diff --git a/src/cmd/metadata.rs b/src/cmd/metadata.rs
index c301c3015427a3fbca2522123c98bbdd9c18e858..387e16bc6571766643f016f5d39dcea2b90288f5 100644
--- a/src/cmd/metadata.rs
+++ b/src/cmd/metadata.rs
@@ -29,10 +29,7 @@ use contract_metadata::{
     SourceLanguage, SourceWasm, User,
 };
 use semver::Version;
-use std::{
-    fs,
-    path::{Path, PathBuf},
-};
+use std::{fs, path::PathBuf};
 use url::Url;
 
 const METADATA_FILE: &str = "metadata.json";
@@ -123,12 +120,6 @@ impl GenerateMetadataCommand {
         if self.unstable_options.original_manifest {
             generate_metadata(&self.crate_metadata.manifest_path)?;
         } else {
-            let manifest_dir = match self.crate_metadata.manifest_path.directory() {
-                Some(dir) => dir,
-                None => Path::new("./"),
-            };
-            let absolute_package_path = manifest_dir.canonicalize()?;
-
             Workspace::new(
                 &self.crate_metadata.cargo_meta,
                 &self.crate_metadata.root_package.id,
@@ -139,7 +130,7 @@ impl GenerateMetadataCommand {
                     .with_profile_release_lto(false)?;
                 Ok(())
             })?
-            .with_metadata_gen_package(absolute_package_path)?
+            .with_metadata_gen_package(self.crate_metadata.manifest_path.absolute_directory()?)?
             .using_temp(generate_metadata)?;
         }
 
diff --git a/src/crate_metadata.rs b/src/crate_metadata.rs
index 5633f0be2e23955dcb1145b5310cbb1c5d218d8e..95e11d131e7f542617ff51fc2aa5cbe0e5ff872a 100644
--- a/src/crate_metadata.rs
+++ b/src/crate_metadata.rs
@@ -43,11 +43,17 @@ impl CrateMetadata {
     /// Parses the contract manifest and returns relevant metadata.
     pub fn collect(manifest_path: &ManifestPath) -> Result<Self> {
         let (metadata, root_package) = get_cargo_metadata(manifest_path)?;
-        let target_directory = metadata.target_directory.as_path().join("ink");
+        let mut target_directory = metadata.target_directory.as_path().join("ink");
 
         // Normalize the package name.
         let package_name = root_package.name.replace("-", "_");
 
+        let absolute_manifest_path = manifest_path.absolute_directory()?;
+        let absolute_workspace_root = metadata.workspace_root.canonicalize()?;
+        if absolute_manifest_path != absolute_workspace_root {
+            target_directory = target_directory.join(package_name.clone());
+        }
+
         // {target_dir}/wasm32-unknown-unknown/release/{package_name}.wasm
         let mut original_wasm = target_directory.clone();
         original_wasm.push("wasm32-unknown-unknown");
diff --git a/src/workspace/manifest.rs b/src/workspace/manifest.rs
index 40ef117c55f47e7f7e4b016f7ce8f83684cd36f9..69d9a2723d335264f18655c5c453d742813a062c 100644
--- a/src/workspace/manifest.rs
+++ b/src/workspace/manifest.rs
@@ -66,6 +66,15 @@ impl ManifestPath {
             None
         }
     }
+
+    /// Returns the absolute directory path of the manifest.
+    pub fn absolute_directory(&self) -> Result<PathBuf, std::io::Error> {
+        let directory = match self.directory() {
+            Some(dir) => dir,
+            None => Path::new("./"),
+        };
+        directory.canonicalize()
+    }
 }
 
 impl TryFrom<&PathBuf> for ManifestPath {
@@ -404,3 +413,30 @@ fn crate_type_exists(crate_type: &str, crate_types: &[value::Value]) -> bool {
         .iter()
         .any(|v| v.as_str().map_or(false, |s| s == crate_type))
 }
+
+#[cfg(test)]
+mod test {
+    use super::ManifestPath;
+    use crate::util::tests::with_tmp_dir;
+    use std::fs;
+
+    #[test]
+    fn must_return_absolute_path_from_absolute_path() {
+        with_tmp_dir(|path| {
+            // given
+            let cargo_toml_path = path.join("Cargo.toml");
+            let _ = fs::File::create(&cargo_toml_path).expect("file creation failed");
+            let manifest_path =
+                ManifestPath::new(cargo_toml_path).expect("manifest path creation failed");
+
+            // when
+            let absolute_path = manifest_path
+                .absolute_directory()
+                .expect("absolute path extraction failed");
+
+            // then
+            assert_eq!(absolute_path.as_path(), path);
+            Ok(())
+        })
+    }
+}