diff --git a/prance/__init__.py b/prance/__init__.py
index 505cb34..6a1caf9 100644
--- a/prance/__init__.py
+++ b/prance/__init__.py
@@ -282,7 +282,7 @@ def _validate(self):
     # We therefore use our own resolver first, and validate later.
     from .util.resolver import RefResolver
     forward_arg_names = ('encoding', 'recursion_limit',
-            'recursion_limit_handler', 'resolve_types')
+            'recursion_limit_handler', 'resolve_types', 'resolve_method')
     forward_args = {
       k: v for (k, v) in self.options.items() if k in forward_arg_names
     }
diff --git a/prance/util/resolver.py b/prance/util/resolver.py
index 3b659c1..0dcc440 100644
--- a/prance/util/resolver.py
+++ b/prance/util/resolver.py
@@ -15,6 +15,11 @@
 #: Resolve references to local files.
 RESOLVE_FILES = 2 ** 3
 
+#: Copy the schema changing the reference.
+TRANSLATE_EXTERNAL = 0
+#: Replace the reference with inlined schema.
+TRANSLATE_DEFAULT = 1
+
 #: Default, resole all references.
 RESOLVE_ALL = RESOLVE_INTERNAL | RESOLVE_HTTP | RESOLVE_FILES
 
@@ -66,6 +71,9 @@ def __init__(self, specs, url = None, **options):
         detect_encoding is used to determine the encoding.
     :param int resolve_types: [optional] Specify which types of references to
         resolve. Defaults to RESOLVE_ALL.
+    :param int resolve_method: [optional] Specify whether to translate external
+        references in components/schemas or dereference in place. Defaults
+        to TRANSLATE_DEFAULT.
     """
     import copy
     self.specs = copy.deepcopy(specs)
@@ -89,11 +97,20 @@ def __init__(self, specs, url = None, **options):
       self.parsed_url = self._url_key = None
 
     self.__resolve_types = options.get('resolve_types', RESOLVE_ALL)
+    self.__resolve_method = options.get('resolve_method', TRANSLATE_DEFAULT)
     self.__encoding = options.get('encoding', None)
+    self.__soft_dereference_objs = {}
 
   def resolve_references(self):
     """Resolve JSON pointers/references in the spec."""
     self.specs = self._resolve_partial(self.parsed_url, self.specs, ())
+    
+    # If there are any objects collected when using TRANSLATE_EXTERNAL, add them to components/schemas
+    if self.__soft_dereference_objs:
+      if "components" not in self.specs: self.specs["components"] = dict()
+      if "schemas" not in self.specs["components"]: self.specs["components"].update({"schemas":{}})
+
+      self.specs["components"]["schemas"].update(self.__soft_dereference_objs)
 
   def _dereferencing_iterator(self, base_url, partial, path, recursions):
     """
@@ -111,6 +128,8 @@ def _dereferencing_iterator(self, base_url, partial, path, recursions):
       # Split the reference string into parsed URL and object path
       ref_url, obj_path = _url.split_url_reference(base_url, refstring)
 
+      translate = self.__resolve_method == TRANSLATE_EXTERNAL and self.parsed_url.path != ref_url.path
+
       if self._skip_reference(base_url, ref_url):
         continue
 
@@ -136,7 +155,20 @@ def _dereferencing_iterator(self, base_url, partial, path, recursions):
       full_path = path + item_path
 
       # First yield parent
-      yield full_path, ref_value
+      if translate:
+        url = self._collect_soft_refs(ref_url, obj_path, ref_value)
+        yield full_path, {"$ref": "#/components/schemas/"+url}
+      else:
+        yield full_path, ref_value
+  
+  def _collect_soft_refs(self, ref_url, item_path, value):
+    """
+    Returns a portion of the dereferenced url for TRANSLATE_EXTERNAL mode.
+    format - ref-url_obj-path
+    """
+    dref_url = ref_url.path.split("/")[-1]+"_"+"_".join(item_path[1:])
+    self.__soft_dereference_objs[dref_url] = value
+    return dref_url
 
