diff --git a/crates/turbopack-ecmascript-plugins/src/transform/relay.rs b/crates/turbopack-ecmascript-plugins/src/transform/relay.rs
index d8dae3fb3eff6..83f59a10c5cf0 100644
--- a/crates/turbopack-ecmascript-plugins/src/transform/relay.rs
+++ b/crates/turbopack-ecmascript-plugins/src/transform/relay.rs
@@ -1,6 +1,6 @@
 use std::path::PathBuf;
 
-use anyhow::Result;
+use anyhow::{Context, Result};
 use async_trait::async_trait;
 use serde::{Deserialize, Serialize};
 use swc_core::{
@@ -12,6 +12,7 @@ use swc_core::{
 };
 use swc_relay::RelayLanguageConfig;
 use turbo_tasks::trace::TraceRawVcs;
+use turbo_tasks_fs::FileSystemPath;
 use turbopack_ecmascript::{CustomTransformer, TransformContext};
 
 #[derive(Clone, Debug, PartialEq, Serialize, Deserialize, TraceRawVcs)]
@@ -33,10 +34,11 @@ pub enum RelayLanguage {
 #[derive(Debug)]
 pub struct RelayTransformer {
     config: swc_relay::Config,
+    project_path: FileSystemPath,
 }
 
 impl RelayTransformer {
-    pub fn new(config: &RelayConfig) -> Self {
+    pub fn new(config: &RelayConfig, project_path: &FileSystemPath) -> Self {
         let options = swc_relay::Config {
             artifact_directory: config.artifact_directory.as_ref().map(PathBuf::from),
             language: config.language.as_ref().map_or(
@@ -49,7 +51,11 @@ impl RelayTransformer {
             ),
             ..Default::default()
         };
-        Self { config: options }
+
+        Self {
+            config: options,
+            project_path: project_path.clone(),
+        }
     }
 }
 
@@ -59,21 +65,28 @@ impl CustomTransformer for RelayTransformer {
     async fn transform(&self, program: &mut Program, ctx: &TransformContext<'_>) -> Result<()> {
         // If user supplied artifact_directory, it should be resolvable already.
         // Otherwise, supply default relative path (./__generated__)
-        let (root, config) = if self.config.artifact_directory.is_some() {
-            (PathBuf::new(), None)
+        let path_to_proj = PathBuf::from(
+            ctx.file_path
+                .parent()
+                .await?
+                .get_relative_path_to(&self.project_path)
+                .context("Expected relative path to relay artifact")?,
+        );
+
+        let config = if self.config.artifact_directory.is_some() {
+            self.config.clone()
         } else {
-            let config = swc_relay::Config {
+            swc_relay::Config {
                 artifact_directory: Some(PathBuf::from("__generated__")),
                 ..self.config
-            };
-            (PathBuf::from("."), Some(config))
+            }
         };
 
         let p = std::mem::replace(program, Program::Module(Module::dummy()));
         *program = p.fold_with(&mut swc_relay::relay(
-            config.as_ref().unwrap_or(&self.config),
+            &config,
             FileName::Real(PathBuf::from(ctx.file_name_str)),
-            root,
+            path_to_proj,
             // [TODO]: pages_dir comes through next-swc-loader
             // https://github.com/vercel/next.js/blob/ea472e8058faea8ebdab2ef6d3aab257a1f0d11c/packages/next/src/build/webpack-config.ts#L792
             None,