diff --git a/packages/cli/src/__tests__/load-nodes-and-credentials.test.ts b/packages/cli/src/__tests__/load-nodes-and-credentials.test.ts
index 10c3cad60e8..4a7c849095b 100644
--- a/packages/cli/src/__tests__/load-nodes-and-credentials.test.ts
+++ b/packages/cli/src/__tests__/load-nodes-and-credentials.test.ts
@@ -130,6 +130,14 @@ describe('LoadNodesAndCredentials', () => {
 		});
 
 		describe('N8N_CUSTOM_EXTENSIONS', () => {
+			it('should return file path if url contains a relative custom file path', () => {
+				const result = instanceCustom.resolveIcon(
+					packageNameCustom,
+					`${pathPrefixCustom}/node_modules/custom-node/icon.png`,
+				);
+				expect(result).toBe(`${dirCustom}/node_modules/custom-node/icon.png`);
+			});
+
 			it('should return file path if url contains "//" with absolute custom file path', () => {
 				const result = instanceCustom.resolveIcon(
 					packageNameCustom,
diff --git a/packages/cli/src/load-nodes-and-credentials.ts b/packages/cli/src/load-nodes-and-credentials.ts
index 8b6bb55beb9..dcfe614de77 100644
--- a/packages/cli/src/load-nodes-and-credentials.ts
+++ b/packages/cli/src/load-nodes-and-credentials.ts
@@ -245,8 +245,14 @@ export class LoadNodesAndCredentials {
 
 		const pathPrefix = `/icons/${packageName}/`;
 		const urlFilePath = url.substring(pathPrefix.length);
-		const filePath = isCustom ? resolvePathCustom(urlFilePath) : resolvePath(urlFilePath);
+		if (isCustom && !isWindowsFilePath(urlFilePath)) {
+			const relativeFilePath = resolvePath(urlFilePath);
+			if (isContainedWithin(loader.directory, relativeFilePath)) {
+				return relativeFilePath;
+			}
+		}
 
+		const filePath = isCustom ? resolvePathCustom(urlFilePath) : resolvePath(urlFilePath);
 		return isContainedWithin(loader.directory, filePath) ? filePath : undefined;
 	}
 
diff --git a/packages/core/src/nodes-loader/__tests__/directory-loader.test.ts b/packages/core/src/nodes-loader/__tests__/directory-loader.test.ts
index e5f449cb0f6..f725f5a69ff 100644
--- a/packages/core/src/nodes-loader/__tests__/directory-loader.test.ts
+++ b/packages/core/src/nodes-loader/__tests__/directory-loader.test.ts
@@ -109,6 +109,14 @@ describe('DirectoryLoader', () => {
 			expect(mockFs.readFileSync).not.toHaveBeenCalled();
 		});
 
+		it('should build custom icon URLs relative to the custom directory for absolute source paths', () => {
+			const loader = new CustomDirectoryLoader(directory);
+
+			loader.loadNodeFromFile(`${directory}/dist/Node1/Node1.node.js`);
+
+			expect(mockNode1.description.iconUrl).toBe('icons/CUSTOM/dist/Node1/node1.svg');
+		});
+
 		it('should load custom nodes when specified with CUSTOM prefix in includeNodes', async () => {
 			const loader = new CustomDirectoryLoader(directory, [], ['CUSTOM.node1', 'CUSTOM.node2']);
 
diff --git a/packages/core/src/nodes-loader/directory-loader.ts b/packages/core/src/nodes-loader/directory-loader.ts
index 9d80718bbef..b25367e8bfe 100644
--- a/packages/core/src/nodes-loader/directory-loader.ts
+++ b/packages/core/src/nodes-loader/directory-loader.ts
@@ -424,14 +424,21 @@ export abstract class DirectoryLoader implements NodeLoader {
 
 	private getIconPath(icon: string, filePath: string) {
 		const iconPath = path.join(path.dirname(filePath), icon.replace('file:', ''));
+		const absoluteIconPath = path.isAbsolute(iconPath)
+			? iconPath
+			: path.join(this.directory, iconPath);
 
-		if (!isContainedWithin(this.directory, path.join(this.directory, iconPath))) {
+		if (!isContainedWithin(this.directory, absoluteIconPath)) {
 			throw new UnexpectedError(
 				`Icon path "${iconPath}" is not contained within the package directory "${this.directory}"`,
 			);
 		}
 
-		return `icons/${this.packageName}/${iconPath}`;
+		const relativeIconPath = path.isAbsolute(iconPath)
+			? path.relative(this.directory, absoluteIconPath).replaceAll(path.sep, '/')
+			: iconPath;
+
+		return `icons/${this.packageName}/${relativeIconPath}`;
 	}
 
 	private fixIconPaths(