diff --git a/tests/src/CMakeLists.txt b/tests/src/CMakeLists.txt
index a45966c..505f52f 100644
--- a/tests/src/CMakeLists.txt
+++ b/tests/src/CMakeLists.txt
@@ -1,8 +1,10 @@
 set(local_tests
     src_set
-    src_common)
+    src_common
+    src_context)
 set(local_tests_wraps
     " "
-    "-Wl,--wrap=realloc")
+    "-Wl,--wrap=realloc"
+    "-Wl,--wrap=ly_set_add")
 set(tests ${tests} ${local_tests} PARENT_SCOPE)
 set(tests_wraps ${tests_wraps} ${local_tests_wraps} PARENT_SCOPE)
diff --git a/tests/src/context.c b/tests/src/context.c
new file mode 100644
index 0000000..11903ea
--- /dev/null
+++ b/tests/src/context.c
@@ -0,0 +1,162 @@
+/*
+ * @file set.c
+ * @author: Radek Krejci <rkrejci@cesnet.cz>
+ * @brief unit tests for functions from context.c
+ *
+ * Copyright (c) 2018 CESNET, z.s.p.o.
+ *
+ * This source code is licensed under BSD 3-Clause License (the "License").
+ * You may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *     https://opensource.org/licenses/BSD-3-Clause
+ */
+
+#include "tests/config.h"
+#include "../../src/context.c"
+
+#include <stdarg.h>
+#include <stddef.h>
+#include <setjmp.h>
+#include <cmocka.h>
+
+#include <string.h>
+#include <stdio.h>
+
+#include "libyang.h"
+
+#define BUFSIZE 1024
+char logbuf[BUFSIZE] = {0};
+
+/* set to 0 to printing error messages to stderr instead of checking them in code */
+#define ENABLE_LOGGER_CHECKING 1
+
+static void
+logger(LY_LOG_LEVEL level, const char *msg, const char *path)
+{
+    (void) level; /* unused */
+    (void) path; /* unused */
+
+    strncpy(logbuf, msg, BUFSIZE - 1);
+}
+
+static int
+logger_setup(void **state)
+{
+    (void) state; /* unused */
+#if ENABLE_LOGGER_CHECKING
+    ly_set_log_clb(logger, 0);
+#endif
+    return 0;
+}
+
+#if ENABLE_LOGGER_CHECKING
+#   define logbuf_assert(str) assert_string_equal(logbuf, str)
+#else
+#   define logbuf_assert(str)
+#endif
+
+int __real_ly_set_add(struct ly_set *set, void *object, int options);
+int __wrap_ly_set_add(struct ly_set *set, void *object, int options)
+{
+    int wrap = mock_type(int);
+
+    if (wrap) {
+        /* error */
+        return -1;
+    } else {
+        return __real_ly_set_add(set, object, options);
+    }
+}
+
+static void
+test_searchdirs(void **state)
+{
+    (void) state; /* unused */
+
+    struct ly_ctx *ctx;
+    const char * const *list;
+
+    assert_int_equal(LY_SUCCESS, ly_ctx_new(NULL, 0, &ctx));
+
+    /* invalid arguments */
+    assert_int_equal(LY_EINVAL, ly_ctx_set_searchdir(NULL, NULL));
+    logbuf_assert("Invalid argument ctx (ly_ctx_set_searchdir()).");
+    assert_null(ly_ctx_get_searchdirs(NULL));
+    logbuf_assert("Invalid argument ctx (ly_ctx_get_searchdirs()).");
+    assert_int_equal(LY_EINVAL, ly_ctx_unset_searchdirs(NULL, 0));
+    logbuf_assert("Invalid argument ctx (ly_ctx_unset_searchdirs()).");
+    assert_int_equal(LY_EINVAL, ly_ctx_unset_searchdirs(ctx, 0));
+    logbuf_assert("Invalid argument index (ly_ctx_unset_searchdirs()).");
+
+    /* readable and executable, but not a directory */
+    assert_int_equal(LY_EINVAL, ly_ctx_set_searchdir(ctx, TESTS_BIN"/src_context"));
