diff --git a/tests/integration/buildcmd/test_build_cmd.py b/tests/integration/buildcmd/test_build_cmd.py
index d21d3a9f0f1..d1e25a1969c 100644
--- a/tests/integration/buildcmd/test_build_cmd.py
+++ b/tests/integration/buildcmd/test_build_cmd.py
@@ -1588,6 +1588,13 @@ def test_nested_build(self, use_container, cached, parallel):
             )
 
 
+@parameterized_class(
+    ("template", "use_base_dir"),
+    [
+        (os.path.join("deep-nested", "template.yaml"), False),
+        (os.path.join("base-dir", "template", "template.yaml"), "use_base_dir"),
+    ],
+)
 class TestBuildWithNestedStacks3Level(NestedBuildIntegBase):
     """
     In this template, it has the same structure as .aws-sam/build
@@ -1610,7 +1617,12 @@ def test_nested_build(self):
         if SKIP_DOCKER_TESTS:
             self.skipTest(SKIP_DOCKER_MESSAGE)
 
-        cmdlist = self.get_command_list(use_container=True, cached=True, parallel=True)
+        cmdlist = self.get_command_list(
+            use_container=True,
+            cached=True,
+            parallel=True,
+            base_dir=(os.path.join(self.test_data_path, "base-dir") if self.use_base_dir else None),
+        )
 
         LOG.info("Running Command: %s", cmdlist)
         LOG.info(self.working_dir)
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/FunctionA/main_a_2.py b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/FunctionA/main_a_2.py
new file mode 100644
index 00000000000..c1098a40c28
--- /dev/null
+++ b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/FunctionA/main_a_2.py
@@ -0,0 +1,8 @@
+import json
+
+
+def handler(event, context):
+    """
+    FunctionA in leaf template
+    """
+    return {"statusCode": 200, "body": json.dumps({"hello": "a2"})}
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/FunctionA/requirements.txt b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/FunctionA/requirements.txt
new file mode 100644
index 00000000000..e69de29bb2d
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/MyLayerVersion/__init__.py b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/MyLayerVersion/__init__.py
new file mode 100644
index 00000000000..e69de29bb2d
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/MyLayerVersion/my_layer/__init__.py b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/MyLayerVersion/my_layer/__init__.py
new file mode 100644
index 00000000000..e69de29bb2d
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/MyLayerVersion/my_layer/requirements.txt b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/MyLayerVersion/my_layer/requirements.txt
new file mode 100644
index 00000000000..e69de29bb2d
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/MyLayerVersion/my_layer/simple_python.py b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/MyLayerVersion/my_layer/simple_python.py
new file mode 100644
index 00000000000..1998a450d7c
--- /dev/null
+++ b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/MyLayerVersion/my_layer/simple_python.py
@@ -0,0 +1,2 @@
+def layer_ping():
+    return "This is a Layer Ping from simple_python"
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/template.yaml b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/template.yaml
new file mode 100644
index 00000000000..c87a76fc2e0
--- /dev/null
+++ b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/ChildStackY/template.yaml
@@ -0,0 +1,21 @@
+AWSTemplateFormatVersion : '2010-09-09'
+Transform: AWS::Serverless-2016-10-31
+Description: A hello world application.
+
+Resources:
+  FunctionA:
+    Type: AWS::Serverless::Function
+    Properties:
+      Handler: main_a_2.handler
+      Runtime: python3.7
+      CodeUri: ChildStackX/ChildStackY/FunctionA
+      Timeout: 600
+
+  MyLayerVersion:
+    Type: AWS::Serverless::LayerVersion
+    Properties:
+      LayerName: MyLayer
+      Description: Layer description
+      ContentUri: ChildStackX/ChildStackY/MyLayerVersion
+      CompatibleRuntimes:
+        - python3.7
\ No newline at end of file
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/FunctionB/main_b.py b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/FunctionB/main_b.py
new file mode 100644
index 00000000000..c879b04a979
--- /dev/null
+++ b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/FunctionB/main_b.py
@@ -0,0 +1,8 @@
+import json
+
+
+def handler(event, context):
+    """
+    FunctionB in child template
+    """
+    return {"statusCode": 200, "body": json.dumps({"hello": "b"})}
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/FunctionB/requirements.txt b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/FunctionB/requirements.txt
new file mode 100644
index 00000000000..e69de29bb2d
diff --git a/tests/integration/testdata/buildcmd/base-dir/ChildStackX/template.yaml b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/template.yaml
new file mode 100644
index 00000000000..14d70104d4d
--- /dev/null
+++ b/tests/integration/testdata/buildcmd/base-dir/ChildStackX/template.yaml
@@ -0,0 +1,17 @@
+AWSTemplateFormatVersion : '2010-09-09'
+Transform: AWS::Serverless-2016-10-31
+Description: A hello world application.
+
+Resources:
+  FunctionB:
+    Type: AWS::Serverless::Function
+    Properties:
+      Handler: main_b.handler
+      Runtime: python3.7
+      CodeUri: ChildStackX/FunctionB
+      Timeout: 600
+
+  ChildStackY:
+    Type: AWS::Serverless::Application
+    Properties:
+      Location: ChildStackY/template.yaml
diff --git a/tests/integration/testdata/buildcmd/base-dir/FunctionA/main_a.py b/tests/integration/testdata/buildcmd/base-dir/FunctionA/main_a.py
new file mode 100644
index 00000000000..3279b0789b8
--- /dev/null
+++ b/tests/integration/testdata/buildcmd/base-dir/FunctionA/main_a.py
@@ -0,0 +1,8 @@
+import json
+
+
+def handler(event, context):
+    """
+    FunctionA in root template
+    """
+    return {"statusCode": 200, "body": json.dumps({"hello": "a"})}
diff --git a/tests/integration/testdata/buildcmd/base-dir/FunctionA/requirements.txt b/tests/integration/testdata/buildcmd/base-dir/FunctionA/requirements.txt
new file mode 100644
index 00000000000..e69de29bb2d
diff --git a/tests/integration/testdata/buildcmd/base-dir/template/template.yaml b/tests/integration/testdata/buildcmd/base-dir/template/template.yaml
new file mode 100644
index 00000000000..4dbd1e5de95
--- /dev/null
+++ b/tests/integration/testdata/buildcmd/base-dir/template/template.yaml
@@ -0,0 +1,17 @@
+AWSTemplateFormatVersion : '2010-09-09'
+Transform: AWS::Serverless-2016-10-31
+Description: A hello world application.
+
+Resources:
+  FunctionA:
+    Type: AWS::Serverless::Function
+    Properties:
+      Handler: main_a.handler
+      Runtime: python3.7
+      CodeUri: FunctionA
+      Timeout: 600
+
+  ChildStackX:
+    Type: AWS::Serverless::Application
+    Properties:
+      Location: ChildStackX/template.yaml