diff --git a/e2e/cli/test_prepare b/e2e/cli/test_prepare
index 991e61010c..a1901fa471 100644
--- a/e2e/cli/test_prepare
+++ b/e2e/cli/test_prepare
@@ -492,3 +492,35 @@ assert_not_contains "cat tera_output.txt" "{{env.MY_TEMPLATE_VAR}}"
 # Clean up
 rm -f tera_input.txt tera_output.txt mise.toml
 rm -rf .mise
+
+# Test dir option affects source/output resolution for custom providers
+mkdir -p subdir
+echo '{"name": "test"}' >subdir/package.json
+echo '{"lockfileVersion": 3}' >subdir/package-lock.json
+
+cat >mise.toml <<'EOF'
+[prepare.subdir_custom]
+dir = "subdir"
+sources = ["package.json", "package-lock.json"]
+outputs = ["build_output"]
+run = "echo SUBDIR_RAN"
+EOF
+
+# Sources should resolve against subdir, not project root
+assert_contains "mise prepare --list" "subdir_custom"
+assert_contains "mise prepare --list" "subdir/package.json"
+assert_contains "mise prepare --list" "subdir/package-lock.json"
+
+# Run prepare and verify source hashes are tracked (provider becomes fresh)
+mkdir -p subdir/build_output
+assert_contains "mise prepare --only subdir_custom" "Prepared: subdir_custom"
+
+# Second run should be fresh (sources hashed correctly via subdir)
+assert_contains "mise prepare --only subdir_custom" "up to date"
+
+# Modify source in subdir → should be stale
+echo '{"name": "modified"}' >subdir/package.json
+assert_contains "mise prepare --only subdir_custom" "Prepared: subdir_custom"
+
+# Clean up
+rm -rf subdir mise.toml .mise
diff --git a/src/prepare/providers/bun.rs b/src/prepare/providers/bun.rs
index 5db39cf5d7..96660d672c 100644
--- a/src/prepare/providers/bun.rs
+++ b/src/prepare/providers/bun.rs
@@ -21,12 +21,13 @@ impl BunPrepareProvider {
     }
 
     fn lockfile_path(&self) -> Option<PathBuf> {
+        let root = self.base.config_root();
         // Bun supports both bun.lockb (binary) and bun.lock (text)
-        let binary_lock = self.base.project_root.join("bun.lockb");
+        let binary_lock = root.join("bun.lockb");
         if binary_lock.exists() {
             return Some(binary_lock);
         }
-        let text_lock = self.base.project_root.join("bun.lock");
+        let text_lock = root.join("bun.lock");
         if text_lock.exists() {
             return Some(text_lock);
         }
@@ -44,12 +45,12 @@ impl PrepareProvider for BunPrepareProvider {
         if let Some(lockfile) = self.lockfile_path() {
             sources.push(lockfile);
         }
-        sources.push(self.base.project_root.join("package.json"));
+        sources.push(self.base.config_root().join("package.json"));
         sources
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
-        vec![self.base.project_root.join("node_modules")]
+        vec![self.base.config_root().join("node_modules")]
     }
 
     fn prepare_command(&self) -> Result<PrepareCommand> {
@@ -61,7 +62,7 @@ impl PrepareProvider for BunPrepareProvider {
             program: "bun".to_string(),
             args: vec!["install".to_string()],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
diff --git a/src/prepare/providers/bundler.rs b/src/prepare/providers/bundler.rs
index 47c05935b0..2780a9cfaa 100644
--- a/src/prepare/providers/bundler.rs
+++ b/src/prepare/providers/bundler.rs
@@ -27,20 +27,19 @@ impl PrepareProvider for BundlerPrepareProvider {
     }
 
     fn sources(&self) -> Vec<PathBuf> {
-        vec![
-            self.base.project_root.join("Gemfile.lock"),
-            self.base.project_root.join("Gemfile"),
-        ]
+        let root = self.base.config_root();
+        vec![root.join("Gemfile.lock"), root.join("Gemfile")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
+        let root = self.base.config_root();
         // Check for vendor/bundle if using --path vendor/bundle
-        let vendor = self.base.project_root.join("vendor/bundle");
+        let vendor = root.join("vendor/bundle");
         if vendor.exists() {
             vec![vendor]
         } else {
             // Use .bundle directory as fallback indicator
-            vec![self.base.project_root.join(".bundle")]
+            vec![root.join(".bundle")]
         }
     }
 
