diff --git a/cabextract/ChangeLog b/cabextract/ChangeLog
index 5358652..d8fd73c 100644
--- a/cabextract/ChangeLog
+++ b/cabextract/ChangeLog
@@ -1,3 +1,11 @@
+2023-02-19  Stuart Caie <kyzer@cabextract.org.uk>
+
+	* ensure_filepath(): had wrong logic, for the archive-controlled
+	part of a pathname, it was using the result of lstat() whether
+	it succeeded or not, and thus not creating directories when it
+	ought to. Fixed and added a testcase for cabextract's --directory
+	option. Thanks to iq2luc for raising the issue and offering a fix.
+
 2023-02-04  Stuart Caie <kyzer@cabextract.org.uk>
 
 	* src/cabextract.c: By default, cabextract will now overwrite
diff --git a/cabextract/Makefile.am b/cabextract/Makefile.am
index 42dce77..7335650 100644
--- a/cabextract/Makefile.am
+++ b/cabextract/Makefile.am
@@ -9,7 +9,7 @@ bundled_mspack =        mspack/mspack.h \
                         mspack/macros.h mspack/readbits.h mspack/readhuff.h
 
 TESTS =                 test/bugs.test test/case-ascii.test test/case-utf8.test \
-                        test/dirwalk-vulns.test test/encoding.test \
+                        test/dir.test test/dirwalk-vulns.test test/encoding.test \
                         test/mixed.test test/search.test test/simple.test \
                         test/split.test test/utf8-stresstest.test \
                         test/symlinks.test
diff --git a/cabextract/src/cabextract.c b/cabextract/src/cabextract.c
index 0a19a9b..25c03af 100644
--- a/cabextract/src/cabextract.c
+++ b/cabextract/src/cabextract.c
@@ -1227,8 +1227,10 @@ static int ensure_filepath(char *path, int n) {
       /* in the archive-determined part of the path and not keeping symlinks:
        * use lstat() and delete symlinks if found */
       ok = (lstat(path, &st_buf) == 0);
-      if (ok && (st_buf.st_mode & S_IFMT) == S_IFLNK) unlink(path);
-      ok = S_ISDIR(st_buf.st_mode);
+      if (ok) {
+        if ((st_buf.st_mode & S_IFMT) == S_IFLNK) unlink(path);
+        ok = S_ISDIR(st_buf.st_mode);
+      }
     }
     if (!ok) ok = (mkdir(path, 0777 & ~user_umask) == 0);
     *p = '/';
diff --git a/cabextract/test/dir.test b/cabextract/test/dir.test
new file mode 100755
index 0000000..6906b67
--- /dev/null
+++ b/cabextract/test/dir.test
@@ -0,0 +1,59 @@
+#!/bin/sh
+# test that cabextract creates directories as expected
+. test/testcase
+
+# extract to user-chosen absolute path
+"$cabextract" -d $tmpdir/test cabs/dir.cab >$actual
+compare_with <<EOF
+Extracting cabinet: cabs/dir.cab
+  extracting $tmpdir/test/plain.c
+  extracting $tmpdir/test/1/2/3/4.c
+
+All done, no errors.
+EOF
+
+# cd to $tmpdir
+basedir=`pwd`
+cd $tmpdir || exit 1
+
+# extract to current path
+"$cabextract" "$basedir/cabs/dir.cab" >$actual
+compare_with <<EOF
+Extracting cabinet: $basedir/cabs/dir.cab
+  extracting plain.c
+  extracting 1/2/3/4.c
+
+All done, no errors.
+EOF
+
+# extract to user-chosen relative directory
+"$cabextract" -d tdir "$basedir/cabs/dir.cab" >$actual
+compare_with <<EOF
+Extracting cabinet: $basedir/cabs/dir.cab
+  extracting tdir/plain.c
+  extracting tdir/1/2/3/4.c
+
+All done, no errors.
+EOF
+
+# extract to user-chosen relative directory with two elements
+"$cabextract" -d a/b "$basedir/cabs/dir.cab" >$actual
+compare_with <<EOF
+Extracting cabinet: $basedir/cabs/dir.cab
+  extracting a/b/plain.c
+  extracting a/b/1/2/3/4.c
+
+All done, no errors.
+EOF
+
+# extract to user-chosen relative directory with two elements, one of which already exists
+"$cabextract" -d tdir/a "$basedir/cabs/dir.cab" >$actual
+compare_with <<EOF
+Extracting cabinet: $basedir/cabs/dir.cab
+  extracting tdir/a/plain.c
+  extracting tdir/a/1/2/3/4.c
+
+All done, no errors.
+EOF
+
+read status < $status && test "x$status" = xsuccess