diff --git a/Cargo.lock b/Cargo.lock
index 9bd1437cf..768b6ad95 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -394,6 +394,12 @@ version = "1.0.4"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "9330f8b2ff13f34540b44e946ef35111825727b38d33286ef986142615121801"
 
+[[package]]
+name = "cfg_aliases"
+version = "0.2.1"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "613afe47fcd5fac7ccf1db93babcb082c5994d996f20b8b159f2ad1658eb5724"
+
 [[package]]
 name = "charset"
 version = "0.1.5"
@@ -1446,6 +1452,7 @@ dependencies = [
  "minijinja",
  "multipart",
  "native-tls",
+ "nix",
  "normpath",
  "once_cell",
  "path-slash",
@@ -1596,6 +1603,18 @@ dependencies = [
  "tempfile",
 ]
 
+[[package]]
+name = "nix"
+version = "0.30.1"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "74523f3a35e05aba87a1d978330aef40f67b0304ac79c1c00b294c9830543db6"
+dependencies = [
+ "bitflags",
+ "cfg-if",
+ "cfg_aliases",
+ "libc",
+]
+
 [[package]]
 name = "nom"
 version = "7.1.3"
diff --git a/Cargo.toml b/Cargo.toml
index 3029e3ac1..7e53ee1e7 100644
--- a/Cargo.toml
+++ b/Cargo.toml
@@ -145,11 +145,12 @@ pretty_assertions = { version = "1.3.0", optional = true }
 expect-test = "1.4.1"
 fs4 = { version = "0.13.1", features = ["fs-err3"] }
 indoc = "2.0.3"
+nix = { version = "0.30.1", default-features = false, features = ["user"] }
 insta = "1.34.0"
 pretty_assertions = "1.3.0"
 rstest = "0.26.1"
 rustversion = "1.0.9"
-serial_test = { version ="3.2.0", default-features = false }
+serial_test = { version = "3.2.0", default-features = false }
 time = { version = "0.3.34", features = ["macros"] }
 trycmd = "0.15.0"
 which = "7.0.0"
diff --git a/Changelog.md b/Changelog.md
index 42d5abdc1..831ebd90d 100644
--- a/Changelog.md
+++ b/Changelog.md
@@ -2,6 +2,9 @@
 
 ## Unreleased
 
+* Skip unreadable directories not included in the wheel instead of failing
+* Filter out directories from `cargo package --list` output when building sdists
+
 ## [1.11.0]
 
 * Refactor `ModuleWriter` to be easier to implement and use
diff --git a/src/module_writer/mod.rs b/src/module_writer/mod.rs
index 30b34226a..d0a65585d 100644
--- a/src/module_writer/mod.rs
+++ b/src/module_writer/mod.rs
@@ -12,7 +12,7 @@ use ignore::WalkBuilder;
 use indexmap::IndexMap;
 use itertools::Itertools as _;
 use normpath::PathExt as _;
-use tracing::debug;
+use tracing::{debug, trace};
 
 use crate::Metadata24;
 use crate::PyProjectToml;
@@ -142,7 +142,25 @@ pub fn write_python_part(
         .git_exclude(false)
         .build()
     {
-        let absolute = absolute?.into_path();
+        let absolute = match absolute {
+            Ok(entry) => entry.into_path(),
+            Err(err) => {
+                // Skip errors for paths that don't need to be included, e.g. for directories
+                // that we don't have permissions for.
+                if let ignore::Error::WithPath { path, .. } = &err {
+                    if !python_packages.iter().any(|pkg| path.starts_with(pkg)) {
+                        // Log priority logging, we're only looking at the directory at all due to
+                        // a particularity in how we're doing path traversal.
+                        trace!(
+                            "Skipping inaccessible path {} due to read error: {err}",
+                            path.display()
+                        );
+                        continue;
+                    }
+                }
+                return Err(err.into());
+            }
+        };
         if !python_packages
             .iter()
             .any(|path| absolute.starts_with(path))
diff --git a/src/source_distribution.rs b/src/source_distribution.rs
index f1849a80a..8974dedfb 100644
--- a/src/source_distribution.rs
+++ b/src/source_distribution.rs
@@ -262,7 +262,9 @@ fn add_crate_to_source_distribution(
                 debug!("Ignoring {}", target);
                 false
             } else {
-                source.exists()
+                // Use `is_file` instead of `exists` to work around cargo bug:
+                // https://github.com/rust-lang/cargo/issues/16465
+                source.is_file()
             }
         })
         .collect();
diff --git a/tests/common/other.rs b/tests/common/other.rs
index f0f312a7a..3fcfe11a8 100644
--- a/tests/common/other.rs
+++ b/tests/common/other.rs
@@ -13,6 +13,26 @@ use tar::Archive;
 use time::OffsetDateTime;
 use zip::ZipArchive;
 
