diff --git a/CMakeLists.txt b/CMakeLists.txt
index 898a837b77..f436fc2cea 100644
--- a/CMakeLists.txt
+++ b/CMakeLists.txt
@@ -1407,15 +1407,19 @@ if(WITH_HALIDE OR HAVE_HALIDE)
   status("    Halide:"     HAVE_HALIDE      THEN "YES (${HALIDE_LIBRARIES} ${HALIDE_INCLUDE_DIRS})" ELSE NO)
 endif()
 
-if(WITH_INF_ENGINE OR HAVE_INF_ENGINE)
-  if(HAVE_INF_ENGINE)
-    set(__msg "YES")
-    if(DEFINED INF_ENGINE_VERSION)
-      set(__msg "YES (ver ${INF_ENGINE_VERSION})")
+if(WITH_INF_ENGINE OR INF_ENGINE_TARGET)
+  if(INF_ENGINE_TARGET)
+    set(__msg "YES (${INF_ENGINE_RELEASE} / ${INF_ENGINE_VERSION})")
+    get_target_property(_lib ${INF_ENGINE_TARGET} IMPORTED_LOCATION)
+    if(NOT _lib)
+      get_target_property(_lib_rel ${INF_ENGINE_TARGET} IMPORTED_IMPLIB_RELEASE)
+      get_target_property(_lib_dbg ${INF_ENGINE_TARGET} IMPORTED_IMPLIB_DEBUG)
+      set(_lib "${_lib_rel} / ${_lib_dbg}")
     endif()
+    get_target_property(_inc ${INF_ENGINE_TARGET} INTERFACE_INCLUDE_DIRECTORIES)
     status("    Inference Engine:" "${__msg}")
-    status("                libs:" "${INF_ENGINE_LIBRARIES}")
-    status("            includes:" "${INF_ENGINE_INCLUDE_DIRS}")
+    status("                libs:" "${_lib}")
+    status("            includes:" "${_inc}")
   else()
     status("    Inference Engine:"     "NO")
   endif()
diff --git a/cmake/OpenCVDetectInferenceEngine.cmake b/cmake/OpenCVDetectInferenceEngine.cmake
index 366509ed39..e5e64fc6db 100644
--- a/cmake/OpenCVDetectInferenceEngine.cmake
+++ b/cmake/OpenCVDetectInferenceEngine.cmake
@@ -1,83 +1,87 @@
 # The script detects Intel(R) Inference Engine installation
 #
-# Parameters:
-# INTEL_CVSDK_DIR - Path to Inference Engine root folder
-# IE_PLUGINS_PATH - Path to folder with Inference Engine plugins
+# Cache variables:
+# INF_ENGINE_OMP_DIR - directory with OpenMP library to link with (needed by some versions of IE)
+# INF_ENGINE_RELEASE - a number reflecting IE source interface (linked with OpenVINO release)
 #
-# On return this will define:
+# Detect parameters:
+# 1. Native cmake IE package:
+#    - enironment variable InferenceEngine_DIR is set to location of cmake module
+# 2. Custom location:
+#    - INF_ENGINE_INCLUDE_DIRS - headers search location
+#    - INF_ENGINE_LIB_DIRS     - library search location
+# 3. OpenVINO location:
+#    - environment variable INTEL_CVSDK_DIR is set to location of OpenVINO installation dir
+#    - INF_ENGINE_PLATFORM - part of name of library directory representing its platform (default ubuntu_16.04)
 #
-# HAVE_INF_ENGINE          - True if Intel Inference Engine was found
-# INF_ENGINE_INCLUDE_DIRS  - Inference Engine include folder
-# INF_ENGINE_LIBRARIES     - Inference Engine libraries and it's dependencies
+# Result:
+# INF_ENGINE_TARGET - set to name of imported library target representing InferenceEngine
 #
-macro(ie_fail)
-    set(HAVE_INF_ENGINE FALSE)
-    return()
-endmacro()
 
 if(NOT HAVE_CXX11)
     message(WARNING "DL Inference engine requires C++11. You can turn it on via ENABLE_CXX11=ON CMake flag.")
-    ie_fail()
-endif()
-
-find_package(InferenceEngine QUIET)
-if(InferenceEngine_FOUND)
-  set(INF_ENGINE_LIBRARIES "${InferenceEngine_LIBRARIES}")
-  set(INF_ENGINE_INCLUDE_DIRS "${InferenceEngine_INCLUDE_DIRS}")
-  set(INF_ENGINE_VERSION "${InferenceEngine_VERSION}")
-  set(HAVE_INF_ENGINE TRUE)
-  return()
+    return()
 endif()
 
