diff --git a/src/cargo/core/registry.rs b/src/cargo/core/registry.rs
index 055b3b63ff3..e66a62f848f 100644
--- a/src/cargo/core/registry.rs
+++ b/src/cargo/core/registry.rs
@@ -731,10 +731,16 @@ impl<'gctx> Registry for PackageRegistry<'gctx> {
             kind: QueryKind,
             f: &mut dyn FnMut(IndexSummary),
         ) -> CargoResult<()> {
-            source
-                .query(dep, kind, f)
-                .await
-                .with_context(|| format!("unable to update {}", source.source_id()))
+            let res = source.query(dep, kind, f).await;
+            if let Err(e) = &res {
+                if dep.source_id().is_path()
+                    && crate::core::resolver::errors::is_manifest_not_found(e)
+                    && has_nearby_manifests(dep)
+                {
+                    return Ok(());
+                }
+            }
+            res.with_context(|| format!("unable to update {}", source.source_id()))
                 .with_context(|| {
                     format!(
                         "failed to load source for dependency `{}`",
@@ -743,6 +749,48 @@ impl<'gctx> Registry for PackageRegistry<'gctx> {
                 })
         }
 
+        /// Check if the dependency path contains subdirectories with Cargo.toml
+        /// files that could provide useful hints in the resolver error message.
+        /// This mirrors the check that `alt_paths` performs —
+        /// only suppress the error when RecursivePathSource would find packages.
+        fn has_nearby_manifests(dep: &Dependency) -> bool {
+            let dep_path = match dep.source_id().url().to_file_path() {
+                Ok(p) => p,
+                Err(_) => return false,
+            };
+
+            // Only check inside the dep path itself, since `alt_paths`
+            // searches inside `dep_path` using RecursivePathSource.
+            if dep_path.is_dir() {
+                has_cargo_toml_in_subdirs(&dep_path, 0)
+            } else {
+                false
+            }
+        }
+
+        fn has_cargo_toml_in_subdirs(dir: &std::path::Path, depth: usize) -> bool {
+            if depth >= 5 {
+                return false;
+            }
+            let entries = match std::fs::read_dir(dir) {
+                Ok(e) => e,
+                Err(_) => return false,
+            };
+            for entry in entries.flatten() {
+                let path = entry.path();
+                if path.is_dir() {
+                    if path.join("Cargo.toml").exists() {
+                        return true;
+                    }
+                    // Check one level deeper
+                    if has_cargo_toml_in_subdirs(&path, depth + 1) {
+                        return true;
+                    }
+                }
+            }
+            false
+        }
+
         let source = self.sources.borrow().get(dep.source_id()).cloned();
         match (override_summary, source) {
             (Some(_), None) => {
diff --git a/src/cargo/core/resolver/errors.rs b/src/cargo/core/resolver/errors.rs
index cab65502f38..05ff2d2be5c 100644
--- a/src/cargo/core/resolver/errors.rs
+++ b/src/cargo/core/resolver/errors.rs
@@ -1,7 +1,8 @@
 use std::fmt;
 use std::fmt::Write as _;
+use std::path::{Path, PathBuf};
 
-use crate::core::{Dependency, PackageId, Registry, Summary};
+use crate::core::{Dependency, Package, PackageId, Registry, Summary};
 use crate::sources::IndexSummary;
 use crate::sources::source::QueryKind;
 use crate::util::edit_distance::{closest, edit_distance};
@@ -93,6 +94,8 @@ pub(super) fn activation_error(
         )
     };
 
