diff --git a/Project.toml b/Project.toml
index d995cd2..6266e5e 100644
--- a/Project.toml
+++ b/Project.toml
@@ -1,6 +1,6 @@
 name = "TestEnv"
 uuid = "1e6cf692-eddd-4d53-88a5-2d735e33781b"
-version = "1.102.2"
+version = "1.102.3"
 
 [deps]
 Pkg = "44cfe95a-1eb2-52ea-b672-e2afdf69b78f"
diff --git a/src/julia-1.11/activate_set.jl b/src/julia-1.11/activate_set.jl
index 3ed050f..5527618 100644
--- a/src/julia-1.11/activate_set.jl
+++ b/src/julia-1.11/activate_set.jl
@@ -62,8 +62,9 @@ function activate(pkg::AbstractString=current_pkg_name(); allow_reresolve=true)
     for source in values(temp_ctx.env.project.sources)
         isa(source, Dict) || continue
         haskey(source, "path") || continue
+        base_path = test_dir_has_project_file(temp_ctx, pkgspec) ? joinpath(pkgspec.path, "test") : pkgspec.path
         if !isabspath(source["path"])
-            source["path"] = joinpath(pkgspec.path, source["path"])
+            source["path"] = joinpath(base_path, source["path"])
         end
     end
 
diff --git a/test/activate_set.jl b/test/activate_set.jl
index 5094da8..89f59a2 100644
--- a/test/activate_set.jl
+++ b/test/activate_set.jl
@@ -105,5 +105,22 @@
                 Pkg.activate(orig_project_toml_path)
             end
         end
+        @testset "activate with [sources] and two Project.toml approach" begin
+            orig_project_toml_path = Base.active_project()
+            push!(LOAD_PATH, mktempdir())  # put something weird in LOAD_PATH for testing
+            orig_load_path = Base.LOAD_PATH
+            try
+                Pkg.activate(joinpath(@__DIR__, "sources", "MainTestProjectEnv"))
+                TestEnv.activate()
+                new_project_toml_path = Base.active_project()
+                @test new_project_toml_path != orig_project_toml_path
+                @test orig_load_path == Base.LOAD_PATH
+                @eval using MainTestProjectEnv
+                @test isdefined(@__MODULE__, :MainTestProjectEnv)
+                @test MainTestProjectEnv.bar() == 42
+            finally
+                Pkg.activate(orig_project_toml_path)
+            end
+        end
     end
 end
diff --git a/test/sources/MainTestProjectEnv/Project.toml b/test/sources/MainTestProjectEnv/Project.toml
new file mode 100644
index 0000000..9f5d8a5
--- /dev/null
+++ b/test/sources/MainTestProjectEnv/Project.toml
@@ -0,0 +1,9 @@
+name = "MainTestProjectEnv"
+uuid = "e316c70a-63ba-4d10-8c0b-cec00dfd6f7f"
+version = "0.0.0"
+
+[deps]
+DependentEnv = "c9261501-a1a4-4a21-a37c-0c7025a0fef8"
+
+[sources]
+DependentEnv = {path = "../DependentEnv"}
\ No newline at end of file
diff --git a/test/sources/MainTestProjectEnv/src/MainTestProjectEnv.jl b/test/sources/MainTestProjectEnv/src/MainTestProjectEnv.jl
new file mode 100644
index 0000000..34ad9cd
--- /dev/null
+++ b/test/sources/MainTestProjectEnv/src/MainTestProjectEnv.jl
@@ -0,0 +1,6 @@
+module MainTestProjectEnv
+using DependentEnv
+
+bar() = DependentEnv.foo() + 2  # Same as in MainEnv
+
+end
diff --git a/test/sources/MainTestProjectEnv/test/Project.toml b/test/sources/MainTestProjectEnv/test/Project.toml
new file mode 100644
index 0000000..23e5946
--- /dev/null
+++ b/test/sources/MainTestProjectEnv/test/Project.toml
@@ -0,0 +1,8 @@
+[deps]
+MainEnv = "1b324c26-e66a-4bf4-9aeb-d8ecf06e8e93"
+MainTestProjectEnv = "e316c70a-63ba-4d10-8c0b-cec00dfd6f7f"
+Test = "8dfed614-e22c-5e08-85e1-65c5234f0b40"
+
+[sources]
+MainTestProjectEnv = {path = ".."}
+MainEnv = {path = "../../MainEnv"}
\ No newline at end of file
diff --git a/test/sources/MainTestProjectEnv/test/runtests.jl b/test/sources/MainTestProjectEnv/test/runtests.jl
new file mode 100644
index 0000000..71a9deb
--- /dev/null
+++ b/test/sources/MainTestProjectEnv/test/runtests.jl
@@ -0,0 +1,5 @@
+using MainTestProjectEnv
+using MainEnv
+using Test
+
+@test MainTestProjectEnv.bar() == MainEnv.foo()