+fn copy_dir_recursive(src: &Path, dst: &Path) -> std::io::Result<()> {
+    fs_err::create_dir_all(dst)?;
+    for entry in fs_err::read_dir(src)? {
+        let entry = entry?;
+        let name = entry.file_name();
+        // Skip build artifacts and caches
+        if name.to_str() == Some("target") {
+            continue;
+        }
+        let src_path = entry.path();
+        let dst_path = dst.join(name);
+        if src_path.is_dir() {
+            copy_dir_recursive(&src_path, &dst_path)?;
+        } else {
+            fs_err::copy(&src_path, &dst_path)?;
+        }
+    }
+    Ok(())
+}
+
 /// Tries to compile a sample crate (pyo3-pure) for musl,
 /// given that rustup and the the musl target are installed
 ///
@@ -400,3 +420,75 @@ pub fn abi3_without_version() -> Result<()> {
 
     Ok(())
 }
+
+/// Test that builds succeed even when there are unreadable directories in the project root.
+///
+/// See https://github.com/PyO3/maturin/issues/2777
+#[cfg(unix)]
+pub fn test_unreadable_dir() -> Result<()> {
+    use std::os::unix::fs::PermissionsExt;
+
+    // Root bypasses permission checks, so we can't test this as root.
+    if nix::unistd::getuid().is_root() {
+        return Ok(());
+    }
+
+    let temp_dir = tempfile::tempdir()?;
+    let project_dir = temp_dir.path().join("pyo3-mixed");
+    copy_dir_recursive(Path::new("test-crates/pyo3-mixed"), &project_dir)?;
+
+    // Create an unreadable dir that is not the python package.
+    let unreadable_dir = project_dir.join("unreadable_cache");
+    fs_err::create_dir(&unreadable_dir)?;
+    fs_err::write(unreadable_dir.join("cache_file"), "cached data")?;
+    fs_err::set_permissions(&unreadable_dir, std::fs::Permissions::from_mode(0o000))?;
+    assert!(
+        fs_err::read_dir(&unreadable_dir).is_err(),
+        "Directory must be unreadable"
+    );
+
+    // Test source dist build. See also https://github.com/rust-lang/cargo/issues/16465
+    let sdist_options = BuildOptions::try_parse_from([
+        "build",
+        "--manifest-path",
+        project_dir.join("Cargo.toml").to_str().unwrap(),
+        "--quiet",
+        "--target-dir",
+        temp_dir.path().join("target").to_str().unwrap(),
+        "--out",
+        temp_dir.path().join("dist").to_str().unwrap(),
+    ])?;
+
+    let sdist_context = sdist_options
+        .into_build_context()
+        .strip(false)
+        .editable(false)
+        .sdist_only(true)
+        .build()?;
+    sdist_context.build_source_distribution()?;
+
+    // Test wheel build
+    let wheel_options = BuildOptions::try_parse_from([
+        "build",
+        "--manifest-path",
+        project_dir.join("Cargo.toml").to_str().unwrap(),
+        "--quiet",
+        "--target-dir",
+        temp_dir.path().join("target").to_str().unwrap(),
+        "--out",
+        temp_dir.path().join("dist").to_str().unwrap(),
+    ])?;
+
+    let wheel_context = wheel_options
+        .into_build_context()
+        .strip(cfg!(feature = "faster-tests"))
+        .editable(false)
+        .build()?;
+    let wheel_result = wheel_context.build_wheels();
+
+    // Restore permissions before temp_dir cleanup
+    fs_err::set_permissions(&unreadable_dir, std::fs::Permissions::from_mode(0o755))?;
+
+    wheel_result?;
+    Ok(())
+}
diff --git a/tests/run.rs b/tests/run.rs
index c678bf88a..f16d0f18d 100644
--- a/tests/run.rs
+++ b/tests/run.rs
@@ -603,6 +603,12 @@ fn musl() {
     }
 }
 
+#[test]
+#[cfg(unix)]
+fn unreadable_dir() {
+    handle_result(other::test_unreadable_dir())
+}
+
 #[test]
 fn workspace_cargo_lock() {
     handle_result(other::test_workspace_cargo_lock())