diff --git a/src/Composer/Downloader/DownloadManager.php b/src/Composer/Downloader/DownloadManager.php
index e466bbb09..e1441f182 100644
--- a/src/Composer/Downloader/DownloadManager.php
+++ b/src/Composer/Downloader/DownloadManager.php
@@ -125,14 +125,14 @@ class DownloadManager
         $sourceType   = $package->getSourceType();
         $distType     = $package->getDistType();
 
-        if (!($preferSource && $sourceType) && $distType) {
+        if (!$package->isDev() && !($preferSource && $sourceType) && $distType) {
             $package->setInstallationSource('dist');
         } elseif ($sourceType) {
             $package->setInstallationSource('source');
+        } elseif ($package->isDev()) {
+            throw new \InvalidArgumentException('Dev package '.$package.' must have a source specified');
         } else {
-            throw new \InvalidArgumentException(
-                'Package '.$package.' should have source or dist specified'
-            );
+            throw new \InvalidArgumentException('Package '.$package.' must have a source or dist specified');
         }
 
         $fs = new Filesystem();
diff --git a/src/Composer/Installer/LibraryInstaller.php b/src/Composer/Installer/LibraryInstaller.php
index a3f0b2b74..8eef0d7ed 100644
--- a/src/Composer/Installer/LibraryInstaller.php
+++ b/src/Composer/Installer/LibraryInstaller.php
@@ -109,7 +109,9 @@ class LibraryInstaller implements InstallerInterface
         $this->downloadManager->update($initial, $target, $downloadPath);
         $this->installBinaries($target);
         $this->repository->removePackage($initial);
-        $this->repository->addPackage(clone $target);
+        if (!$this->repository->hasPackage($target)) {
+            $this->repository->addPackage(clone $target);
+        }
     }
 
     /**
diff --git a/src/Composer/Package/MemoryPackage.php b/src/Composer/Package/MemoryPackage.php
index d1e63e102..a57f2b6f6 100644
--- a/src/Composer/Package/MemoryPackage.php
+++ b/src/Composer/Package/MemoryPackage.php
@@ -41,6 +41,7 @@ class MemoryPackage extends BasePackage
     protected $extra = array();
     protected $binaries = array();
     protected $scripts = array();
+    protected $dev;
 
     protected $requires = array();
     protected $conflicts = array();
@@ -63,6 +64,16 @@ class MemoryPackage extends BasePackage
 
         $this->version = $version;
         $this->prettyVersion = $prettyVersion;
+
+        $this->dev = 'dev-' === substr($version, 0, 4) || '-dev' === substr($version, -4);
+    }
+
+    /**
+     * {@inheritDoc}
+     */
+    public function isDev()
+    {
+        return $this->dev;
     }
 
     /**
diff --git a/src/Composer/Package/PackageInterface.php b/src/Composer/Package/PackageInterface.php
index c8f92b581..1f19a835f 100644
--- a/src/Composer/Package/PackageInterface.php
+++ b/src/Composer/Package/PackageInterface.php
@@ -68,6 +68,13 @@ interface PackageInterface
      */
     function matches($name, LinkConstraintInterface $constraint);
 
+    /**
+     * Returns whether the package is a development virtual package or a concrete one
+     *
+     * @return Boolean
+     */
+    function isDev();
+
     /**
      * Returns the package type, e.g. library
      *
diff --git a/tests/Composer/Test/Installer/InstallerInstallerTest.php b/tests/Composer/Test/Installer/InstallerInstallerTest.php
index 4e2f8c732..eab2d948a 100644
--- a/tests/Composer/Test/Installer/InstallerInstallerTest.php
+++ b/tests/Composer/Test/Installer/InstallerInstallerTest.php
@@ -67,9 +67,9 @@ class InstallerInstallerTest extends \PHPUnit_Framework_TestCase
             ->method('getPackages')
             ->will($this->returnValue(array($this->packages[0])));
         $this->repository
-            ->expects($this->once())
+            ->expects($this->exactly(2))
             ->method('hasPackage')
-            ->will($this->returnValue(true));
+            ->will($this->onConsecutiveCalls(true, false));
         $installer = new InstallerInstallerMock(__DIR__.'/Fixtures/', __DIR__.'/Fixtures/bin', $this->dm, $this->repository, $this->io, $this->im);
 
         $test = $this;
@@ -90,9 +90,9 @@ class InstallerInstallerTest extends \PHPUnit_Framework_TestCase
             ->method('getPackages')
             ->will($this->returnValue(array($this->packages[1])));
         $this->repository
-            ->expects($this->once())
+            ->expects($this->exactly(2))
             ->method('hasPackage')
-            ->will($this->returnValue(true));
+            ->will($this->onConsecutiveCalls(true, false));
         $installer = new InstallerInstallerMock(__DIR__.'/Fixtures/', __DIR__.'/Fixtures/bin', $this->dm, $this->repository, $this->io, $this->im);
 
         $test = $this;
diff --git a/tests/Composer/Test/Installer/LibraryInstallerTest.php b/tests/Composer/Test/Installer/LibraryInstallerTest.php
index 3399345f0..ba86954e3 100644
--- a/tests/Composer/Test/Installer/LibraryInstallerTest.php
+++ b/tests/Composer/Test/Installer/LibraryInstallerTest.php
@@ -128,10 +128,9 @@ class LibraryInstallerTest extends \PHPUnit_Framework_TestCase
             ->will($this->returnValue('package1'));
 
         $this->repository
-            ->expects($this->exactly(2))
+            ->expects($this->exactly(3))
             ->method('hasPackage')
-            ->with($initial)
-            ->will($this->onConsecutiveCalls(true, false));
+            ->will($this->onConsecutiveCalls(true, false, false));
 
         $this->dm
             ->expects($this->once())