diff --git a/src/dist/component/tests.rs b/src/dist/component/tests.rs
index 3c1bfcfe33..55a692d5d8 100644
--- a/src/dist/component/tests.rs
+++ b/src/dist/component/tests.rs
@@ -492,3 +492,128 @@ fn rollback_failure_keeps_going() {
 #[test]
 #[ignore]
 fn intermediate_dir_rollback() {}
+
+#[test]
+#[cfg(unix)]
+fn copy_dir_preserves_symlinks() {
+    // copy_dir must preserve symlinks, not follow them
+    use std::os::unix::fs::symlink;
+
+    let cx = DistContext::new(None).unwrap();
+    let mut tx = cx.transaction();
+
+    let src_dir = cx.pkg_dir.path();
+
+    let real_file = src_dir.join("real_file.txt");
+    utils::write_file("", &real_file, "original content").unwrap();
+
+    let subdir = src_dir.join("subdir");
+    fs::create_dir(&subdir).unwrap();
+
+    let file_symlink = subdir.join("link_to_file.txt");
+    symlink("../real_file.txt", &file_symlink).unwrap();
+
+    let real_dir = src_dir.join("real_dir");
+    fs::create_dir(&real_dir).unwrap();
+    utils::write_file("", &real_dir.join("inner.txt"), "inner content").unwrap();
+    let dir_symlink = subdir.join("link_to_dir");
+    symlink("../real_dir", &dir_symlink).unwrap();
+
+    assert!(
+        fs::symlink_metadata(&file_symlink)
+            .unwrap()
+            .file_type()
+            .is_symlink(),
+        "Source file symlink should be a symlink"
+    );
+    assert!(
+        fs::symlink_metadata(&dir_symlink)
+            .unwrap()
+            .file_type()
+            .is_symlink(),
+        "Source dir symlink should be a symlink"
+    );
+
+    tx.copy_dir("test-component", PathBuf::from("dest"), src_dir)
+        .unwrap();
+    tx.commit();
+
+    let dest_file_symlink = cx.prefix.path().join("dest/subdir/link_to_file.txt");
+    let dest_dir_symlink = cx.prefix.path().join("dest/subdir/link_to_dir");
+
+    assert!(
+        fs::symlink_metadata(&dest_file_symlink)
+            .unwrap()
+            .file_type()
+            .is_symlink(),
+        "Destination file symlink should be preserved as a symlink"
+    );
+    assert!(
+        fs::symlink_metadata(&dest_dir_symlink)
+            .unwrap()
+            .file_type()
+            .is_symlink(),
+        "Destination dir symlink should be preserved as a symlink"
+    );
+
+    assert_eq!(
+        fs::read_link(&dest_file_symlink).unwrap().to_str().unwrap(),
+        "../real_file.txt",
+        "File symlink target should be preserved"
+    );
+    assert_eq!(
+        fs::read_link(&dest_dir_symlink).unwrap().to_str().unwrap(),
+        "../real_dir",
+        "Dir symlink target should be preserved"
+    );
+}
+
+#[test]
+#[cfg(unix)]
+fn copy_file_preserves_symlinks() {
+    // copy_file must preserve symlink targets, not create new symlinks to source
+    use std::os::unix::fs::symlink;
+
+    let cx = DistContext::new(None).unwrap();
+    let mut tx = cx.transaction();
+
+    let src_dir = cx.pkg_dir.path();
+    let real_file = src_dir.join("real_file.txt");
+    utils::write_file("", &real_file, "content").unwrap();
+
+    let link_file = src_dir.join("link.txt");
+    symlink("real_file.txt", &link_file).unwrap();
+
+    assert!(
+        fs::symlink_metadata(&link_file)
+            .unwrap()
+            .file_type()
+            .is_symlink()
+    );
+    assert_eq!(
+        fs::read_link(&link_file).unwrap().to_str().unwrap(),
+        "real_file.txt"
+    );
+
+    tx.copy_file(
+        "test-component",
+        PathBuf::from("copied_link.txt"),
+        &link_file,
+    )
+    .unwrap();
+    tx.commit();
+
+    let dest_link = cx.prefix.path().join("copied_link.txt");
+    assert!(
+        fs::symlink_metadata(&dest_link)
+            .unwrap()
+            .file_type()
+            .is_symlink(),
+        "Copied file should be a symlink"
+    );
+    assert_eq!(
+        fs::read_link(&dest_link).unwrap().to_str().unwrap(),
+        "real_file.txt",
+        "Symlink target should be preserved, not point to original source"
+    );
+}
diff --git a/src/utils/mod.rs b/src/utils/mod.rs
index b4ac6f6856..21557e5b10 100644
--- a/src/utils/mod.rs
+++ b/src/utils/mod.rs
@@ -232,7 +232,12 @@ pub(crate) fn copy_file(src: &Path, dest: &Path) -> Result<()> {
         path: PathBuf::from(src),
     })?;
     if metadata.file_type().is_symlink() {
-        symlink_file(src, dest).map(|_| ())
+        // Read the symlink target and create a new symlink with the same target
+        let link_target = fs::read_link(src).with_context(|| RustupError::ReadingFile {
+            name: "symlink target for",
+            path: PathBuf::from(src),
+        })?;
+        symlink_file(&link_target, dest).map(|_| ())
     } else {
         fs::copy(src, dest)
             .with_context(|| {
diff --git a/src/utils/raw.rs b/src/utils/raw.rs
index 53e45813d3..a4ad696641 100644
--- a/src/utils/raw.rs
+++ b/src/utils/raw.rs
@@ -253,12 +253,29 @@ pub(crate) fn copy_dir(src: &Path, dest: &Path) -> io::Result<()> {
     for entry in src.read_dir()? {
         let entry = entry?;
         let kind = entry.file_type()?;
-        let src = entry.path();
-        let dest = dest.join(entry.file_name());
-        if kind.is_dir() {
-            copy_dir(&src, &dest)?;
+        let src_path = entry.path();
+        let dest_path = dest.join(entry.file_name());
+
+        // Check for symlinks first, before is_dir() which follows symlinks
+        if kind.is_symlink() {
+            let link_target = fs::read_link(&src_path)?;
+            #[cfg(unix)]
+            {
+                std::os::unix::fs::symlink(&link_target, &dest_path)?;
+            }
+            #[cfg(windows)]
+            {
+                // On Windows, we need to know if it's a file or directory symlink
+                if src_path.is_dir() {
+                    std::os::windows::fs::symlink_dir(&link_target, &dest_path)?;
+                } else {
+                    std::os::windows::fs::symlink_file(&link_target, &dest_path)?;
+                }
+            }
+        } else if kind.is_dir() {
+            copy_dir(&src_path, &dest_path)?;
         } else {
-            fs::copy(&src, &dest)?;
+            fs::copy(&src_path, &dest_path)?;
         }
     }
     Ok(())