diff --git a/lnt/tests/test_suite.py b/lnt/tests/test_suite.py
index 93cd093e..7c93e5c6 100644
--- a/lnt/tests/test_suite.py
+++ b/lnt/tests/test_suite.py
@@ -193,9 +193,6 @@ def run_test(self, opts):
         if opts.exec_mode and opts.build_dir is None and not opts.exec_interleaved_builds:
             self._fatal("--exec requires --build-dir (or use --exec-interleaved-builds)")
 
-        if opts.build_dir and not opts.exec_mode and not opts.exec_interleaved_builds:
-            self._fatal("--build-dir can only be used with --exec or --exec-interleaved-builds")
-
         if opts.exec_interleaved_builds:
             # --exec-interleaved-builds implies --exec
             opts.exec_mode = True
@@ -216,13 +213,15 @@ def run_test(self, opts):
                         build_dir)
 
         if opts.build_dir:
-            # Validate build directory
             opts.build_dir = os.path.abspath(opts.build_dir)
-            if not os.path.exists(opts.build_dir):
-                self._fatal("--build-dir does not exist: %r" % opts.build_dir)
-            cmakecache = os.path.join(opts.build_dir, 'CMakeCache.txt')
-            if not os.path.exists(cmakecache):
-                self._fatal("--build-dir is not a configured build: %r" % opts.build_dir)
+            # In --exec mode, validate that build_dir already exists and is configured
+            # In --build mode, we'll create the directory if needed
+            if opts.exec_mode:
+                if not os.path.exists(opts.build_dir):
+                    self._fatal("--build-dir does not exist: %r" % opts.build_dir)
+                cmakecache = os.path.join(opts.build_dir, 'CMakeCache.txt')
+                if not os.path.exists(cmakecache):
+                    self._fatal("--build-dir is not a configured build: %r" % opts.build_dir)
 
         if opts.cc is not None:
             opts.cc = resolve_command_path(opts.cc)
@@ -336,15 +335,15 @@ def run_test(self, opts):
         self.start_time = timestamp()
 
         # Work out where to put our build stuff
-        if opts.exec_mode and opts.build_dir:
-            # In exec mode with --build-dir, use the specified build directory
+        if opts.build_dir and (opts.exec_mode or opts.build):
+            # With --build-dir, use the specified build directory (for both --build and --exec modes)
             basedir = opts.build_dir
         elif opts.exec_interleaved_builds:
             # For exec-interleaved-builds, each build uses its own directory
             # We'll return early from _run_interleaved_builds(), so basedir doesn't matter
             basedir = opts.sandbox_path
         else:
-            # Normal mode or build mode: use sandbox/build or sandbox/test-<timestamp>
+            # Normal mode: use sandbox/build or sandbox/test-<timestamp>
             if opts.timestamp_build:
                 ts = self.start_time.replace(' ', '_').replace(':', '-')
                 build_dir_name = "test-%s" % ts
diff --git a/tests/runtest/test_suite-build-dir.shtest b/tests/runtest/test_suite-build-dir.shtest
new file mode 100644
index 00000000..4abd32bc
--- /dev/null
+++ b/tests/runtest/test_suite-build-dir.shtest
@@ -0,0 +1,65 @@
+# Test --build-dir option with --build and --exec modes
+
+# Test 1: --build with --build-dir to create a build in a custom location
+# RUN: rm -rf %t.SANDBOX %t.CUSTOM_BUILD
+# RUN: mkdir -p %t.CUSTOM_BUILD
+# RUN: lnt runtest test-suite \
+# RUN:     --sandbox %t.SANDBOX \
+# RUN:     --no-timestamp \
+# RUN:     --test-suite %S/Inputs/test-suite-cmake \
+# RUN:     --cc %{shared_inputs}/FakeCompilers/clang-r154331 \
+# RUN:     --use-cmake %S/Inputs/test-suite-cmake/fake-cmake \
+# RUN:     --use-make %S/Inputs/test-suite-cmake/fake-make \
+# RUN:     --use-lit %S/Inputs/test-suite-cmake/fake-lit \
+# RUN:     --build \
+# RUN:     --build-dir %t.CUSTOM_BUILD/mybuild \
+# RUN:     > %t.build.log 2> %t.build.err
+# RUN: filecheck --check-prefix CHECK-BUILD-CUSTOM < %t.build.err %s
+# CHECK-BUILD-CUSTOM: Building tests (--build mode)...
+# CHECK-BUILD-CUSTOM: Build complete. Build directory: {{.*}}CUSTOM_BUILD/mybuild
+# CHECK-BUILD-CUSTOM: Use --exec --build-dir {{.*}}CUSTOM_BUILD/mybuild to run tests.
+
+# Verify that build files were created in the custom location
+# RUN: test -f %t.CUSTOM_BUILD/mybuild/CMakeCache.txt
+
+# Test 2: --exec with --build-dir using the custom build location
+# RUN: lnt runtest test-suite \
+# RUN:     --sandbox %t.SANDBOX \
+# RUN:     --no-timestamp \
+# RUN:     --exec \
+# RUN:     --build-dir %t.CUSTOM_BUILD/mybuild \
+# RUN:     --use-cmake %S/Inputs/test-suite-cmake/fake-cmake \
+# RUN:     --use-lit %S/Inputs/test-suite-cmake/fake-lit \
+# RUN:     --output %t.exec.report \
+# RUN:     > %t.exec.log 2> %t.exec.err
+# RUN: filecheck --check-prefix CHECK-EXEC-CUSTOM < %t.exec.err %s
+# CHECK-EXEC-CUSTOM-NOT: Configuring
+# CHECK-EXEC-CUSTOM-NOT: Building
+# CHECK-EXEC-CUSTOM: Testing
+
+# Verify that report was created in the custom build directory
+# RUN: test -f %t.CUSTOM_BUILD/mybuild/report.json
+
+# Test 3: Error case - --exec with --build-dir pointing to non-existent directory should fail
+# RUN: not lnt runtest test-suite \
+# RUN:     --sandbox %t.SANDBOX \
+# RUN:     --no-timestamp \
+# RUN:     --exec \
+# RUN:     --build-dir %t.NONEXISTENT \
+# RUN:     --use-lit %S/Inputs/test-suite-cmake/fake-lit \
+# RUN:     > %t.err1.log 2> %t.err1.err
+# RUN: filecheck --check-prefix CHECK-ERR-NONEXISTENT < %t.err1.err %s
+# CHECK-ERR-NONEXISTENT: --build-dir does not exist
+
+# Test 4: Error case - --exec with --build-dir pointing to unconfigured directory should fail
+# RUN: rm -rf %t.UNCONFIGURED
+# RUN: mkdir -p %t.UNCONFIGURED
+# RUN: not lnt runtest test-suite \
+# RUN:     --sandbox %t.SANDBOX \
+# RUN:     --no-timestamp \
+# RUN:     --exec \
+# RUN:     --build-dir %t.UNCONFIGURED \
+# RUN:     --use-lit %S/Inputs/test-suite-cmake/fake-lit \
+# RUN:     > %t.err2.log 2> %t.err2.err
+# RUN: filecheck --check-prefix CHECK-ERR-UNCONFIGURED < %t.err2.err %s
+# CHECK-ERR-UNCONFIGURED: --build-dir is not a configured build