diff --git a/pyproject.toml b/pyproject.toml
index 266bd2e..7112f3d 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -40,6 +40,7 @@ dynamic = [
 ]
 dependencies = [
   "packaging>=24.2",
+  "tomli>=2.2.1; python_version<'3.11'",
   "tox>=4.26,<5",
   "typing-extensions>=4.12.2; python_version<'3.10'",
   "uv>=0.5.31,<1",
@@ -66,7 +67,7 @@ test = [
   "pytest-cov>=6",
   "pytest-mock>=3.14",
 ]
-type = [ "mypy==1.15", { include-group = "test" } ]
+type = [ "mypy==1.15", "types-setuptools>=80.9.0.20250801", { include-group = "test" } ]
 lint = [ "pre-commit-uv>=4.1.4" ]
 pkg-meta = [ "check-wheel-contents>=0.6.1", "twine>=6.1", "uv>=0.5.31" ]
 
diff --git a/src/tox_uv/_installer.py b/src/tox_uv/_installer.py
index a4ce87b..56d32de 100644
--- a/src/tox_uv/_installer.py
+++ b/src/tox_uv/_installer.py
@@ -3,11 +3,17 @@
 from __future__ import annotations
 
 import logging
+import sys
 from collections import defaultdict
 from collections.abc import Sequence
+from functools import cached_property
 from itertools import chain
 from typing import TYPE_CHECKING, Any, Final
 
+if sys.version_info >= (3, 11):  # pragma: no cover (py311+)
+    import tomllib
+else:  # pragma: no cover (py311+)
+    import tomli as tomllib
 from packaging.requirements import Requirement
 from packaging.utils import parse_sdist_filename, parse_wheel_filename
 from tox.config.types import Command
@@ -101,6 +107,17 @@ def install(self, arguments: Any, section: str, of_type: str) -> None:  # noqa:
             _LOGGER.warning("uv cannot install %r", arguments)  # pragma: no cover
             raise SystemExit(1)  # pragma: no cover
 
+    @cached_property
+    def _sourced_pkg_names(self) -> set[str]:
+        pyproject_file = self._env.conf._conf.src_path.parent / "pyproject.toml"  # noqa: SLF001
+        if not pyproject_file.exists():  # pragma: no cover
+            return set()
+        with pyproject_file.open("rb") as file_handler:
+            pyproject = tomllib.load(file_handler)
+
+        sources = pyproject.get("tool", {}).get("uv", {}).get("sources", {})
+        return {key for key, val in sources.items() if val.get("workspace", False)}
+
     def _install_list_of_deps(  # noqa: C901, PLR0912
         self,
         arguments: Sequence[
@@ -114,12 +131,20 @@ def _install_list_of_deps(  # noqa: C901, PLR0912
             if isinstance(arg, Requirement):  # pragma: no branch
                 groups["req"].append(str(arg))  # pragma: no cover
             elif isinstance(arg, (WheelPackage, SdistPackage, EditablePackage)):
-                groups["req"].extend(str(i) for i in arg.deps)
+                for pkg in arg.deps:
+                    if (
+                        isinstance(pkg, Requirement)
+                        and pkg.name in self._sourced_pkg_names
+                        and "." not in groups["uv_editable"]
+                    ):
+                        groups["uv_editable"].append(".")
+                        continue
+                    groups["req"].append(str(pkg))
                 parser = parse_sdist_filename if isinstance(arg, SdistPackage) else parse_wheel_filename
                 name, *_ = parser(arg.path.name)
                 groups["pkg"].append(f"{name}@{arg.path}")
             elif isinstance(arg, EditableLegacyPackage):
-                groups["req"].extend(str(i) for i in arg.deps)
+                groups["req"].extend(str(pkg) for pkg in arg.deps)
                 groups["dev_pkg"].append(str(arg.path))
             elif isinstance(arg, UvPackage):
                 extras_suffix = f"[{','.join(arg.extras)}]" if arg.extras else ""
diff --git a/tests/conftest.py b/tests/conftest.py
index ed5c923..b768868 100644
--- a/tests/conftest.py
+++ b/tests/conftest.py
@@ -28,6 +28,16 @@ def demo_pkg_setuptools(root: Path) -> Path:
     return root / "demo_pkg_setuptools"
 
