diff -u b/core/modules/migrate_drupal/config/optional/migrate.migration.d7_file.yml b/core/modules/migrate_drupal/config/optional/migrate.migration.d7_file.yml
--- b/core/modules/migrate_drupal/config/optional/migrate.migration.d7_file.yml
+++ b/core/modules/migrate_drupal/config/optional/migrate.migration.d7_file.yml
@@ -1,5 +1,5 @@
-# Every migration that saves into {file_managed} must have the d7_file
-# migration as an optional dependency to ensure d7_file runs first.
+# Every migration that references a file by fid should specify this migration
+# as an optional dependency.
 id: d7_file
 label: Drupal 7 files
 migration_tags:
@@ -11,8 +11,8 @@
   filename: filename
   uri: uri
   filemime: filemime
-  # filesize is dynamically computed when files are saved, so there is no point
-  # in migrating this value.
+  # filesize is dynamically computed when file entities are saved, so there is
+  # no point in migrating it.
   # filesize: filesize
   status: status
   created: timestamp
@@ -20,7 +20,7 @@
   uid: uid
 destination:
   plugin: entity:file
-  source_path_property: uri
+  source_path_property: filepath
 dependencies:
   module:
     - file
diff -u b/core/modules/migrate_drupal/src/Plugin/migrate/source/d7/File.php b/core/modules/migrate_drupal/src/Plugin/migrate/source/d7/File.php
--- b/core/modules/migrate_drupal/src/Plugin/migrate/source/d7/File.php
+++ b/core/modules/migrate_drupal/src/Plugin/migrate/source/d7/File.php
@@ -7,6 +7,7 @@
 
 namespace Drupal\migrate_drupal\Plugin\migrate\source\d7;
 
+use Drupal\migrate\Row;
 use Drupal\migrate_drupal\Plugin\migrate\source\DrupalSqlBase;
 
 /**
@@ -30,6 +31,27 @@
   /**
    * {@inheritdoc}
    */
+  public function prepareRow(Row $row) {
+    // Compute the filepath property, which is a physical representation of
+    // the URI relative to the Drupal root.
+    $search = array('public:/', 'private:/', 'temporary:/');
+    $replace = array(
+      $this->variableGet('file_public_path', 'sites/default/files'),
+      $this->variableGet('file_private_path', NULL),
+      $this->variableGet('file_temporary_path', '/tmp'),
+    );
+    $path = str_replace($search, $replace, $row->getSourceProperty('uri'));
+    // At this point, $path could be an absolute path or a relative path,
+    // depending on how the scheme's variable was set. So we need to shear out
+    // the source_base_path in order to make them all relative.
+    $path = str_replace($this->migration->get('destination.source_base_path'), NULL, $path);
+
+    $row->setSourceProperty('filepath', $path);
+  }
+
+  /**
+   * {@inheritdoc}
+   */
   public function fields() {
     return array(
       'fid' => $this->t('File ID'),
@@ -41,6 +63,7 @@
       'timestamp' => $this->t('The time that the file was added.'),
     );
   }
+
   /**
    * {@inheritdoc}
    */
diff -u b/core/modules/migrate_drupal/src/Tests/d7/MigrateFileTest.php b/core/modules/migrate_drupal/src/Tests/d7/MigrateFileTest.php
--- b/core/modules/migrate_drupal/src/Tests/d7/MigrateFileTest.php
+++ b/core/modules/migrate_drupal/src/Tests/d7/MigrateFileTest.php
@@ -16,6 +16,7 @@
  *
  * @group migrate_drupal 7.x
  * @dumpFile d7/FileManaged.php
+ * @dumpFile d7/Variable.php
  * @migration d7_file
  */
 class MigrateFileTest extends MigrateDrupal7TestBase {
@@ -30,13 +31,32 @@
 
     $this->loadDumps([
       $this->getDumpDirectory() . '/FileManaged.php',
+      $this->getDumpDirectory() . '/Variable.php',
     ]);
     $this->installEntitySchema('file');
 
-    touch('public://cube.jpeg');
-    file_put_contents('public://cube.jpeg', str_repeat('*', 3620));
+    /** @var \Drupal\Core\File\FileSystemInterface $fs */
+    $fs = \Drupal::service('file_system');
+    // /tmp will serve as the root directory for the fictional D7 site we're
+    // migrating. Silence any "file exists" warnings thrown by mkdir().
+    // We don't care.
+    @$fs->mkdir('/tmp/sites/default/files');
+    touch('/tmp/sites/default/files/cube.jpeg');
+    file_put_contents('/tmp/sites/default/files/cube.jpeg', str_repeat('*', 3620));
 
+    /** @var \Drupal\migrate\Entity\MigrationInterface $migration */
     $migration = entity_load('migration', 'd7_file');
+    // Set the destination plugin's source_base_path configuration value, which
+    // would normally be set by the user running the migration.
+    $migration->set('destination', [
+      'plugin' => 'entity:file',
+      // Note that source_base_path must include a trailing slash because it's
+      // prepended directly to the value of the source path property.
+      'source_base_path' => '/tmp/',
+      // This is set in the migration's YAML file, but we need to repeat it
+      // here because all the destination configuration must be set at once.
+      'source_path_property' => 'filepath',
+    ]);
     $executable = new MigrateExecutable($migration, $this);
     $executable->import();
   }
@@ -47,14 +67,20 @@
     $this->assertTrue($file instanceof FileInterface);
     $this->assertIdentical($name, $file->getFilename());
     $this->assertIdentical($uri, $file->getFileUri());
+    $this->assertTrue(file_exists($uri));
     $this->assertIdentical($mime, $file->getMimeType());
     $this->assertIdentical($size, $file->getSize());
-    // @TODO Check status, since that's important for files.
+    // isPermanent(), isTemporary(), etc. are determined by the status column.
+    $this->assertTrue($file->isPermanent());
     $this->assertIdentical($created, $file->getCreatedTime());
     $this->assertIdentical($changed, $file->getChangedTime());
     $this->assertIdentical($uid, $file->getOwnerId());
   }
 
+  public function tearDown() {
+    unlink('/tmp/sites/default/files/cube.jpeg');
+  }
+
   /**
    * Tests that all expected files are migrated.
    */