diff --git a/src/applications/project/engine/PhabricatorProjectEditEngine.php b/src/applications/project/engine/PhabricatorProjectEditEngine.php
index a7702c345f..5eb6b49b87 100644
--- a/src/applications/project/engine/PhabricatorProjectEditEngine.php
+++ b/src/applications/project/engine/PhabricatorProjectEditEngine.php
@@ -51,7 +51,11 @@ final class PhabricatorProjectEditEngine
   }
 
   protected function newEditableObject() {
-    return PhabricatorProject::initializeNewProject($this->getViewer());
+    $parent = nonempty($this->parentProject, $this->milestoneProject);
+
+    return PhabricatorProject::initializeNewProject(
+      $this->getViewer(),
+      $parent);
   }
 
   protected function newObjectQuery() {
@@ -112,6 +116,7 @@ final class PhabricatorProjectEditEngine
       PhabricatorTransactions::TYPE_VIEW_POLICY,
       PhabricatorTransactions::TYPE_EDIT_POLICY,
       PhabricatorTransactions::TYPE_JOIN_POLICY,
+      PhabricatorTransactions::TYPE_SPACE,
       PhabricatorProjectIconTransaction::TRANSACTIONTYPE,
       PhabricatorProjectColorTransaction::TRANSACTIONTYPE,
     );
diff --git a/src/applications/project/storage/PhabricatorProject.php b/src/applications/project/storage/PhabricatorProject.php
index aa035aedf5..a049354ad7 100644
--- a/src/applications/project/storage/PhabricatorProject.php
+++ b/src/applications/project/storage/PhabricatorProject.php
@@ -61,7 +61,10 @@ final class PhabricatorProject extends PhabricatorProjectDAO
   const ITEM_MILESTONES = 'project.milestones';
   const ITEM_SUBPROJECTS = 'project.subprojects';
 
-  public static function initializeNewProject(PhabricatorUser $actor) {
+  public static function initializeNewProject(
+    PhabricatorUser $actor,
+    PhabricatorProject $parent = null) {
+
     $app = id(new PhabricatorApplicationQuery())
       ->setViewer(PhabricatorUser::getOmnipotentUser())
       ->withClasses(array('PhabricatorProjectApplication'))
@@ -74,6 +77,14 @@ final class PhabricatorProject extends PhabricatorProjectDAO
     $join_policy = $app->getPolicy(
       ProjectDefaultJoinCapability::CAPABILITY);
 
+    // If this is the child of some other project, default the Space to the
+    // Space of the parent.
+    if ($parent) {
+      $space_phid = $parent->getSpacePHID();
+    } else {
+      $space_phid = $actor->getDefaultSpacePHID();
+    }
+
     $default_icon = PhabricatorProjectIconSet::getDefaultIconKey();
     $default_color = PhabricatorProjectIconSet::getDefaultColorKey();
 
@@ -84,7 +95,7 @@ final class PhabricatorProject extends PhabricatorProjectDAO
       ->setViewPolicy($view_policy)
       ->setEditPolicy($edit_policy)
       ->setJoinPolicy($join_policy)
-      ->setSpacePHID($actor->getDefaultSpacePHID())
+      ->setSpacePHID($space_phid)
       ->setIsMembershipLocked(0)
       ->attachMemberPHIDs(array())
       ->attachSlugs(array())
@@ -704,6 +715,9 @@ final class PhabricatorProject extends PhabricatorProjectDAO
 
 
   public function getSpacePHID() {
+    if ($this->isMilestone()) {
+      return $this->getParentProject()->getSpacePHID();
+    }
     return $this->spacePHID;
   }