-ocv_check_environment_variables(INTEL_CVSDK_DIR INF_ENGINE_ROOT_DIR IE_PLUGINS_PATH)
+# =======================
 
-if(NOT INF_ENGINE_ROOT_DIR OR NOT EXISTS "${INF_ENGINE_ROOT_DIR}/include/inference_engine.hpp")
-    set(ie_root_paths "${INF_ENGINE_ROOT_DIR}")
-    if(DEFINED INTEL_CVSDK_DIR)
-        list(APPEND ie_root_paths "${INTEL_CVSDK_DIR}/")
-        list(APPEND ie_root_paths "${INTEL_CVSDK_DIR}/deployment_tools/inference_engine")
-    endif()
+function(add_custom_ie_build _inc _lib _lib_rel _lib_dbg _msg)
+  if(NOT _inc OR NOT (_lib OR _lib_rel OR _lib_dbg))
+    return()
+  endif()
+  add_library(inference_engine UNKNOWN IMPORTED)
+  set_target_properties(inference_engine PROPERTIES
+    IMPORTED_LOCATION "${_lib}"
+    IMPORTED_IMPLIB_RELEASE "${_lib_rel}"
+    IMPORTED_IMPLIB_DEBUG "${_lib_dbg}"
+    INTERFACE_INCLUDE_DIRECTORIES "${_inc}"
+  )
+  find_library(omp_lib iomp5 PATHS "${INF_ENGINE_OMP_DIR}" NO_DEFAULT_PATH)
+  if(NOT omp_lib)
+    message(WARNING "OpenMP for IE have not been found. Set INF_ENGINE_OMP_DIR variable if you experience build errors.")
+  else()
+    set_target_properties(inference_engine PROPERTIES IMPORTED_LINK_INTERFACE_LIBRARIES "${omp_lib}")
+  endif()
+  set(INF_ENGINE_VERSION "Unknown" CACHE STRING "")
+  set(INF_ENGINE_TARGET inference_engine PARENT_SCOPE)
+  message(STATUS "Detected InferenceEngine: ${_msg}")
+endfunction()
 
-    if(NOT ie_root_paths)
-        list(APPEND ie_root_paths "/opt/intel/computer_vision_sdk/deployment_tools/inference_engine/")
-    endif()
+# ======================
 
-    find_path(INF_ENGINE_ROOT_DIR include/inference_engine.hpp PATHS ${ie_root_paths})
-    if(INF_ENGINE_ROOT_DIR MATCHES "-NOTFOUND$")
-      unset(INF_ENGINE_ROOT_DIR CACHE)
-    endif()
+find_package(InferenceEngine QUIET)
+if(InferenceEngine_FOUND)
+  set(INF_ENGINE_TARGET IE::inference_engine)
+  set(INF_ENGINE_VERSION "${InferenceEngine_VERSION}" CACHE STRING "")
+  message(STATUS "Detected InferenceEngine: cmake package")
 endif()
 
-set(INF_ENGINE_INCLUDE_DIRS "${INF_ENGINE_ROOT_DIR}/include" CACHE PATH "Path to Inference Engine include directory")
-
-if(NOT INF_ENGINE_ROOT_DIR
-    OR NOT EXISTS "${INF_ENGINE_ROOT_DIR}"
-    OR NOT EXISTS "${INF_ENGINE_ROOT_DIR}/include/inference_engine.hpp"
-)
-    message(WARNING "DL IE: Can't detect INF_ENGINE_ROOT_DIR location.")
-    ie_fail()
+if(NOT INF_ENGINE_TARGET AND INF_ENGINE_LIB_DIRS AND INF_ENGINE_INCLUDE_DIRS)
+  find_path(ie_custom_inc "inference_engine.hpp" PATHS "${INF_ENGINE_INCLUDE_DIRS}" NO_DEFAULT_PATH)
+  find_library(ie_custom_lib "inference_engine" PATHS "${INF_ENGINE_LIB_DIRS}" NO_DEFAULT_PATH)
+  find_library(ie_custom_lib_rel "inference_engine" PATHS "${INF_ENGINE_LIB_DIRS}/Release" NO_DEFAULT_PATH)
+  find_library(ie_custom_lib_dbg "inference_engine" PATHS "${INF_ENGINE_LIB_DIRS}/Debug" NO_DEFAULT_PATH)
+  add_custom_ie_build("${ie_custom_inc}" "${ie_custom_lib}" "${ie_custom_lib_rel}" "${ie_custom_lib_dbg}" "INF_ENGINE_{INCLUDE,LIB}_DIRS")
 endif()
 