 
+@pytest.fixture(scope="session")
+def demo_pkg_workspace(root: Path) -> Path:
+    return root / "demo_pkg_workspace"
+
+
+@pytest.fixture(scope="session")
+def demo_pkg_no_pyproject(root: Path) -> Path:
+    return root / "demo_pkg_no_pyproject"
+
+
 @pytest.fixture(scope="session")
 def demo_pkg_inline(root: Path) -> Path:
     return root / "demo_pkg_inline"
diff --git a/tests/demo_pkg_no_pyproject/setup.cfg b/tests/demo_pkg_no_pyproject/setup.cfg
new file mode 100644
index 0000000..3950347
--- /dev/null
+++ b/tests/demo_pkg_no_pyproject/setup.cfg
@@ -0,0 +1,8 @@
+[metadata]
+name=demo-pkg
+version=0.0.1
+
+[options]
+
+[bdist_wheel]
+universal=1
diff --git a/tests/demo_pkg_no_pyproject/setup.py b/tests/demo_pkg_no_pyproject/setup.py
new file mode 100644
index 0000000..8e987d1
--- /dev/null
+++ b/tests/demo_pkg_no_pyproject/setup.py
@@ -0,0 +1,5 @@
+from __future__ import annotations
+
+from setuptools import setup
+
+setup(name="demo-pkg", package_dir={"": "src"})
diff --git a/tests/demo_pkg_no_pyproject/src/demo_pkg/__init__.py b/tests/demo_pkg_no_pyproject/src/demo_pkg/__init__.py
new file mode 100644
index 0000000..e69de29
diff --git a/tests/demo_pkg_workspace/README.md b/tests/demo_pkg_workspace/README.md
new file mode 100644
index 0000000..e69de29
diff --git a/tests/demo_pkg_workspace/packages/demo_foo/README.md b/tests/demo_pkg_workspace/packages/demo_foo/README.md
new file mode 100644
index 0000000..e69de29
diff --git a/tests/demo_pkg_workspace/packages/demo_foo/pyproject.toml b/tests/demo_pkg_workspace/packages/demo_foo/pyproject.toml
new file mode 100644
index 0000000..65a95f3
--- /dev/null
+++ b/tests/demo_pkg_workspace/packages/demo_foo/pyproject.toml
@@ -0,0 +1,20 @@
+[build-system]
+build-backend = "uv_build"
+requires = [ "uv-build>=0.8.9,<0.9" ]
+
+[project]
+name = "demo-foo"
+version = "0.1.0"
+description = "Add your description here"
+readme = "README.md"
+authors = [ { name = "Sorin Sbarnea", email = "sorin.sbarnea@gmail.com" } ]
+requires-python = ">=3.9"
+classifiers = [
+  "Programming Language :: Python :: 3 :: Only",
+  "Programming Language :: Python :: 3.9",
+  "Programming Language :: Python :: 3.10",
+  "Programming Language :: Python :: 3.11",
+  "Programming Language :: Python :: 3.12",
+  "Programming Language :: Python :: 3.13",
+]
+dependencies = [ "demo-root" ]
diff --git a/tests/demo_pkg_workspace/packages/demo_foo/src/demo_foo/__init__.py b/tests/demo_pkg_workspace/packages/demo_foo/src/demo_foo/__init__.py
new file mode 100644
index 0000000..62b1de5
--- /dev/null
+++ b/tests/demo_pkg_workspace/packages/demo_foo/src/demo_foo/__init__.py
@@ -0,0 +1,5 @@
+from __future__ import annotations
+
+
+def hello() -> str:
+    return "Hello from demo-foo!"
diff --git a/tests/demo_pkg_workspace/packages/demo_foo/src/demo_foo/py.typed b/tests/demo_pkg_workspace/packages/demo_foo/src/demo_foo/py.typed
new file mode 100644