+    let mut is_handled_custom_path_error = false;
+
     if !candidates.is_empty() {
         let mut msg = format!("failed to select a version for `{}`.", dep.package_name());
         msg.push_str("\n    ... required by ");
@@ -360,6 +363,92 @@ pub(super) fn activation_error(
                 "\nnote: perhaps a crate was updated and forgotten to be re-vendored?"
             );
         }
+    } else if let Some(packages) = alt_paths(dep, gctx) {
+        is_handled_custom_path_error = true;
+        let path = dep.source_id().url().to_file_path().unwrap();
+        let parent_root = parent.package_id().source_id().url().to_file_path().ok();
+
+        let rel_path = |p: &Path| -> String {
+            let rel = if let Some(ref base) = parent_root {
+                p.strip_prefix(base).unwrap_or(p)
+            } else {
+                p
+            };
+            let mut s = rel.to_string_lossy().replace('\\', "/");
+            if s.is_empty() {
+                s = p
+                    .file_name()
+                    .map(|name| name.to_string_lossy().into_owned())
+                    .unwrap_or_else(|| ".".to_string());
+            }
+            if !s.ends_with('/') {
+                s.push('/');
+            }
+            s
+        };
+
+        let _ = writeln!(
+            &mut msg,
+            "no matching package named `{}` found at `{}`",
+            dep.package_name(),
+            rel_path(&path),
+        );
+        let _ = write!(
+            &mut msg,
+            "required by {}",
+            describe_path_in_context(resolver_ctx, &parent.package_id()),
+        );
+
+        let mut exact_match: Option<PathBuf> = None;
+        let mut found_dir: Option<String> = None;
+        let mut names_found: Vec<(String, PathBuf)> = vec![];
+
+        for pkg in &packages {
+            let manifest_dir = pkg.manifest_path().parent().unwrap();
+            let p_name = pkg.name().as_str();
+            if p_name == dep.package_name().as_str() {
+                exact_match = Some(manifest_dir.to_path_buf());
+                break;
+            } else if manifest_dir == path {
+                found_dir = Some(p_name.to_string());
+            } else {
+                names_found.push((p_name.to_string(), manifest_dir.to_path_buf()));
+            }
+        }
+
+        if let Some(dir) = exact_match {
+            let _ = writeln!(&mut hints);
+            let _ = write!(
+                &mut hints,
+                "help: package `{}` exists at `{}`",
+                dep.package_name(),
+                rel_path(&dir)
+            );
+        } else if let Some(dir_pkg) = found_dir {
+            let _ = writeln!(&mut hints);
+            let _ = write!(
+                &mut hints,
+                "help: package `{}` exists at `{}`",
+                dir_pkg,
+                rel_path(&path)
+            );
+        } else {
+            names_found.sort_by(|a, b| a.0.cmp(&b.0));
+            if !names_found.is_empty() {
+                let _ = writeln!(&mut hints);
+            }
+            for (i, (name, p)) in names_found.iter().take(3).enumerate() {
+                if i > 0 {
+                    let _ = writeln!(&mut hints);
+                }
+                let _ = write!(
+                    &mut hints,
+                    "help: package `{}` exists at `{}`",
+                    name,
+                    rel_path(p)
+                );
+            }
+        }
     } else if let Some(name_candidates) = alt_names(registry, dep) {
         let name_candidates = match name_candidates {
             Ok(c) => c,
@@ -400,16 +489,18 @@ pub(super) fn activation_error(
         );
     }
 
-    let mut location_searched_msg = registry.describe_source(dep.source_id());
-    if location_searched_msg.is_empty() {
-        location_searched_msg = format!("{}", dep.source_id());
+    if !is_handled_custom_path_error {
+        let mut location_searched_msg = registry.describe_source(dep.source_id());
+        if location_searched_msg.is_empty() {
+            location_searched_msg = format!("{}", dep.source_id());
+        }
+        let _ = writeln!(&mut msg, "location searched: {}", location_searched_msg);
+        let _ = write!(
+            &mut msg,
+            "required by {}",
+            describe_path_in_context(resolver_ctx, &parent.package_id()),
+        );
     }
-    let _ = writeln!(&mut msg, "location searched: {}", location_searched_msg);
-    let _ = write!(
-        &mut msg,
-        "required by {}",
-        describe_path_in_context(resolver_ctx, &parent.package_id()),
-    );
 
     if let Some(gctx) = gctx {
         if let Some(offline_flag) = gctx.offline_flag() {
@@ -497,6 +588,45 @@ fn alt_names(
     }
 }
 
+/// Maybe the path dependency has packages in subdirectories or siblings?
+/// We use `RecursivePathSource` to find possible alternative packages.
+fn alt_paths(dep: &Dependency, gctx: Option<&GlobalContext>) -> Option<Vec<Package>> {
+    let gctx = gctx?;
+    if !dep.source_id().is_path() {
+        return None;
+    }
+    let path = dep.source_id().url().to_file_path().ok()?;
+    let mut src = crate::sources::RecursivePathSource::new(&path, dep.source_id(), gctx);
+    let packages = src.read_packages().ok()?;
+    if packages.is_empty() {
+        None
+    } else {
+        Some(packages)
+    }
+}
+
+/// Checks if an error is a "manifest not found" error (Cargo.toml missing).
+/// This is used to allow the resolver to continue and provide helpful hints
+/// for path dependencies instead of failing immediately with a load error.
+pub fn is_manifest_not_found(err: &anyhow::Error) -> bool {
+    use crate::util::errors::ManifestError;
+    use std::error::Error;
+
+    for cause in err.chain() {
+        if let Some(manifest_err) = cause.downcast_ref::<ManifestError>() {
+            if let Some(io_err) = manifest_err
+                .source()
+                .and_then(|s| s.downcast_ref::<std::io::Error>())
+            {
+                if io_err.kind() == std::io::ErrorKind::NotFound {
+                    return true;
+                }
+            }
+        }
+    }
+    false
+}
+
 /// Returns String representation of dependency chain for a particular `pkgid`
 /// within given context.
 pub(super) fn describe_path_in_context(cx: &ResolverContext, id: &PackageId) -> String {
diff --git a/tests/testsuite/build.rs b/tests/testsuite/build.rs
index d28efeace62..5345aec9bce 100644
--- a/tests/testsuite/build.rs
+++ b/tests/testsuite/build.rs
@@ -1290,9 +1290,9 @@ fn cargo_compile_with_dep_name_mismatch() {
     p.cargo("build")
         .with_status(101)
         .with_stderr_data(str![[r#"
-[ERROR] no matching package named `notquitebar` found
-location searched: [ROOT]/foo/bar
+[ERROR] no matching package named `notquitebar` found at `bar/`
 required by package `foo v0.0.1 ([ROOT]/foo)`
+[HELP] package `bar` exists at `bar/`
 