-set(INF_ENGINE_LIBRARIES "")
-
-set(ie_lib_list inference_engine)
-
-if(NOT IS_ABSOLUTE "${IE_PLUGINS_PATH}")
-  set(IE_PLUGINS_PATH "${INF_ENGINE_ROOT_DIR}/${IE_PLUGINS_PATH}")
+set(_loc "$ENV{INTEL_CVSDK_DIR}")
+if(NOT INF_ENGINE_TARGET AND _loc)
+  set(INF_ENGINE_PLATFORM "ubuntu_16.04" CACHE STRING "InferenceEngine platform (library dir)")
+  find_path(ie_custom_env_inc "inference_engine.hpp" PATHS "${_loc}/deployment_tools/inference_engine/include" NO_DEFAULT_PATH)
+  find_library(ie_custom_env_lib "inference_engine" PATHS "${_loc}/deployment_tools/inference_engine/lib/${INF_ENGINE_PLATFORM}/intel64" NO_DEFAULT_PATH)
+  find_library(ie_custom_env_lib_rel "inference_engine" PATHS "${_loc}/deployment_tools/inference_engine/lib/intel64/Release" NO_DEFAULT_PATH)
+  find_library(ie_custom_env_lib_dbg "inference_engine" PATHS "${_loc}/deployment_tools/inference_engine/lib/intel64/Debug" NO_DEFAULT_PATH)
+  add_custom_ie_build("${ie_custom_env_inc}" "${ie_custom_env_lib}" "${ie_custom_env_lib_rel}" "${ie_custom_env_lib_dbg}" "OpenVINO (${_loc})")
 endif()
 
-link_directories(
-  ${INF_ENGINE_ROOT_DIR}/external/mkltiny_lnx/lib
-  ${INF_ENGINE_ROOT_DIR}/external/cldnn/lib
-)
-
-foreach(lib ${ie_lib_list})
-    find_library(${lib} NAMES ${lib} HINTS ${IE_PLUGINS_PATH})
-    if(NOT ${lib})
-        message(WARNING "DL IE: Can't find library: '${lib}'")
-        ie_fail()
-    endif()
-    list(APPEND INF_ENGINE_LIBRARIES ${${lib}})
-endforeach()
+# Add more features to the target
 
-set(HAVE_INF_ENGINE TRUE)
+if(INF_ENGINE_TARGET)
+  if(NOT INF_ENGINE_RELEASE)
+    message(WARNING "InferenceEngine version have not been set, 2018R2 will be used by default. Set INF_ENGINE_RELEASE variable if you experience build errors.")
+  endif()
+  set(INF_ENGINE_RELEASE "2018020000" CACHE STRING "Force IE version, should be in form YYYYAABBCC (e.g. 2018R2.0.2 -> 2018020002)")
+  set_target_properties(${INF_ENGINE_TARGET} PROPERTIES
+    INTERFACE_COMPILE_DEFINITIONS "HAVE_INF_ENGINE=1;INF_ENGINE_RELEASE=${INF_ENGINE_RELEASE}"
+  )
+endif()
diff --git a/modules/dnn/CMakeLists.txt b/modules/dnn/CMakeLists.txt
index a4cdc18cf7..64fefb3509 100644
--- a/modules/dnn/CMakeLists.txt
+++ b/modules/dnn/CMakeLists.txt
@@ -85,12 +85,6 @@ else()
   set(sources_options EXCLUDE_OPENCL)
 endif()
 
