diff --git a/src/libflake/flake/flakeref.cc b/src/libflake/flake/flakeref.cc
index 720f771ab09..fbe61c294dc 100644
--- a/src/libflake/flake/flakeref.cc
+++ b/src/libflake/flake/flakeref.cc
@@ -107,7 +107,7 @@ std::pair<FlakeRef, std::string> parsePathFlakeRefWithFragment(
            to 'baseDir'). If so, search upward to the root of the
            repo (i.e. the directory containing .git). */
 
-        path = absPath(path, baseDir);
+        path = absPath(path, baseDir, true);
 
         if (isFlake) {
 
diff --git a/tests/functional/flakes/meson.build b/tests/functional/flakes/meson.build
index cc65dc306a1..af7fb304b7a 100644
--- a/tests/functional/flakes/meson.build
+++ b/tests/functional/flakes/meson.build
@@ -28,6 +28,7 @@ suites += {
     'commit-lock-file-summary.sh',
     'non-flake-inputs.sh',
     'relative-paths.sh',
+    'symlink-paths.sh'
   ],
   'workdir': meson.current_source_dir(),
 }
diff --git a/tests/functional/flakes/symlink-paths.sh b/tests/functional/flakes/symlink-paths.sh
new file mode 100644
index 00000000000..2559e81073a
--- /dev/null
+++ b/tests/functional/flakes/symlink-paths.sh
@@ -0,0 +1,75 @@
+#!/usr/bin/env bash
+
+source ./common.sh
+
+requireGit
+
+create_flake() {
+    local flakeDir="$1"
+    createGitRepo $flakeDir
+    cat > $flakeDir/flake.nix <<EOF
+{
+    outputs = { self }: { x = 2; };
+}
+EOF
+    git -C $flakeDir add flake.nix
+    git -C $flakeDir commit -m Initial
+}
+
+test_symlink_points_to_flake() {
+    create_flake "$TEST_ROOT/flake1"
+    ln -sn "$TEST_ROOT/flake1" "$TEST_ROOT/flake1_sym"
+    [[ $(nix eval "$TEST_ROOT/flake1_sym#x") = 2 ]]
+    rm -rf "$TEST_ROOT/flake1" "$TEST_ROOT/flake1_sym"
+}
+test_symlink_points_to_flake
+
+test_symlink_points_to_flake_in_subdir() {
+    create_flake "$TEST_ROOT/subdir/flake1"
+    ln -sn "$TEST_ROOT/subdir" "$TEST_ROOT/subdir_sym"
+    [[ $(nix eval "$TEST_ROOT/subdir_sym/flake1#x") = 2 ]]
+    rm -rf "$TEST_ROOT/subdir" "$TEST_ROOT/subdir_sym"
+}
+test_symlink_points_to_flake_in_subdir
+
+test_symlink_points_to_dir_in_repo() {
+    local repoDir="$TEST_ROOT/flake1"
+    createGitRepo $repoDir
+    mkdir -p "$repoDir/subdir"
+    cat > $repoDir/subdir/flake.nix <<EOF
+{
+    outputs = { self }: { x = 2; };
+}
+EOF
+    git -C $repoDir add subdir/flake.nix
+    git -C $repoDir commit -m Initial
+    ln -sn "$TEST_ROOT/flake1/subdir" "$TEST_ROOT/flake1_sym"
+    [[ $(nix eval "$TEST_ROOT/flake1_sym#x") = 2 ]]
+    rm -rf "$TEST_ROOT/flake1" "$TEST_ROOT/flake1_sym"
+}
+test_symlink_points_to_dir_in_repo
+
+test_symlink_from_repo_to_another() {
+    local repoDir="$TEST_ROOT/repo1"
+    createGitRepo $repoDir
+    echo "Hello" > $repoDir/file
+    mkdir $repoDir/subdir
+    cat > $repoDir/subdir/flake.nix <<EOF
+{
+    outputs = { self }: { x = builtins.readFile ../file; };
+}
+EOF
+    git -C $repoDir add subdir/flake.nix file
+    git -C $repoDir commit -m Initial
+    [[ $(nix eval "$TEST_ROOT/repo1/subdir#x") == \"Hello\\n\" ]]
+
+    local repo2Dir="$TEST_ROOT/repo2"
+    createGitRepo $repo2Dir
+    ln -sn "$repoDir/subdir" "$repo2Dir/flake1_sym"
+    echo "World" > $repo2Dir/file
+    git -C "$repo2Dir" add flake1_sym file
+    git -C "$repo2Dir" commit -m Initial
+    [[ $(nix eval "$repo2Dir/flake1_sym#x") == \"Hello\\n\" ]]
+    rm -rf "$TEST_ROOT/repo1" "$TEST_ROOT/repo2"
+}
+test_symlink_from_repo_to_another