@@ -53,7 +52,7 @@ impl PrepareProvider for BundlerPrepareProvider {
             program: "bundle".to_string(),
             args: vec!["install".to_string()],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -64,6 +63,6 @@ impl PrepareProvider for BundlerPrepareProvider {
     }
 
     fn is_applicable(&self) -> bool {
-        self.base.project_root.join("Gemfile.lock").exists()
+        self.base.config_root().join("Gemfile.lock").exists()
     }
 }
diff --git a/src/prepare/providers/composer.rs b/src/prepare/providers/composer.rs
index 5bffef0225..a108597364 100644
--- a/src/prepare/providers/composer.rs
+++ b/src/prepare/providers/composer.rs
@@ -27,14 +27,12 @@ impl PrepareProvider for ComposerPrepareProvider {
     }
 
     fn sources(&self) -> Vec<PathBuf> {
-        vec![
-            self.base.project_root.join("composer.lock"),
-            self.base.project_root.join("composer.json"),
-        ]
+        let root = self.base.config_root();
+        vec![root.join("composer.lock"), root.join("composer.json")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
-        vec![self.base.project_root.join("vendor")]
+        vec![self.base.config_root().join("vendor")]
     }
 
     fn prepare_command(&self) -> Result<PrepareCommand> {
@@ -46,7 +44,7 @@ impl PrepareProvider for ComposerPrepareProvider {
             program: "composer".to_string(),
             args: vec!["install".to_string()],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -57,6 +55,6 @@ impl PrepareProvider for ComposerPrepareProvider {
     }
 
     fn is_applicable(&self) -> bool {
-        self.base.project_root.join("composer.lock").exists()
+        self.base.config_root().join("composer.lock").exists()
     }
 }
diff --git a/src/prepare/providers/custom.rs b/src/prepare/providers/custom.rs
index a78988441b..18500d6813 100644
--- a/src/prepare/providers/custom.rs
+++ b/src/prepare/providers/custom.rs
@@ -26,8 +26,9 @@ impl CustomPrepareProvider {
         let mut paths = vec![];
 
         for pattern in patterns {
+            let base_dir = self.base.config_root();
             let full_pattern = if PathBuf::from(pattern).is_relative() {
-                self.base.project_root.join(pattern)
+                base_dir.join(pattern)
             } else {
                 PathBuf::from(pattern)
             };
diff --git a/src/prepare/providers/git_submodule.rs b/src/prepare/providers/git_submodule.rs
index 60cca1d803..999205c9c6 100644
--- a/src/prepare/providers/git_submodule.rs
+++ b/src/prepare/providers/git_submodule.rs
@@ -25,7 +25,7 @@ impl GitSubmodulePrepareProvider {
     /// Handles INI-style sections and comments. Only extracts `path` values
     /// from `[submodule "..."]` sections.
     fn submodule_paths(&self) -> Vec<PathBuf> {
-        let gitmodules = self.base.project_root.join(".gitmodules");
+        let gitmodules = self.base.config_root().join(".gitmodules");
         let Ok(content) = std::fs::read_to_string(&gitmodules) else {
             return vec![];
         };
@@ -53,7 +53,7 @@ impl GitSubmodulePrepareProvider {
                     let value = value.trim_start();
                     value
                         .strip_prefix('=')
-                        .map(|value| self.base.project_root.join(value.trim()))
+                        .map(|value| self.base.config_root().join(value.trim()))
                 } else {
                     None
                 }
@@ -68,7 +68,7 @@ impl PrepareProvider for GitSubmodulePrepareProvider {
     }
 
     fn sources(&self) -> Vec<PathBuf> {
-        vec![self.base.project_root.join(".gitmodules")]
+        vec![self.base.config_root().join(".gitmodules")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
@@ -89,7 +89,7 @@ impl PrepareProvider for GitSubmodulePrepareProvider {
                 "--recursive".to_string(),
             ],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -100,7 +100,7 @@ impl PrepareProvider for GitSubmodulePrepareProvider {
     }
 
     fn is_applicable(&self) -> bool {
-        let gitmodules = self.base.project_root.join(".gitmodules");
+        let gitmodules = self.base.config_root().join(".gitmodules");
         gitmodules.exists() && gitmodules.metadata().map(|m| m.len() > 0).unwrap_or(false)
     }
 }
diff --git a/src/prepare/providers/go.rs b/src/prepare/providers/go.rs
index ecd58aa86a..9b449f3569 100644
--- a/src/prepare/providers/go.rs
+++ b/src/prepare/providers/go.rs
@@ -28,17 +28,18 @@ impl PrepareProvider for GoPrepareProvider {
 
     fn sources(&self) -> Vec<PathBuf> {
         // go.mod defines dependencies - changes here trigger downloads
-        vec![self.base.project_root.join("go.mod")]
+        vec![self.base.config_root().join("go.mod")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
+        let root = self.base.config_root();
         // Go downloads modules to GOPATH/pkg/mod, but we can check vendor/ if used
-        let vendor = self.base.project_root.join("vendor");
+        let vendor = root.join("vendor");
         if vendor.exists() {
             vec![vendor]
         } else {
             // go.sum gets updated after go mod download completes
-            vec![self.base.project_root.join("go.sum")]
+            vec![root.join("go.sum")]
         }
     }
 
