From 4d51d5d0ac17a73f298ccfdc8199d226174eef28 Mon Sep 17 00:00:00 2001
From: Guillaume de Rouville <guillaume@dagger.io>
Date: Mon, 20 Jul 2026 18:13:38 -0700
Subject: [PATCH 1/3] feat: make Python module discovery cwd-aware

---
 .dagger/modules/e2e/dagger.json               |   2 +-
 .../toml/.dagger-python-sdk-skip-generate     |   1 +
 .../e2e/fixtures/toml/app/dagger-module.toml  |   4 +
 .../e2e/fixtures/toml/app/nested/.keep        |   1 +
 .dagger/modules/e2e/main.dang                 |  46 +++++--
 dagger.json                                   |   4 +-
 dagger.toml                                   |   3 +
 docs/cwd-aware-discovery.md                   |  20 +++
 mod.dang                                      |  29 ++++-
 python-sdk.dang                               | 120 ++++++++++--------
 10 files changed, 156 insertions(+), 74 deletions(-)
 create mode 100644 .dagger/modules/e2e/fixtures/toml/.dagger-python-sdk-skip-generate
 create mode 100644 .dagger/modules/e2e/fixtures/toml/app/dagger-module.toml
 create mode 100644 .dagger/modules/e2e/fixtures/toml/app/nested/.keep
 create mode 100644 docs/cwd-aware-discovery.md

diff --git a/.dagger/modules/e2e/dagger.json b/.dagger/modules/e2e/dagger.json
index 0466464..a8bdbc1 100644
--- a/.dagger/modules/e2e/dagger.json
+++ b/.dagger/modules/e2e/dagger.json
@@ -1,6 +1,6 @@
 {
   "name": "e2e",
-  "engineVersion": "v0.21.4",
+  "engineVersion": "v1.0.0-0",
   "sdk": {
     "source": "dang"
   },
diff --git a/.dagger/modules/e2e/fixtures/toml/.dagger-python-sdk-skip-generate b/.dagger/modules/e2e/fixtures/toml/.dagger-python-sdk-skip-generate
new file mode 100644
index 0000000..8b13789
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/toml/.dagger-python-sdk-skip-generate
@@ -0,0 +1 @@
+
diff --git a/.dagger/modules/e2e/fixtures/toml/app/dagger-module.toml b/.dagger/modules/e2e/fixtures/toml/app/dagger-module.toml
new file mode 100644
index 0000000..036bad5
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/toml/app/dagger-module.toml
@@ -0,0 +1,4 @@
+engineVersion = "v1.0.0-0"
+
+[runtime]
+source = "python"
diff --git a/.dagger/modules/e2e/fixtures/toml/app/nested/.keep b/.dagger/modules/e2e/fixtures/toml/app/nested/.keep
new file mode 100644
index 0000000..8b13789
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/toml/app/nested/.keep
@@ -0,0 +1 @@
+
diff --git a/.dagger/modules/e2e/main.dang b/.dagger/modules/e2e/main.dang
index a39ae7b..53b3a7a 100644
--- a/.dagger/modules/e2e/main.dang
+++ b/.dagger/modules/e2e/main.dang
@@ -13,6 +13,7 @@ type E2e {
   let depsModulePath: String! = fixtureRoot + "/deps/app"
   let configModulePath: String! = fixtureRoot + "/config/app"
   let configuredModulePath: String! = fixtureRoot + "/config/configured"
+  let tomlModulePath: String! = fixtureRoot + "/toml/app"
 
   let generatedMarkerPath: String! = "sdk/src/dagger/client/gen.py"
   let generatedMarkerContents: String! = "Code generated by dagger."
@@ -73,12 +74,41 @@ type E2e {
     let nested = pythonSdk.mod(ws, path: lookupNestedPath)
     let exact = pythonSdk.mod(ws, path: lookupModulePath, findUp: false)
 
-    assert(nested.path == lookupModulePath, "find-up lookup returned the wrong module path")
-    assert(exact.path == lookupModulePath, "exact lookup returned the wrong module path")
+    assert(nested.rootPath == lookupModulePath, "find-up lookup returned the wrong module path")
+    assert(exact.rootPath == lookupModulePath, "exact lookup returned the wrong module path")
 
