diff --git a/.gitignore b/.gitignore
index 7f1e029d45..dd83850771 100644
--- a/.gitignore
+++ b/.gitignore
@@ -6,6 +6,7 @@
 # bazel
 /bazel-*
 /examples/bazel-*
+/examples/*/bazel-*
 /docs/bazel-*
 
 # rustfmt
diff --git a/examples/.bazelignore b/examples/.bazelignore
new file mode 100644
index 0000000000..6d0dadddd2
--- /dev/null
+++ b/examples/.bazelignore
@@ -0,0 +1 @@
+hello_cargo_manifest_dir
diff --git a/examples/WORKSPACE b/examples/WORKSPACE
index 7a647f7493..584d93ee68 100644
--- a/examples/WORKSPACE
+++ b/examples/WORKSPACE
@@ -11,3 +11,9 @@ deps()
 load(":examples_transitive_deps.bzl", "transitive_deps")
 
 transitive_deps()
+
+# For the hello_uses_cargo_manifest_dir example.
+local_repository(
+    name = "hello_cargo_manifest_dir",
+    path = "hello_cargo_manifest_dir",
+)
diff --git a/examples/hello_cargo_manifest_dir/BUILD b/examples/hello_cargo_manifest_dir/BUILD
new file mode 100644
index 0000000000..e20dc354be
--- /dev/null
+++ b/examples/hello_cargo_manifest_dir/BUILD
@@ -0,0 +1,8 @@
+load("@io_bazel_rules_rust//rust:rust.bzl", "rust_library")
+
+rust_library(
+    name = "hello_cargo_manifest_dir",
+    srcs = ["src/lib.rs"],
+    data = ["include/included_file.rs.inc"],
+    visibility = ["//visibility:public"],
+)
diff --git a/examples/hello_cargo_manifest_dir/WORKSPACE b/examples/hello_cargo_manifest_dir/WORKSPACE
new file mode 100644
index 0000000000..ad319577bd
--- /dev/null
+++ b/examples/hello_cargo_manifest_dir/WORKSPACE
@@ -0,0 +1,12 @@
+local_repository(
+    name = "io_bazel_rules_rust",
+    path = "../..",
+)
+
+load("@io_bazel_rules_rust//rust:repositories.bzl", "rust_repositories")
+
+rust_repositories()
+
+load("@io_bazel_rules_rust//:workspace.bzl", "rust_workspace")
+
+rust_workspace()
diff --git a/examples/hello_cargo_manifest_dir/include/included_file.rs.inc b/examples/hello_cargo_manifest_dir/include/included_file.rs.inc
new file mode 100644
index 0000000000..4091ebba06
--- /dev/null
+++ b/examples/hello_cargo_manifest_dir/include/included_file.rs.inc
@@ -0,0 +1 @@
+I love veggies!
diff --git a/examples/hello_cargo_manifest_dir/src/lib.rs b/examples/hello_cargo_manifest_dir/src/lib.rs
new file mode 100644
index 0000000000..b462aebe04
--- /dev/null
+++ b/examples/hello_cargo_manifest_dir/src/lib.rs
@@ -0,0 +1,4 @@
+
+pub fn get_included_str() -> &'static str {
+    include_str!(concat!(env!("CARGO_MANIFEST_DIR"), "/include/included_file.rs.inc"))
+}
diff --git a/examples/hello_uses_cargo_manifest_dir/BUILD b/examples/hello_uses_cargo_manifest_dir/BUILD
new file mode 100644
index 0000000000..0740e663fe
--- /dev/null
+++ b/examples/hello_uses_cargo_manifest_dir/BUILD
@@ -0,0 +1,8 @@
+load("@io_bazel_rules_rust//rust:rust.bzl", "rust_test")
+
+rust_test(
+    name = "hello_uses_cargo_manifest_dir",
+    srcs = ["src/lib.rs"],
+    deps = ["@hello_cargo_manifest_dir//:hello_cargo_manifest_dir"],
+    edition = "2018",
+)
diff --git a/examples/hello_uses_cargo_manifest_dir/src/lib.rs b/examples/hello_uses_cargo_manifest_dir/src/lib.rs
new file mode 100644
index 0000000000..8b761b88c2
--- /dev/null
+++ b/examples/hello_uses_cargo_manifest_dir/src/lib.rs
@@ -0,0 +1,7 @@
+
+use hello_cargo_manifest_dir::get_included_str;
+
+#[test]
+fn test_lib_with_include() {
+    assert_eq!(get_included_str(), "I love veggies!\n")
+}
diff --git a/rust/private/rustc.bzl b/rust/private/rustc.bzl
index 4c08f30bd2..fbcd015cc0 100644
--- a/rust/private/rustc.bzl
+++ b/rust/private/rustc.bzl
@@ -442,9 +442,18 @@ def construct_arguments(
     # may not follow the `src/lib.rs` convention. As such we use `ctx.build_file_path` mapped into the
     # `exec_root`. Since we cannot (seemingly) get the `exec_root` from starlark, we cheat a little
     # and use `${pwd}` which resolves the `exec_root` at action execution time.
+    #
+    # Unfortunately, ctx.build_file_path isn't relative to the exec_root for external repositories in
+    # which case we use ctx.label.workspace_root to complete the path.
     args.add("--subst", "pwd=${pwd}")
 
-    env["CARGO_MANIFEST_DIR"] = "${pwd}/" + ctx.build_file_path[:ctx.build_file_path.rfind("/")]
+    workspace_root_items = ctx.label.workspace_root.split("/")
+    if len(workspace_root_items) >= 2 and \
+            workspace_root_items[0] == "external" and \
+            workspace_root_items[-1] == ctx.build_file_path.split("/")[0]:
+        workspace_root_items = workspace_root_items[:-1]
+
+    env["CARGO_MANIFEST_DIR"] = "${pwd}/" + "/".join(workspace_root_items + ctx.build_file_path.split("/")[:-1])
 
     if out_dir != None:
         env["OUT_DIR"] = "${pwd}/" + out_dir