# redhat, gentoo, debian, and suse are current options.
-# Fedora users should enable redhat.
-DISTRO = redhat
-
-# Direct admin init
-# Setting this will allow sysadm to directly
-# run init scripts, instead of requring run_init.
-# This is a build option, as role transitions do
-# not work in conditional policy.
-DIRECT_INITRC=y
-
-# Build monolithic policy.  Putting n here
-# will build a loadable module policy.
-MONOLITHIC=y
-
-# Uncomment this to disable command echoing
-#QUIET:=@
-
 ########################################
 #
 # NO OPTIONS BELOW HERE
 #
 
+include build.conf
+
 # executable paths
 PREFIX := /usr
 BINDIR := $(PREFIX)/bin
diff --git a/refpolicy/README b/refpolicy/README
index f64a0b108..8b9919982 100644
--- a/refpolicy/README
+++ b/refpolicy/README
@@ -70,9 +70,19 @@ checklabels		Check the labels on the filesystem, and report when
 restorelabels		Relabel the filesystem and report each file that is
 			relabeled.
 
-2) Reference Policy Directories
+2) Reference Policy Files and Directories
 All directories relative to the root of the Reference Policy sources directory.
 
+Makefile		General rules for building the policy.
+
+Rules.modular		Rules specific to building loadable module policies.
+
+Rules.monolithic	Rules specific to building monolithic policies.
+
+build.conf		Options which influence the building of the policy,
+			such as the policy type (strict, targeted, etc.)
+			and distribution.
+
 config/appconfig-*	Application configuration files for all configurations
 			of the Reference Policy (targeted/strict with or without
 			MLS or MCS).  These are used by SELinux-aware programs.
diff --git a/refpolicy/build.conf b/refpolicy/build.conf
new file mode 100644
index 000000000..916a0636c
--- /dev/null
+++ b/refpolicy/build.conf
@@ -0,0 +1,46 @@
+########################################
+#
+# Policy build options
+#
+
+# Policy version
+# By default, checkpolicy will create the highest
+# version policy it supports.  Setting this will
+# override the version.  This only has an
+# effect for monolithic policies.
+#OUTPUT_POLICY = 18
+
+# Policy Type
+# strict, targeted,
+# strict-mls, targeted-mls,
+# strict-mcs, targeted-mcs
+TYPE = targeted-mcs
+
+# Policy Name
+# If set, this will be used as the policy
+# name.  Otherwise the policy type will be
+# used for the name.
+NAME = refpolicy
+
+# Distribution
+# Some distributions have portions of policy
+# for programs or configurations specific to the
+# distribution.  Setting this will enable options
+# for the distribution.
+# redhat, gentoo, debian, and suse are current options.
+# Fedora users should enable redhat.
+DISTRO = redhat
+
+# Direct admin init
+# Setting this will allow sysadm to directly
+# run init scripts, instead of requring run_init.
+# This is a build option, as role transitions do
+# not work in conditional policy.
+DIRECT_INITRC=y
+
+# Build monolithic policy.  Putting n here
+# will build a loadable module policy.
+MONOLITHIC=y
+
+# Uncomment this to disable command echoing
+#QUIET:=@