   def _skip_reference(self, base_url, ref_url):
     """Return whether the URL should not be dereferenced."""
diff --git a/tests/test_util_resolver.py b/tests/test_util_resolver.py
index 35d7adc..d2b4c37 100644
--- a/tests/test_util_resolver.py
+++ b/tests/test_util_resolver.py
@@ -494,3 +494,94 @@ def test_issue_78_resolve_internal_bug():
   assert 'application/json' in val
   # Internal reference within file is NOT resolved
   assert '$ref' in val['application/json']
+
+
+
+@pytest.mark.skipif(none_of('openapi-spec-validator'), reason='Missing backends')
+def test_issue_77_translate_external():
+  specs = ''
+  with open('tests/specs/issue_78/openapi.json', 'r') as fh:
+    specs = fh.read()
+
+  from prance.util import formats
+  specs = formats.parse_spec(specs, 'openapi.json')
+
+  res = resolver.RefResolver(specs,
+      fs.abspath('openapi.json'),
+      resolve_types = resolver.RESOLVE_FILES,
+      resolve_method= resolver.TRANSLATE_EXTERNAL
+      )
+  res.resolve_references()
+
+  from prance.util.path import path_get
+  val = path_get(res.specs, ('components', 'schemas', '_schemas.json_Body'))
+
+  # Reference to file is translated in components/schemas
+  assert 'content' in val
+  assert 'application/json' in val['content']
+
+  # Reference url is updated
+  val = path_get(res.specs, ('paths', '/endpoint', 'post', 'requestBody', '$ref'))
+  assert val == '#/components/schemas/_schemas.json_Body'
+
+
+
+@pytest.mark.skipif(none_of('openapi-spec-validator'), reason='Missing backends')
+def test_issue_77_translate_external_refs_internal():
+  specs = ''
+  with open('tests/specs/issue_78/openapi.json', 'r') as fh:
+    specs = fh.read()
+
+  from prance.util import formats
+  specs = formats.parse_spec(specs, 'openapi.json')
+
+  res = resolver.RefResolver(specs,
+      fs.abspath('openapi.json'),
+      resolve_types = resolver.RESOLVE_FILES | resolver.RESOLVE_INTERNAL,
+      resolve_method= resolver.TRANSLATE_EXTERNAL
+      )
+  res.resolve_references()
+
+  from prance.util.path import path_get
+  val = path_get(res.specs, ('components', 'schemas', '_schemas.json_Body'))
+
+  # Reference to file is translated in components/schemas
+  assert 'content' in val
+  assert 'application/json' in val['content']
+
+  # Internal Reference links updated
+  assert '#/components/schemas/_schemas.json_Something' == val['content']['application/json']['$ref']
+
+  # Internal references is copied to componnents/schemas seperately
+  val = path_get(res.specs, ('components', 'schemas', '_schemas.json_Something'))
+  assert 'type' in val
+
+  # File reference url is updated as well
+  val = path_get(res.specs, ('paths', '/endpoint', 'post', 'requestBody', '$ref'))
+  assert val == '#/components/schemas/_schemas.json_Body'
+
+
+@pytest.mark.skipif(none_of('openapi-spec-validator'), reason='Missing backends')
+def test_issue_77_internal_refs_unresolved():
+  specs = ''
+  with open('tests/specs/issue_78/openapi.json', 'r') as fh:
+    specs = fh.read()
+
+  from prance.util import formats
+  specs = formats.parse_spec(specs, 'openapi.json')
+
+  res = resolver.RefResolver(specs,
+      fs.abspath('openapi.json'),
+      resolve_types = resolver.RESOLVE_FILES,
+      resolve_method= resolver.TRANSLATE_EXTERNAL
+      )
+  res.resolve_references()
+
+  from prance.util.path import path_get
+  val = path_get(res.specs, ('components', 'schemas'))
+
+  # File reference resolved
+  assert '_schemas.json_Body' in val
+
+  # Internal file reference not resolved
+  assert '_schemas.json_Something' not in val