+    logbuf_assert("Given search directory \""TESTS_BIN"/src_context\" is not a directory.");
+    /* not executable */
+    assert_int_equal(LY_EINVAL, ly_ctx_set_searchdir(ctx, TESTS_SRC"/src/context.c"));
+    logbuf_assert("Unable to use search directory \""TESTS_SRC"/src/context.c\" (Permission denied)");
+    /* not existing */
+    assert_int_equal(LY_EINVAL, ly_ctx_set_searchdir(ctx, "/nonexistingfile"));
+    logbuf_assert("Unable to use search directory \"/nonexistingfile\" (No such file or directory)");
+
+    /* ly_set_add() fails */
+    will_return(__wrap_ly_set_add, 1);
+    assert_int_equal(LY_EMEM, ly_ctx_set_searchdir(ctx, TESTS_BIN"/src"));
+
+    /* correct path */
+    will_return_always(__wrap_ly_set_add, 0);
+    assert_int_equal(LY_SUCCESS, ly_ctx_set_searchdir(ctx, TESTS_BIN"/src"));
+    assert_int_equal(1, ctx->search_paths.count);
+    assert_string_equal(TESTS_BIN"/src", ctx->search_paths.objs[0]);
+
+    /* duplicated paths - function succeeds, but context still contains just a single path */
+    assert_int_equal(LY_SUCCESS, ly_ctx_set_searchdir(ctx, TESTS_BIN"/src"));
+    assert_int_equal(1, ctx->search_paths.count);
+    assert_string_equal(TESTS_BIN"/src", ctx->search_paths.objs[0]);
+
+    /* another paths - add 8 to fill the initial buffer of the searchpaths list */
+    assert_int_equal(LY_SUCCESS, ly_ctx_set_searchdir(ctx, TESTS_BIN"/CMakeFiles"));
+    assert_int_equal(LY_SUCCESS, ly_ctx_set_searchdir(ctx, TESTS_SRC"/../src"));
+    assert_int_equal(LY_SUCCESS, ly_ctx_set_searchdir(ctx, TESTS_SRC"/../CMakeModules"));
+    assert_int_equal(LY_SUCCESS, ly_ctx_set_searchdir(ctx, TESTS_SRC"/../doc"));
+    assert_int_equal(LY_SUCCESS, ly_ctx_set_searchdir(ctx, TESTS_SRC));
+    assert_int_equal(LY_SUCCESS, ly_ctx_set_searchdir(ctx, TESTS_BIN));
+    assert_int_equal(LY_SUCCESS, ly_ctx_set_searchdir(ctx, "/tmp"));
+    assert_int_equal(8, ctx->search_paths.count);
+
+    /* get searchpaths */
+    list = ly_ctx_get_searchdirs(ctx);
+    assert_non_null(list);
+    assert_string_equal(TESTS_BIN"/src", list[0]);
+    assert_string_equal(TESTS_BIN"/CMakeFiles", list[1]);
+    assert_string_equal(TESTS_SRC, list[5]);
+    assert_string_equal(TESTS_BIN, list[6]);
+    assert_string_equal("/tmp", list[7]);
+    assert_null(list[8]);
+
+    /* removing searchpaths */
+    /* first */
+    assert_int_equal(LY_SUCCESS, ly_ctx_unset_searchdirs(ctx, 0));
+    assert_string_not_equal(TESTS_BIN"/src", list[0]);
+    assert_int_equal(7, ctx->search_paths.count);
+    /* middle */
+    assert_int_equal(LY_SUCCESS, ly_ctx_unset_searchdirs(ctx, 4));
+    assert_int_equal(6, ctx->search_paths.count);
+    /* last */
+    assert_int_equal(LY_SUCCESS, ly_ctx_unset_searchdirs(ctx, 5));
+    assert_int_equal(5, ctx->search_paths.count);
+    /* all */
+    assert_int_equal(LY_SUCCESS, ly_ctx_unset_searchdirs(ctx, -5));
+    assert_int_equal(0, ctx->search_paths.count);
+
+    ly_ctx_destroy(ctx, NULL);
+}
+
+int main(void)
+{
+    const struct CMUnitTest tests[] = {
+        cmocka_unit_test_setup(test_searchdirs, logger_setup),
+    };
+
+    return cmocka_run_group_tests(tests, NULL, NULL);
+}