diff --git a/packages/js/src/utils/assets/copy-assets-handler.spec.ts b/packages/js/src/utils/assets/copy-assets-handler.spec.ts
index a65e5a6481..6fa736d797 100644
--- a/packages/js/src/utils/assets/copy-assets-handler.spec.ts
+++ b/packages/js/src/utils/assets/copy-assets-handler.spec.ts
@@ -66,8 +66,12 @@ describe('AssetInputOutputHandler', () => {
   let projectDir: string;
   let outputDir: string;
   let callback: jest.SpyInstance;
+  let originalCwd: string;
 
   beforeEach(() => {
+    // Store original cwd to restore later
+    originalCwd = process.cwd();
+
     // Resolve to real paths to avoid symlink discrepancies with watcher.
     const tmp = fs.realpathSync(path.join(os.tmpdir()));
 
@@ -102,6 +106,11 @@ describe('AssetInputOutputHandler', () => {
     });
   });
 
+  afterEach(() => {
+    // Restore original cwd
+    process.chdir(originalCwd);
+  });
+
   test('watchAndProcessOnAssetChange', async () => {
     const dispose = await sut.watchAndProcessOnAssetChange();
 
@@ -219,6 +228,61 @@ describe('AssetInputOutputHandler', () => {
       },
     ]);
   });
+
+  test('should copy assets to correct location when running from nested directory', async () => {
+    // Create a nested directory structure to simulate running from a subdirectory
+    const nestedDir = path.join(rootDir, 'e2e', 'integration-tests');
+    fs.mkdirSync(nestedDir, { recursive: true });
+
+    // Change to nested directory to simulate running nx command from there
+    process.chdir(nestedDir);
+
+    // Create test files
+    fs.writeFileSync(path.join(rootDir, 'LICENSE'), 'license');
+    fs.writeFileSync(path.join(projectDir, 'README.md'), 'readme');
+    fs.writeFileSync(path.join(projectDir, 'docs/test1.md'), 'test');
+
+    // Create CopyAssetsHandler with relative outputDir (this is where the bug manifests)
+    const nestedSut = new CopyAssetsHandler({
+      rootDir,
+      projectDir,
+      outputDir: 'dist/mylib', // relative path - this triggers the bug
+      callback: callback as any,
+      assets: [
+        'mylib/*.md',
+        {
+          input: 'mylib/docs',
+          glob: '**/*.md',
+          output: 'docs',
+        },
+        'LICENSE',
+      ],
+    });
+
+    await nestedSut.processAllAssetsOnce();
+
+    expect(callback).toHaveBeenCalledWith([
+      {
+        type: 'create',
+        src: path.join(rootDir, 'LICENSE'),
+        dest: path.join(rootDir, 'dist/mylib/LICENSE'),
+      },
+    ]);
+    expect(callback).toHaveBeenCalledWith([
+      {
+        type: 'create',
+        src: path.join(rootDir, 'mylib/README.md'),
+        dest: path.join(rootDir, 'dist/mylib/README.md'),
+      },
+    ]);
+    expect(callback).toHaveBeenCalledWith([
+      {
+        type: 'create',
+        src: path.join(rootDir, 'mylib/docs/test1.md'),
+        dest: path.join(rootDir, 'dist/mylib/docs/test1.md'),
+      },
+    ]);
+  });
 });
 
 function wait(ms: number) {
diff --git a/packages/js/src/utils/assets/copy-assets-handler.ts b/packages/js/src/utils/assets/copy-assets-handler.ts
index 6f874f056a..c104f45b9f 100644
--- a/packages/js/src/utils/assets/copy-assets-handler.ts
+++ b/packages/js/src/utils/assets/copy-assets-handler.ts
@@ -89,16 +89,21 @@ export class CopyAssetsHandler {
       let input: string;
       let output: string;
       let ignore: string[] | null = null;
+
+      const resolvedOutputDir = path.isAbsolute(opts.outputDir)
+        ? opts.outputDir
+        : path.resolve(opts.rootDir, opts.outputDir);
+
       if (typeof f === 'string') {
         pattern = f;
         input = path.relative(opts.rootDir, opts.projectDir);
-        output = path.relative(opts.rootDir, opts.outputDir);
+        output = path.relative(opts.rootDir, resolvedOutputDir);
       } else {
         isGlob = true;
         pattern = pathPosix.join(f.input, f.glob);
         input = f.input;
         output = pathPosix.join(
-          path.relative(opts.rootDir, opts.outputDir),
+          path.relative(opts.rootDir, resolvedOutputDir),
           f.output
         );
         if (f.ignore)