After further tweaking I think I've found the reason. I had the '$winavr/avr/lib' folder in the 'search directories' for the linker. When this is removed, linker finds the correct 'libc.a' somehow and everything builds ok. Aelxx's configuration doesn't have this folder included that was the reason he didn't have linker problems. I'm not sure if it's CB or me added this folder in the 'linker search dirs' but if it is CB, it shouldn't do it anymore for the avr-gcc. Shoud I make a bug report about this?