diff --git a/crates/distribution-types/src/index_url.rs b/crates/distribution-types/src/index_url.rs
index 0b03fd1b2955b..029cb547af73d 100644
--- a/crates/distribution-types/src/index_url.rs
+++ b/crates/distribution-types/src/index_url.rs
@@ -1,14 +1,15 @@
 use std::borrow::Cow;
 use std::fmt::{Display, Formatter};
 use std::ops::Deref;
-use std::path::PathBuf;
+use std::path::{Path, PathBuf};
 use std::str::FromStr;
 
 use itertools::Either;
 use once_cell::sync::Lazy;
-use url::Url;
+use thiserror::Error;
+use url::{ParseError, Url};
 
-use pep508_rs::{expand_env_vars, split_scheme, strip_host, Scheme, VerbatimUrl};
+use pep508_rs::{expand_env_vars, split_scheme, strip_host, Scheme, VerbatimUrl, VerbatimUrlError};
 use uv_fs::normalize_url_path;
 
 use crate::Verbatim;
@@ -90,18 +91,44 @@ impl Verbatim for IndexUrl {
     }
 }
 
+/// An error that can occur when parsing an [`IndexUrl`].
+#[derive(Error, Debug)]
+pub enum IndexUrlError {
+    #[error(transparent)]
+    Io(#[from] std::io::Error),
+    #[error(transparent)]
+    Url(#[from] ParseError),
+    #[error(transparent)]
+    VerbatimUrl(#[from] VerbatimUrlError),
+    #[error("Index URL must be a valid base URL")]
+    CannotBeABase,
+}
+
 impl FromStr for IndexUrl {
-    type Err = url::ParseError;
+    type Err = IndexUrlError;
 
     fn from_str(s: &str) -> Result<Self, Self::Err> {
-        let url = Url::parse(s)?;
-        let url = VerbatimUrl::from_url(url).with_given(s.to_owned());
-        if *url.raw() == *PYPI_URL {
-            Ok(Self::Pypi(url))
-        } else if url.scheme() == "file" {
-            Ok(Self::Path(url))
-        } else {
-            Ok(Self::Url(url))
+        match Path::new(s).canonicalize() {
+            Ok(path) => {
+                let url = VerbatimUrl::from_path(path)?.with_given(s.to_owned());
+                Ok(Self::Path(url))
+            }
+            Err(err) if err.kind() == std::io::ErrorKind::NotFound => {
+                let url = Url::parse(s)?;
+                if url.cannot_be_a_base() {
+                    Err(IndexUrlError::CannotBeABase)
+                } else {
+                    let url = VerbatimUrl::from_url(url).with_given(s.to_owned());
+                    if *url.raw() == *PYPI_URL {
+                        Ok(Self::Pypi(url))
+                    } else if url.scheme() == "file" {
+                        Ok(Self::Path(url))
+                    } else {
+                        Ok(Self::Url(url))
+                    }
+                }
+            }
+            Err(err) => Err(err.into()),
         }
     }
 }