diff --git a/app/index.js b/app/index.js
index efd6b1a..416340e 100644
--- a/app/index.js
+++ b/app/index.js
@@ -101,9 +101,9 @@ module.exports = generators.Base.extend({
         this.props.name = _.kebabCase(this.props.name);
 
         var validationResults = validate(this.props.name);
-        var isValid = validationResults.validForNewPackages;
+        var isValidName = validationResults.validForNewPackages;
 
-        if(!isValid) {
+        if(!isValidName) {
           var warnings = validationResults.warnings;
           var error = new Error('Your project name ' + this.props.name + ' is not ' +
             'valid. Please try another name. Reason: ' + warnings[0]);
@@ -111,6 +111,17 @@ module.exports = generators.Base.extend({
           return;
         }
 
+        if (path.isAbsolute(this.props.folder)) {
+          this.props.folder = path.relative(this.destinationPath(), this.props.folder);
+        }
+        var isValidPath = !this.props.folder.includes('../');
+        if (!isValidPath) {
+          var error = new Error('Your project main folder ' + this.props.folder + ' is external ' +
+            'to the project folder. Please set to internal path.');
+          done(error);
+          return;
+        }
+
         done();
       }.bind(this));
     }.bind(this));
@@ -120,11 +131,6 @@ module.exports = generators.Base.extend({
 		var pkgName = this.props.name;
 		var pkgMain = pkgName + '/index.stache!done-autorender';
 
-    if (path.isAbsolute(this.props.folder)) {
-      var cd = __dirname;
-      this.props.folder = path.relative(cd, this.props.folder);
-    }
-
     var self = this;
     var pkgJsonFields = {
       name: pkgName,
diff --git a/test/app.test.js b/test/app.test.js
index c5cde4c..1486d4a 100644
--- a/test/app.test.js
+++ b/test/app.test.js
@@ -1,5 +1,7 @@
 var assert = require('assert');
 var path = require('path');
+var fs = require('fs');
+var os = require('os');
 var helpers = require('yeoman-generator').test;
 var exec = require('child_process').exec;
 var donejsPackage = require('donejs-cli/package.json');
@@ -41,12 +43,8 @@ describe('generator-donejs', function () {
     });
 
     it('fails with an invalid package name', function (done) {
-      var tmpDir;
 
       helpers.run(path.join(__dirname, '../app'))
-        .inTmpDir(function (dir) {
-          tmpDir = dir;
-        })
         .withOptions({
           packages: donejsPackage.donejs,
           skipInstall: true
@@ -63,20 +61,20 @@ describe('generator-donejs', function () {
   });
 
   describe('Absolute path support', function() {
-    var tmpDir;
-
     before(function(done) {
       helpers.run(path.join(__dirname, '../app'))
-        .inTmpDir(function(dir) {
-          tmpDir = dir;
+        .inTmpDir(function (dir) {
+          this.withPrompts({
+            folder: path.join(fs.realpathSync(dir), '/src')
+          })
         })
         .withOptions({
           packages: donejsPackage.donejs,
           skipInstall: true
         })
-        .withPrompts({
-          folder: path.join(__dirname, "../app/src")
-        }).on('end', done);
+        .on('end', function() {
+          done();
+        })
     });
 
     it('set relative path name', function() {
@@ -90,6 +88,25 @@ describe('generator-donejs', function () {
     });
   });
 
+  describe('External path will error', function() {
+    it("fails with external path", function(done) {
+      helpers.run(path.join(__dirname, '../app'))
+        .withPrompts({
+          folder: os.homedir()
+        })
+        .withOptions({
+          packages: donejsPackage.donejs,
+          skipInstall: true
+        })
+        .on('error', function(err){
+          var msg = err.message;
+          console.log(msg);
+          assert(/is external/.test(msg), 'Error because of invalid external folder path');
+          done();
+        });
+    });
+  });
+
   describe('NPM 3 support', function(){
     before(function(done){
       var test = this;