diff --git a/share/sysbuild/CMakeLists.txt b/share/sysbuild/CMakeLists.txt
index f4d5178448b29..8370490fb9476 100644
--- a/share/sysbuild/CMakeLists.txt
+++ b/share/sysbuild/CMakeLists.txt
@@ -16,8 +16,12 @@ set(Sysbuild_DIR ${CMAKE_CURRENT_LIST_DIR}/../sysbuild-package/cmake)
 
 project(sysbuild_toplevel LANGUAGES)
 
+if(NOT DEFINED APPLICATION_BINARY_DIR)
+  set(APPLICATION_BINARY_DIR ${CMAKE_CURRENT_BINARY_DIR} CACHE PATH "Application Binary Directory")
+endif()
+
 if(EXISTS ${APP_DIR}/sysbuild/CMakeLists.txt)
-  add_subdirectory(${APP_DIR}/sysbuild sysbuild/application)
+  add_subdirectory(${APP_DIR}/sysbuild _sysbuild)
 else()
-  add_subdirectory(template sysbuild/application)
+  add_subdirectory(template _sysbuild)
 endif()