diff --git a/vanilla/build.gradle.kts b/vanilla/build.gradle.kts
index b936a70281c..3595ab06aab 100644
--- a/vanilla/build.gradle.kts
+++ b/vanilla/build.gradle.kts
@@ -329,6 +329,7 @@ minecraft {
             mainClass("net.minecraftforge.bootstrap.ForgeBootstrap")
 
             // Configure resources
+            jvmArgs("-Dsponge.dev.root=" + project.rootDir)
             jvmArgs("-Dsponge.dev.boot=" + bootLayerConfig.get().resolvedConfiguration.resolvedArtifacts.joinToString(";") { it.file.name })
             jvmArgs("-Dsponge.dev.gameShaded=" + gameShadedLibrariesConfig.get().resolvedConfiguration.resolvedArtifacts.joinToString(";") { it.file.name })
         }
diff --git a/vanilla/src/devlaunch/java/org/spongepowered/vanilla/devlaunch/SourceSet.java b/vanilla/src/devlaunch/java/org/spongepowered/vanilla/devlaunch/SourceSet.java
index a4fa3b1b537..6bc2ef07a88 100644
--- a/vanilla/src/devlaunch/java/org/spongepowered/vanilla/devlaunch/SourceSet.java
+++ b/vanilla/src/devlaunch/java/org/spongepowered/vanilla/devlaunch/SourceSet.java
@@ -29,7 +29,7 @@
 import java.util.ArrayList;
 import java.util.List;
 
-public record SourceSet(String project, String name, String format) {
+public record SourceSet(Path project, String name, String format) {
 
     @Override
     public String toString() {
@@ -57,32 +57,34 @@ public static SourceSet identify(Path path) {
         }
 
         // from right to left
-        final List<String> parts = new ArrayList<>();
+        final List<String> names = new ArrayList<>();
+        final List<Path> paths = new ArrayList<>();
         while (path != null) {
-            parts.add(path.getFileName().toString());
-            if (parts.size() >= 5) {
+            names.add(path.getFileName().toString());
+            paths.add(path);
+            if (names.size() >= 5) {
                 break;
             }
             path = path.getParent();
         }
 
-        if (parts.size() >= 4 && (parts.get(0).equals("classes") || parts.get(0).equals("resources"))) {
-            final String name = parts.get(1);
-            return new SourceSet(parts.get(3), name.equals("production") ? "main" : name, "IntelliJ");
+        if (names.size() >= 4 && (names.get(0).equals("classes") || names.get(0).equals("resources"))) {
+            final String name = names.get(1);
+            return new SourceSet(paths.get(3), name.equals("production") ? "main" : name, "IntelliJ");
         }
 
-        if (parts.size() >= 4 && (parts.get(1).equals("resources") || parts.get(1).equals("generated"))) {
-            return new SourceSet(parts.get(3), parts.get(0), "Gradle");
+        if (names.size() >= 4 && (names.get(1).equals("resources") || names.get(1).equals("generated"))) {
+            return new SourceSet(paths.get(3), names.get(0), "Gradle");
         }
 
-        if (parts.size() >= 5 && parts.get(2).equals("classes")) {
-            return new SourceSet(parts.get(4), parts.get(0), "Gradle");
+        if (names.size() >= 5 && names.get(2).equals("classes")) {
+            return new SourceSet(paths.get(4), names.get(0), "Gradle");
         }
 
-        if (parts.size() >= 3 && parts.get(1).equals("bin")) {
-            return new SourceSet(parts.get(2), parts.get(0), "Eclipse");
+        if (names.size() >= 3 && names.get(1).equals("bin")) {
+            return new SourceSet(paths.get(2), names.get(0), "Eclipse");
         }
 