-if(HAVE_INF_ENGINE)
-  add_definitions(-DHAVE_INF_ENGINE=1)
-  list(APPEND include_dirs ${INF_ENGINE_INCLUDE_DIRS})
-  list(APPEND libs ${INF_ENGINE_LIBRARIES})
-endif()
-
 ocv_module_include_directories(${include_dirs})
 if(CMAKE_CXX_COMPILER_ID STREQUAL "GNU")
   ocv_append_source_files_cxx_compiler_options(fw_srcs "-Wno-suggest-override")  # GCC
@@ -98,9 +92,9 @@ elseif(CMAKE_CXX_COMPILER_ID STREQUAL "Clang")
   ocv_append_source_files_cxx_compiler_options(fw_srcs "-Wno-inconsistent-missing-override")  # Clang
 endif()
 ocv_glob_module_sources(${sources_options} SOURCES ${fw_srcs})
-ocv_create_module(${libs})
+ocv_create_module(${libs} ${INF_ENGINE_TARGET})
 ocv_add_samples()
-ocv_add_accuracy_tests()
+ocv_add_accuracy_tests(${INF_ENGINE_TARGET})
 ocv_add_perf_tests()
 
 ocv_option(${the_module}_PERF_CAFFE "Add performance tests of Caffe framework" OFF)
@@ -120,9 +114,3 @@ if(BUILD_PERF_TESTS)
     endif()
   endif()
 endif()
-
-# Test Intel's Inference Engine models
-if(HAVE_INF_ENGINE AND TARGET opencv_test_dnn)
-  ocv_target_include_directories(opencv_test_dnn PRIVATE ${INF_ENGINE_INCLUDE_DIRS})
-  ocv_target_link_libraries(opencv_test_dnn LINK_PRIVATE ${INF_ENGINE_LIBRARIES})
-endif()
diff --git a/modules/dnn/src/op_inf_engine.cpp b/modules/dnn/src/op_inf_engine.cpp
index eb409eebbc..7d94b9d54a 100644
--- a/modules/dnn/src/op_inf_engine.cpp
+++ b/modules/dnn/src/op_inf_engine.cpp
@@ -334,6 +334,7 @@ size_t InfEngineBackendNet::getBatchSize() const noexcept
     return 0;
 }
 
+#if INF_ENGINE_VER_MAJOR_GT(INF_ENGINE_RELEASE_2018R2)
 InferenceEngine::StatusCode InfEngineBackendNet::AddExtension(const InferenceEngine::IShapeInferExtensionPtr &extension, InferenceEngine::ResponseDesc *resp) noexcept
 {
     CV_Error(Error::StsNotImplemented, "");
@@ -345,6 +346,7 @@ InferenceEngine::StatusCode InfEngineBackendNet::reshape(const InferenceEngine::
     CV_Error(Error::StsNotImplemented, "");
     return InferenceEngine::StatusCode::OK;
 }
+#endif
 
 void InfEngineBackendNet::init(int targetId)
 {
diff --git a/modules/dnn/src/op_inf_engine.hpp b/modules/dnn/src/op_inf_engine.hpp
index a5ad63fb5f..a811f4eae7 100644
--- a/modules/dnn/src/op_inf_engine.hpp
+++ b/modules/dnn/src/op_inf_engine.hpp
@@ -21,6 +21,17 @@
 #if defined(__GNUC__) && __GNUC__ >= 5
 //#pragma GCC diagnostic pop
 #endif
+
+#define INF_ENGINE_RELEASE_2018R1 2018010000
+#define INF_ENGINE_RELEASE_2018R2 2018020000
+
+#ifndef INF_ENGINE_RELEASE
+#warning("IE version have not been provided via command-line. Using 2018R2 by default")
+#define INF_ENGINE_RELEASE INF_ENGINE_RELEASE_2018R2
+#endif
+
+#define INF_ENGINE_VER_MAJOR_GT(ver) (((INF_ENGINE_RELEASE) / 10000) > ((ver) / 10000))
+
 #endif  // HAVE_INF_ENGINE
 
 namespace cv { namespace dnn {
@@ -92,9 +103,10 @@ public:
 
     virtual size_t getBatchSize() const noexcept CV_OVERRIDE;
 
+#if INF_ENGINE_VER_MAJOR_GT(INF_ENGINE_RELEASE_2018R2)
     virtual InferenceEngine::StatusCode AddExtension(const InferenceEngine::IShapeInferExtensionPtr& extension, InferenceEngine::ResponseDesc* resp) noexcept;
-
     virtual InferenceEngine::StatusCode reshape(const InputShapes& inputShapes, InferenceEngine::ResponseDesc* resp) noexcept;
+#endif
 
     void init(int targetId);