diff --git a/src/libexpr/flake/flakeref.cc b/src/libexpr/flake/flakeref.cc
index 06f8511b6..930ed9ccd 100644
--- a/src/libexpr/flake/flakeref.cc
+++ b/src/libexpr/flake/flakeref.cc
@@ -122,27 +122,28 @@ std::pair<FlakeRef, std::string> parseFlakeRefWithFragment(
 
             if (isFlake) {
 
-            if (!allowMissing && !pathExists(path + "/flake.nix")){
-                notice("path '%s' does not contain a 'flake.nix', searching up",path);
+                if (!allowMissing && !pathExists(path + "/flake.nix")){
+                    notice("path '%s' does not contain a 'flake.nix', searching up",path);
 
-                // Save device to detect filesystem boundary
-                dev_t device = lstat(path).st_dev;
-                bool found = false;
-                while (path != "/") {
-                    if (pathExists(path + "/flake.nix")) {
-                        found = true;
-                        break;
-                    } else if (pathExists(path + "/.git"))
-                        throw Error("unable to find a flake before encountering git boundary at '%s'", path);
-                    else {
-                        if (lstat(path).st_dev != device)
-                        throw Error("path '%s' is not part of a flake (neither it nor its parent directories contain a 'flake.nix' file)", origPath);
+                    // Save device to detect filesystem boundary
+                    dev_t device = lstat(path).st_dev;
+                    bool found = false;
+                    while (path != "/") {
+                        if (pathExists(path + "/flake.nix")) {
+                            found = true;
+                            break;
+                        } else if (pathExists(path + "/.git"))
+                            throw Error("path '%s' is not part of a flake (neither it nor its parent directories contain a 'flake.nix' file)", path);
+                        else {
+                            if (lstat(path).st_dev != device)
+                                throw Error("unable to find a flake before encountering filesystem boundary at '%s'", path);
+                        }
+                        path = dirOf(path);
                     }
-                    path = dirOf(path);
+                    if (!found)
+                        throw BadURL("could not find a flake.nix file");
                 }
-                if (!found)
-                    throw BadURL("could not find a flake.nix file");
-            }
+
                 if (!S_ISDIR(lstat(path).st_mode))
                     throw BadURL("path '%s' is not a flake (because it's not a directory)", path);
 
diff --git a/tests/flake-searching.sh b/tests/flake-searching.sh
index 82ae66894..7c2041ce1 100644
--- a/tests/flake-searching.sh
+++ b/tests/flake-searching.sh
@@ -4,8 +4,11 @@ clearStore
 
 cp ./simple.nix ./simple.builder.sh ./config.nix $TEST_HOME
 cd $TEST_HOME
+mkdir -p foo/subdir
+echo '{ outputs = _: {}; }' > foo/flake.nix
 cat <<EOF > flake.nix
 {
+    inputs.foo.url = "$PWD/foo";
     outputs = a: {
        defaultPackage.$system = import ./simple.nix;
        packages.$system.test = import ./simple.nix;
@@ -13,12 +16,19 @@ cat <<EOF > flake.nix
 }
 EOF
 mkdir subdir
-cd subdir
+pushd subdir
 
-for i in "" . "$PWD" .# .#test; do
+for i in "" . .# .#test ../subdir ../subdir#test "$PWD"; do
     nix build $i || fail "flake should be found by searching up directories"
 done
 
 for i in "path:$PWD"; do
     ! nix build $i || fail "flake should not search up directories when using 'path:'"
 done
+
+popd
+
+nix build --override-input foo . || fail "flake should search up directories when not an installable"
+
+sed "s,$PWD/foo,$PWD/foo/subdir,g" -i flake.nix
+! nix build || fail "flake should not search upwards when part of inputs"