-        return new SourceSet("", parts.get(0), "Unknown");
+        return new SourceSet(paths.get(0), "?", "Unknown");
     }
 }
diff --git a/vanilla/src/devlaunch/java/org/spongepowered/vanilla/devlaunch/SpongeDevClasspathFixer.java b/vanilla/src/devlaunch/java/org/spongepowered/vanilla/devlaunch/SpongeDevClasspathFixer.java
index 47c8f979594..ba527b23e6b 100644
--- a/vanilla/src/devlaunch/java/org/spongepowered/vanilla/devlaunch/SpongeDevClasspathFixer.java
+++ b/vanilla/src/devlaunch/java/org/spongepowered/vanilla/devlaunch/SpongeDevClasspathFixer.java
@@ -28,6 +28,7 @@
 
 import java.nio.file.Files;
 import java.nio.file.Path;
+import java.nio.file.Paths;
 import java.util.ArrayList;
 import java.util.HashMap;
 import java.util.LinkedList;
@@ -51,6 +52,7 @@ public String name() {
      */
     @Override
     public boolean process(final List<Path[]> classpath) {
+        final Path spongeRoot = Paths.get(System.getProperty("sponge.dev.root")).toAbsolutePath();
         final Set<String> bootLibs = Set.of(System.getProperty("sponge.dev.boot").split(";"));
         final Set<String> gameShadedLibs = Set.of(System.getProperty("sponge.dev.gameShaded").split(";"));
 
@@ -67,46 +69,55 @@ public boolean process(final List<Path[]> classpath) {
                 return false;
             }
 
-            final Path path = paths[0];
+            final Path path = paths[0].toAbsolutePath();
             final SourceSet sourceSet = SourceSet.identify(path);
             if (sourceSet != null) {
-                if (DEBUG) {
-                    System.out.println("SourceSet (" + sourceSet + "): " + path);
-                }
+                if (sourceSet.project().startsWith(spongeRoot)) {
+                    if (DEBUG) {
+                        System.out.println("Sponge SourceSet (" + sourceSet + "): " + path);
+                    }
 
-                switch (sourceSet.project()) {
-                    case "modlauncher-transformers":
-                        bootSourceSets.computeIfAbsent("transformers", k -> new LinkedList<>()).add(path);
-                        break;
-                    case "SpongeAPI":
-                        switch (sourceSet.name()) {
-                            case "ap":
-                                // ignore
-                                break;
-                            case "main":
-                                hasAPISourceSet.set(true);
-                                // no break
-                            default:
-                                spongeImplUnion.add(path);
-                                break;
-                        }
-                        break;
-                    case "Sponge", "vanilla":
-                        switch (sourceSet.name()) {
-                            case "devlaunch":
-                                // ignore
-                                break;
-                            case "applaunch":
-                                bootSourceSets.computeIfAbsent("applaunch", k -> new LinkedList<>()).add(path);
-                                break;
-                            default:
-                                spongeImplUnion.add(path);
-                                break;
-                        }
-                        break;
-                    default:
-                        unknownProjects.computeIfAbsent(sourceSet.project(), k -> new LinkedList<>()).add(path);
-                        break;
+                    final String projectName = spongeRoot.relativize(sourceSet.project()).toString();
+                    switch (projectName) {
+                        case "modlauncher-transformers":
+                            bootSourceSets.computeIfAbsent("transformers", k -> new LinkedList<>()).add(path);
+                            break;
+                        case "SpongeAPI":
+                            switch (sourceSet.name()) {
+                                case "ap":
+                                    // ignore
+                                    break;
+                                case "main":
+                                    hasAPISourceSet.set(true);
+                                    // no break
+                                default:
+                                    spongeImplUnion.add(path);
+                                    break;
+                            }
+                            break;
+                        case "", "vanilla":
+                            switch (sourceSet.name()) {
+                                case "devlaunch":
+                                    // ignore
+                                    break;
+                                case "applaunch":
+                                    bootSourceSets.computeIfAbsent("applaunch", k -> new LinkedList<>()).add(path);
+                                    break;
+                                default:
+                                    spongeImplUnion.add(path);
+                                    break;
+                            }
+                            break;
+                        default:
+                            unknownProjects.computeIfAbsent(projectName, k -> new LinkedList<>()).add(path);
+                            break;
+                    }
+                } else {
+                    if (DEBUG) {
+                        System.out.println("External SourceSet (" + sourceSet + "): " + path);
+                    }
+
+                    unknownProjects.computeIfAbsent(sourceSet.project().toString(), k -> new LinkedList<>()).add(path);
                 }
                 return true;
             }