index 0000000..e69de29
diff --git a/tests/demo_pkg_workspace/pyproject.toml b/tests/demo_pkg_workspace/pyproject.toml
new file mode 100644
index 0000000..b8f466c
--- /dev/null
+++ b/tests/demo_pkg_workspace/pyproject.toml
@@ -0,0 +1,28 @@
+[build-system]
+build-backend = "uv_build"
+requires = [ "uv-build>=0.8.9,<0.9" ]
+
+[project]
+name = "demo-root"
+version = "0.1.0"
+description = "Add your description here"
+readme = "README.md"
+requires-python = ">=3.9"
+classifiers = [
+  "Programming Language :: Python :: 3 :: Only",
+  "Programming Language :: Python :: 3.9",
+  "Programming Language :: Python :: 3.10",
+  "Programming Language :: Python :: 3.11",
+  "Programming Language :: Python :: 3.12",
+  "Programming Language :: Python :: 3.13",
+]
+# typing-extensions is not really used but we include it for testing the
+# branch coverage for deps that are not sourced.
+dependencies = [ "demo-foo", "typing-extensions" ]
+
+[tool.uv.sources]
+demo-foo = { workspace = true }
+demo-root = { workspace = true }
+
+[tool.uv.workspace]
+members = [ "packages/*" ]
diff --git a/tests/demo_pkg_workspace/src/demo_root/__init__.py b/tests/demo_pkg_workspace/src/demo_root/__init__.py
new file mode 100644
index 0000000..e69de29
diff --git a/tests/demo_pkg_workspace/src/demo_root/main.py b/tests/demo_pkg_workspace/src/demo_root/main.py
new file mode 100644
index 0000000..fec68a3
--- /dev/null
+++ b/tests/demo_pkg_workspace/src/demo_root/main.py
@@ -0,0 +1,9 @@
+from __future__ import annotations
+
+
+def main() -> None:
+    pass
+
+
+if __name__ == "__main__":
+    main()
diff --git a/tests/test_tox_uv_package.py b/tests/test_tox_uv_package.py
index f91d52c..ce63109 100644
--- a/tests/test_tox_uv_package.py
+++ b/tests/test_tox_uv_package.py
@@ -54,3 +54,31 @@ def test_uv_package_requirements(tox_project: ToxProjectCreator) -> None:
     project = tox_project({"tox.ini": "[testenv]\npackage=skip\ndeps=-r demo.txt", "demo.txt": "tomli"})
     result = project.run("-vv")
     result.assert_success()
+
+
+def test_uv_package_workspace(tox_project: ToxProjectCreator, demo_pkg_workspace: Path) -> None:
+    """Tests ability to install uv workspace projects."""
+    ini = f"""
+    [testenv]
+
+    [testenv:.pkg]
+    uv_seed = true
+    {"deps = wheel" if sys.version_info >= (3, 12) else ""}
+    """
+    project = tox_project({"tox.ini": ini}, base=demo_pkg_workspace)
+    result = project.run()
+    result.assert_success()
+
+
+def test_uv_package_no_pyproject(tox_project: ToxProjectCreator, demo_pkg_no_pyproject: Path) -> None:
+    """Tests ability to install uv workspace projects."""
+    ini = f"""
+    [testenv]
+
+    [testenv:.pkg]
+    uv_seed = true
+    {"deps = wheel" if sys.version_info >= (3, 12) else ""}
+    """
+    project = tox_project({"tox.ini": ini}, base=demo_pkg_no_pyproject)
+    result = project.run()
+    result.assert_success()