@@ -48,7 +49,7 @@ impl PrepareProvider for GoPrepareProvider {
         }
 
         // Use `go mod vendor` if vendor/ exists, otherwise `go mod download`
-        let vendor = self.base.project_root.join("vendor");
+        let vendor = self.base.config_root().join("vendor");
         let (args, desc) = if vendor.exists() {
             (
                 vec!["mod".to_string(), "vendor".to_string()],
@@ -65,7 +66,7 @@ impl PrepareProvider for GoPrepareProvider {
             program: "go".to_string(),
             args,
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -77,6 +78,6 @@ impl PrepareProvider for GoPrepareProvider {
 
     fn is_applicable(&self) -> bool {
         // Check for go.mod (the source/lockfile), not go.sum (which may be an output)
-        self.base.project_root.join("go.mod").exists()
+        self.base.config_root().join("go.mod").exists()
     }
 }
diff --git a/src/prepare/providers/mod.rs b/src/prepare/providers/mod.rs
index dd910e1737..3c2c8badf3 100644
--- a/src/prepare/providers/mod.rs
+++ b/src/prepare/providers/mod.rs
@@ -53,4 +53,13 @@ impl ProviderBase {
     pub fn touch_outputs(&self) -> bool {
         self.config.touch_outputs.unwrap_or(true)
     }
+
+    /// Returns the effective root directory for resolving sources/outputs.
+    /// When `dir` is set in config, returns `project_root/dir`; otherwise `project_root`.
+    pub fn config_root(&self) -> PathBuf {
+        match &self.config.dir {
+            Some(dir) => self.project_root.join(dir),
+            None => self.project_root.clone(),
+        }
+    }
 }
diff --git a/src/prepare/providers/npm.rs b/src/prepare/providers/npm.rs
index 9e6dbb2152..7af2bbd858 100644
--- a/src/prepare/providers/npm.rs
+++ b/src/prepare/providers/npm.rs
@@ -27,14 +27,12 @@ impl PrepareProvider for NpmPrepareProvider {
     }
 
     fn sources(&self) -> Vec<PathBuf> {
-        vec![
-            self.base.project_root.join("package-lock.json"),
-            self.base.project_root.join("package.json"),
-        ]
+        let root = self.base.config_root();
+        vec![root.join("package-lock.json"), root.join("package.json")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
-        vec![self.base.project_root.join("node_modules")]
+        vec![self.base.config_root().join("node_modules")]
     }
 
     fn prepare_command(&self) -> Result<PrepareCommand> {
@@ -46,7 +44,7 @@ impl PrepareProvider for NpmPrepareProvider {
             program: "npm".to_string(),
             args: vec!["install".to_string()],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -57,6 +55,6 @@ impl PrepareProvider for NpmPrepareProvider {
     }
 
     fn is_applicable(&self) -> bool {
-        self.base.project_root.join("package-lock.json").exists()
+        self.base.config_root().join("package-lock.json").exists()
     }
 }
diff --git a/src/prepare/providers/pip.rs b/src/prepare/providers/pip.rs
index 90e12a5e7d..f3c674e954 100644
--- a/src/prepare/providers/pip.rs
+++ b/src/prepare/providers/pip.rs
@@ -27,12 +27,12 @@ impl PrepareProvider for PipPrepareProvider {
     }
 
     fn sources(&self) -> Vec<PathBuf> {
-        vec![self.base.project_root.join("requirements.txt")]
+        vec![self.base.config_root().join("requirements.txt")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
         // Check for .venv directory as output indicator
-        vec![self.base.project_root.join(".venv")]
+        vec![self.base.config_root().join(".venv")]
     }
 
     fn prepare_command(&self) -> Result<PrepareCommand> {
@@ -48,7 +48,7 @@ impl PrepareProvider for PipPrepareProvider {
                 "requirements.txt".to_string(),
             ],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -59,6 +59,6 @@ impl PrepareProvider for PipPrepareProvider {
     }
 
     fn is_applicable(&self) -> bool {
-        self.base.project_root.join("requirements.txt").exists()
+        self.base.config_root().join("requirements.txt").exists()
     }
 }
diff --git a/src/prepare/providers/pnpm.rs b/src/prepare/providers/pnpm.rs
index db95d4adf1..4618fd6c07 100644
--- a/src/prepare/providers/pnpm.rs
+++ b/src/prepare/providers/pnpm.rs
@@ -27,14 +27,12 @@ impl PrepareProvider for PnpmPrepareProvider {
     }
 
     fn sources(&self) -> Vec<PathBuf> {
-        vec![
-            self.base.project_root.join("pnpm-lock.yaml"),
-            self.base.project_root.join("package.json"),
-        ]
+        let root = self.base.config_root();
+        vec![root.join("pnpm-lock.yaml"), root.join("package.json")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
-        vec![self.base.project_root.join("node_modules")]
+        vec![self.base.config_root().join("node_modules")]
     }
 
