diff --git a/lib/call-cabal-project-to-nix.nix b/lib/call-cabal-project-to-nix.nix
index 925c5da186..3268341016 100644
--- a/lib/call-cabal-project-to-nix.nix
+++ b/lib/call-cabal-project-to-nix.nix
@@ -496,6 +496,9 @@ let
           --exclude '*' \
           $tmp/ $out/
 
+    # Make sure the subDir' exists even if it did not contain any cabal files
+    mkdir -p $out${subDir'}
+
     # make sure the path's in the plan.json are relative to $out instead of $tmp
     # this is necessary so that plan-to-nix relative path logic can work.
     substituteInPlace $tmp${subDir'}/dist-newstyle/cache/plan.json --replace "$tmp" "$out"
diff --git a/modules/package.nix b/modules/package.nix
index 3a0f7fa818..01820bf5d8 100644
--- a/modules/package.nix
+++ b/modules/package.nix
@@ -301,6 +301,15 @@ in {
       type = either path package;
       default = pkgs.fetchurl { url = "mirror://hackage/${config.name}.tar.gz"; inherit (config) sha256; };
       defaultText = "pkgs.fetchurl { url = \"mirror://hackage/\${config.name}.tar.gz\"; inherit (config) sha256; };";
+      # Make sure paths have a context so they will be included in the derivation
+      # inputs for the component derivations.  Without this sandbox builds fail
+      # cannot see the input and fail with the error:
+      #   do not know how to unpack source archive /nix/store/...
+      apply = v:
+        let storeDirMatch = __match "(${__storeDir}/[^/]+).*" v;
+        in if isString v && __getContext v == {} && storeDirMatch != null
+          then __appendContext v { ${__head storeDirMatch} = { path = true; }; }
+          else v;
     };
     package-description-override = mkOption {
       type = nullOr str;
diff --git a/test/cabal-project-nix-path/default.nix b/test/cabal-project-nix-path/default.nix
new file mode 100644
index 0000000000..deeef9f904
--- /dev/null
+++ b/test/cabal-project-nix-path/default.nix
@@ -0,0 +1,25 @@
+{ lib, cabalProject', tool, recurseIntoAttrs, testSrc, compiler-nix-name, evalPackages }:
+let
+  project = cabalProject' {
+    name = "cabal-project-nix-path";
+    inherit compiler-nix-name evalPackages;
+    src = testSrc "cabal-project-nix-path";
+    cabalProject = ''
+      packages: ${(tool compiler-nix-name "hello" { inherit evalPackages; }).project.args.src}
+    '';
+  };
+  # The same but with source in a subdir of the store path
+  projectSubDir = project.appendModule {
+    cabalProject = lib.mkForce ''
+      packages: ${evalPackages.runCommand "hello-src" {} "mkdir -p $out && cp -r ${(tool compiler-nix-name "hello" { inherit evalPackages; }).project.args.src} $out/subdir"}/subdir
+    '';
+  };
+
+in recurseIntoAttrs {
+  ifdInputs = {
+    inherit (project) plan-nix;
+  };
+
+  build = project.hsPkgs.hello.components.exes.hello;
+  buildSubDir = projectSubDir.hsPkgs.hello.components.exes.hello;
+}
diff --git a/test/default.nix b/test/default.nix
index 64a0488352..4cdee4dd3a 100644
--- a/test/default.nix
+++ b/test/default.nix
@@ -216,6 +216,7 @@ let
     ca-derivations = callTest ./ca-derivations { inherit CADerivationsEnabled; };
     ca-derivations-include = callTest ./ca-derivations-include { inherit CADerivationsEnabled; };
     test-only = callTest ./test-only { inherit util; };
+    cabal-project-nix-path = callTest ./cabal-project-nix-path {};
     unit = unitTests;
   };