 "#]])
         .run();
diff --git a/tests/testsuite/path.rs b/tests/testsuite/path.rs
index 0305ea58e8a..ae4e38679ea 100644
--- a/tests/testsuite/path.rs
+++ b/tests/testsuite/path.rs
@@ -1669,11 +1669,9 @@ fn invalid_path_dep_in_workspace_with_lockfile() {
     p.cargo("check")
         .with_status(101)
         .with_stderr_data(str![[r#"
-[ERROR] no matching package named `bar` found
-location searched: [ROOT]/foo/foo
+[ERROR] no matching package named `bar` found at `foo/`
 required by package `foo v0.5.0 ([ROOT]/foo/foo)`
-[HELP] packages with similar names: foo
-
+[HELP] package `foo` exists at `foo/`
 
 "#]])
         .run();
@@ -1918,3 +1916,128 @@ foo v1.0.0 ([ROOT]/foo)
 "#]])
         .run();
 }
+
+#[cargo_test]
+fn path_dep_wrong_package_name() {
+    let p = project()
+        .file(
+            "Cargo.toml",
+            r#"
+            [package]
+            name = "foo"
+            version = "0.1.0"
+            edition = "2024"
+            [dependencies]
+            definitely_not_bar = { path = "bar" }
+            "#,
+        )
+        .file("src/lib.rs", "")
+        .file(
+            "bar/Cargo.toml",
+            r#"
+            [package]
+            name = "bar"
+            version = "0.1.0"
+            edition = "2024"
+            "#,
+        )
+        .file("bar/src/lib.rs", "")
+        .build();
+
+    p.cargo("check")
+        .with_status(101)
+        .with_stderr_data(str![[r#"
+[ERROR] no matching package named `definitely_not_bar` found at `bar/`
+required by package `foo v0.1.0 ([ROOT]/foo)`
+[HELP] package `bar` exists at `bar/`
+
+"#]])
+        .run();
+}
+
+#[cargo_test]
+fn path_dep_package_in_subdirectory() {
+    let p = project()
+        .file(
+            "Cargo.toml",
+            r#"
+            [package]
+            name = "foo"
+            version = "0.1.0"
+            edition = "2024"
+            [dependencies]
+            definitely_not_bar = { path = "bar" }
+            "#,
+        )
+        .file("src/lib.rs", "")
+        .file(
+            "bar/definitely_not_bar/Cargo.toml",
+            r#"
+            [package]
+            name = "definitely_not_bar"
+            version = "0.1.0"
+            edition = "2024"
+            "#,
+        )
+        .file("bar/definitely_not_bar/src/lib.rs", "")
+        .build();
+
+    p.cargo("check")
+        .with_status(101)
+        .with_stderr_data(str![[r#"
+[ERROR] no matching package named `definitely_not_bar` found at `bar/`
+required by package `foo v0.1.0 ([ROOT]/foo)`
+[HELP] package `definitely_not_bar` exists at `bar/definitely_not_bar/`
+
+"#]])
+        .run();
+}
+
+#[cargo_test]
+fn path_dep_other_packages_nearby() {
+    let p = project()
+        .file(
+            "Cargo.toml",
+            r#"
+            [package]
+            name = "foo"
+            version = "0.1.0"
+            edition = "2024"
+            [dependencies]
+            definitely_not_bar = { path = "bar" }
+            "#,
+        )
+        .file("src/lib.rs", "")
+        .file(
+            "bar/alice/Cargo.toml",
+            r#"
+            [package]
+            name = "alice"
+            version = "0.1.0"
+            edition = "2024"
+            "#,
+        )
+        .file("bar/alice/src/lib.rs", "")
+        .file(
+            "bar/bob/Cargo.toml",
+            r#"
+            [package]
+            name = "bob"
+            version = "0.1.0"
+            edition = "2024"
+            "#,
+        )
+        .file("bar/bob/src/lib.rs", "")
+        .build();
+
+    p.cargo("check")
+        .with_status(101)
+        .with_stderr_data(str![[r#"
+[ERROR] no matching package named `definitely_not_bar` found at `bar/`
+required by package `foo v0.1.0 ([ROOT]/foo)`
+[HELP] package `alice` exists at `bar/alice/`
+[HELP] package `bob` exists at `bar/bob/`
+
+"#]])
+        .run();
+}