     fn prepare_command(&self) -> Result<PrepareCommand> {
@@ -46,7 +44,7 @@ impl PrepareProvider for PnpmPrepareProvider {
             program: "pnpm".to_string(),
             args: vec!["install".to_string()],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -57,6 +55,6 @@ impl PrepareProvider for PnpmPrepareProvider {
     }
 
     fn is_applicable(&self) -> bool {
-        self.base.project_root.join("pnpm-lock.yaml").exists()
+        self.base.config_root().join("pnpm-lock.yaml").exists()
     }
 }
diff --git a/src/prepare/providers/poetry.rs b/src/prepare/providers/poetry.rs
index f07c69c711..f0effd7950 100644
--- a/src/prepare/providers/poetry.rs
+++ b/src/prepare/providers/poetry.rs
@@ -27,14 +27,12 @@ impl PrepareProvider for PoetryPrepareProvider {
     }
 
     fn sources(&self) -> Vec<PathBuf> {
-        vec![
-            self.base.project_root.join("poetry.lock"),
-            self.base.project_root.join("pyproject.toml"),
-        ]
+        let root = self.base.config_root();
+        vec![root.join("poetry.lock"), root.join("pyproject.toml")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
-        vec![self.base.project_root.join(".venv")]
+        vec![self.base.config_root().join(".venv")]
     }
 
     fn prepare_command(&self) -> Result<PrepareCommand> {
@@ -46,7 +44,7 @@ impl PrepareProvider for PoetryPrepareProvider {
             program: "poetry".to_string(),
             args: vec!["install".to_string()],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -57,6 +55,6 @@ impl PrepareProvider for PoetryPrepareProvider {
     }
 
     fn is_applicable(&self) -> bool {
-        self.base.project_root.join("poetry.lock").exists()
+        self.base.config_root().join("poetry.lock").exists()
     }
 }
diff --git a/src/prepare/providers/uv.rs b/src/prepare/providers/uv.rs
index b34e577273..3ae803c5a4 100644
--- a/src/prepare/providers/uv.rs
+++ b/src/prepare/providers/uv.rs
@@ -27,14 +27,12 @@ impl PrepareProvider for UvPrepareProvider {
     }
 
     fn sources(&self) -> Vec<PathBuf> {
-        vec![
-            self.base.project_root.join("uv.lock"),
-            self.base.project_root.join("pyproject.toml"),
-        ]
+        let root = self.base.config_root();
+        vec![root.join("uv.lock"), root.join("pyproject.toml")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
-        vec![self.base.project_root.join(".venv")]
+        vec![self.base.config_root().join(".venv")]
     }
 
     fn prepare_command(&self) -> Result<PrepareCommand> {
@@ -46,7 +44,7 @@ impl PrepareProvider for UvPrepareProvider {
             program: "uv".to_string(),
             args: vec!["sync".to_string()],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -57,6 +55,6 @@ impl PrepareProvider for UvPrepareProvider {
     }
 
     fn is_applicable(&self) -> bool {
-        self.base.project_root.join("uv.lock").exists()
+        self.base.config_root().join("uv.lock").exists()
     }
 }
diff --git a/src/prepare/providers/yarn.rs b/src/prepare/providers/yarn.rs
index 0ce74b5223..22ceb001b8 100644
--- a/src/prepare/providers/yarn.rs
+++ b/src/prepare/providers/yarn.rs
@@ -27,14 +27,12 @@ impl PrepareProvider for YarnPrepareProvider {
     }
 
     fn sources(&self) -> Vec<PathBuf> {
-        vec![
-            self.base.project_root.join("yarn.lock"),
-            self.base.project_root.join("package.json"),
-        ]
+        let root = self.base.config_root();
+        vec![root.join("yarn.lock"), root.join("package.json")]
     }
 
     fn outputs(&self) -> Vec<PathBuf> {
-        vec![self.base.project_root.join("node_modules")]
+        vec![self.base.config_root().join("node_modules")]
     }
 
     fn prepare_command(&self) -> Result<PrepareCommand> {
@@ -46,7 +44,7 @@ impl PrepareProvider for YarnPrepareProvider {
             program: "yarn".to_string(),
             args: vec!["install".to_string()],
             env: self.base.config.env.clone(),
-            cwd: Some(self.base.project_root.clone()),
+            cwd: Some(self.base.config_root()),
             description: self
                 .base
                 .config
@@ -57,6 +55,6 @@ impl PrepareProvider for YarnPrepareProvider {
     }
 
     fn is_applicable(&self) -> bool {
-        self.base.project_root.join("yarn.lock").exists()
+        self.base.config_root().join("yarn.lock").exists()
     }
 }