diff --git a/src/cargo/sources/path.rs b/src/cargo/sources/path.rs
index 31be1eb781c..cf406e8ddb2 100644
--- a/src/cargo/sources/path.rs
+++ b/src/cargo/sources/path.rs
@@ -197,13 +197,18 @@ impl<'cfg> PathSource<'cfg> {
                 repo.path().display()
             )
         })?;
-        let repo_relative_path = root.strip_prefix(repo_root).chain_err(|| {
-            format!(
-                "expected git repo {} to be parent of package {}",
-                repo.path().display(),
-                root.display()
-            )
-        })?;
+        let repo_relative_path = match paths::strip_prefix_canonical(root, repo_root) {
+            Ok(p) => p,
+            Err(e) => {
+                log::warn!(
+                    "cannot determine if path `{:?}` is in git repo `{:?}`: {:?}",
+                    root,
+                    repo_root,
+                    e
+                );
+                return Ok(None);
+            }
+        };
         let manifest_path = repo_relative_path.join("Cargo.toml");
         if index.get_path(&manifest_path, 0).is_some() {
             return Ok(Some(self.list_files_git(pkg, &repo, filter)?));
diff --git a/src/cargo/util/paths.rs b/src/cargo/util/paths.rs
index 22a0229a961..7b907128e13 100644
--- a/src/cargo/util/paths.rs
+++ b/src/cargo/util/paths.rs
@@ -411,3 +411,25 @@ pub fn set_file_time_no_err<P: AsRef<Path>>(path: P, time: FileTime) {
         ),
     }
 }
+
+/// Strips `base` from `path`.
+///
+/// This canonicalizes both paths before stripping. This is useful if the
+/// paths are obtained in different ways, and one or the other may or may not
+/// have been normalized in some way.
+pub fn strip_prefix_canonical<P: AsRef<Path>>(
+    path: P,
+    base: P,
+) -> Result<PathBuf, std::path::StripPrefixError> {
+    // Not all filesystems support canonicalize. Just ignore if it doesn't work.
+    let safe_canonicalize = |path: &Path| match path.canonicalize() {
+        Ok(p) => p,
+        Err(e) => {
+            log::warn!("cannot canonicalize {:?}: {:?}", path, e);
+            path.to_path_buf()
+        }
+    };
+    let canon_path = safe_canonicalize(path.as_ref());
+    let canon_base = safe_canonicalize(base.as_ref());
+    canon_path.strip_prefix(canon_base).map(|p| p.to_path_buf())
+}
diff --git a/tests/testsuite/install.rs b/tests/testsuite/install.rs
index b6f046da664..5ede0bb4870 100644
--- a/tests/testsuite/install.rs
+++ b/tests/testsuite/install.rs
@@ -10,7 +10,9 @@ use cargo_test_support::install::{
 };
 use cargo_test_support::paths;
 use cargo_test_support::registry::Package;
-use cargo_test_support::{basic_manifest, cargo_process, project, NO_SUCH_FILE_ERR_MSG};
+use cargo_test_support::{
+    basic_manifest, cargo_process, project, symlink_supported, t, NO_SUCH_FILE_ERR_MSG,
+};
 
 fn pkg(name: &str, vers: &str) {
     Package::new(name, vers)
@@ -1458,3 +1460,40 @@ fn git_install_reads_workspace_manifest() {
         .with_stderr_contains("  invalid type: integer `3`[..]")
         .run();
 }
+
+#[cargo_test]
+fn install_git_with_symlink_home() {
+    // Ensure that `cargo install` with a git repo is OK when CARGO_HOME is a
+    // symlink, and uses an build script.
+    if !symlink_supported() {
+        return;
+    }
+    let p = git::new("foo", |p| {
+        p.file("Cargo.toml", &basic_manifest("foo", "1.0.0"))
+            .file("src/main.rs", "fn main() {}")
+            // This triggers discover_git_and_list_files for detecting changed files.
+            .file("build.rs", "fn main() {}")
+    });
+    #[cfg(unix)]
+    use std::os::unix::fs::symlink;
+    #[cfg(windows)]
+    use std::os::windows::fs::symlink_dir as symlink;
+
+    let actual = paths::root().join("actual-home");
+    t!(std::fs::create_dir(&actual));
+    t!(symlink(&actual, paths::home().join(".cargo")));
+    cargo_process("install --git")
+        .arg(p.url().to_string())
+        .with_stderr(
+            "\
+[UPDATING] git repository [..]
+[INSTALLING] foo v1.0.0 [..]
+[COMPILING] foo v1.0.0 [..]
+[FINISHED] [..]
+[INSTALLING] [..]home/.cargo/bin/foo[..]
+[INSTALLED] package `foo [..]
+[WARNING] be sure to add [..]
+",
+        )
+        .run();
+}