     null
   }
 
+  """
+  Lookup must choose the nearest module config even when its filename differs
+  from an ancestor config, and modern TOML modules must be supported.
+  """
+  pub mixedConfigLookupCheck(ws: Workspace!): Void @check {
+    let mod = pythonSdk.mod(ws, path: tomlModulePath + "/nested")
+    assert(mod.rootPath == tomlModulePath, "lookup chose an outer dagger.json instead of the nearer dagger-module.toml")
+    null
+  }
+
+  """
+  Managed-module discovery is cwd-aware and supports both config formats.
+  """
+  pub moduleDiscoveryCheck(ws: Workspace!): Void @check {
+    let roots = pythonSdk.modules(ws).{{rootPath}}.map { mod => mod.rootPath }
+    assert(contains(roots, generateModulePath), "root discovery missed a legacy Python module")
+    assert(contains(roots, tomlModulePath), "root discovery missed a TOML Python module")
+    assert(contains(roots, nonPythonModulePath) == false, "discovery included a non-Python module")
+
+    let nestedWs = ws.directory("/").asWorkspace(cwd: lookupNestedPath)
+    let scoped = pythonSdk.modules(nestedWs).{{rootPath, path}}
+    let scopedRoots = scoped.map { mod => mod.rootPath }
+    let scopedPaths = scoped.map { mod => mod.path }
+    assert(scoped.length == 1, "nested cwd should see only its nearest managed module")
+    assert(contains(scopedRoots, lookupModulePath), "nested cwd resolved the wrong managed module")
+    assert(contains(scopedPaths, ".."), "module path should be relative to the nested cwd")
+    null
+  }
+
   """
   initModule should seed SDK-owned template files without running codegen and
   without writing engine-owned files (dagger.json / dagger-module.toml).
@@ -153,18 +183,6 @@ type E2e {
     null
   }
 
-  """
-  initClient should not materialize files itself. The engine records the client
-  and owns the generated context changeset.
-  """
-  pub initClientCheck(ws: Workspace!): Void @check {
-    let changes = pythonSdk.initClient(ws, path: outputRoot + "/client", module: generateModulePath, dev: true)
-
-    assert(changes.isEmpty, "initClient should return an empty SDK changeset")
-
-    null
-  }
-
   """
   config.get should reflect pyproject.toml and report unset values as null
   rather than guessing, and config.set should edit only pyproject.toml.
diff --git a/dagger.json b/dagger.json
index 62c29c8..dbfc94d 100644
--- a/dagger.json
+++ b/dagger.json
@@ -7,8 +7,8 @@
   "dependencies": [
     {
       "name": "polyfill",
-      "source": "github.com/dagger/sdk-sdk/polyfill@main",
-      "pin": "a16466390cacd68bd72f7ae9910d990966fb2226"
+      "source": "github.com/dagger/polyfill@main",
+      "pin": "b30eb839000fe179e5d0544a9b667b21817b8120"
     }
   ]
 }
diff --git a/dagger.toml b/dagger.toml
index 724adf6..a7f4b83 100644
--- a/dagger.toml
+++ b/dagger.toml
@@ -27,3 +27,6 @@ path = ".dagger/modules/e2e/fixtures/deps/app"
 
 [[modules.python-sdk.as-sdk.modules]]
 path = ".dagger/modules/e2e/fixtures/skip/app"
+
+[[modules.python-sdk.as-sdk.modules]]
+path = ".dagger/modules/e2e/fixtures/toml/app"
diff --git a/docs/cwd-aware-discovery.md b/docs/cwd-aware-discovery.md
new file mode 100644
index 0000000..e342183
--- /dev/null
+++ b/docs/cwd-aware-discovery.md
@@ -0,0 +1,20 @@
+# CWD-aware module discovery
+
+The Python SDK delegates config discovery to `github.com/dagger/polyfill`, then
+intersects the discovered directories with `currentModule.asSDK.modules`. The
+engine's managed-module list remains authoritative while the caller's current
+directory determines scope.
+
+Discovery returns modules at or below the cwd and, when the cwd has no module
+config, its nearest enclosing module. Both `dagger-module.toml` and legacy
+`dagger.json` are considered together, so the nearest config wins regardless of
+filename. Virtual environments and installed packages are excluded.
+
+```console
+dagger check -l
+dagger call e-2-e mixed-config-lookup-check
+dagger call e-2-e module-discovery-check
+```
+
+The fixtures cover mixed nested config formats, modern and legacy configs,
+non-Python exclusion, root discovery, and discovery from inside a module.
diff --git a/mod.dang b/mod.dang
index 6d64737..9ff4f4b 100644
--- a/mod.dang
+++ b/mod.dang
@@ -3,9 +3,9 @@ A Dagger module that uses the Python SDK.
 """
 type Mod {
   """
-  Workspace-relative path of this module root.
+  Workspace-root-relative path of this module root.
   """
-  pub path: String!
+  pub rootPath: String!
 
   """
   The workspace this module belongs to.
@@ -17,18 +17,37 @@ type Mod {
   """
   let skipGenerateFilename: String!
 
+  """
+  Module root relative to the client's cwd.
+  """
+  pub path: String! {
+    let cwd = ws.cwd.trimPrefix("/").trimSuffix("/")
+    if (rootPath == cwd) {
+      "."
+    } else if (cwd == "") {
+      rootPath
+    } else if (rootPath.trimPrefix(cwd + "/") != rootPath) {
+      rootPath.trimPrefix(cwd + "/")
+    } else if (rootPath == "." or cwd.trimPrefix(rootPath + "/") != cwd) {
+      let depth = if (rootPath == ".") { 0 } else { rootPath.split("/").length }
+      cwd.split("/").dropFirst(depth).map { segment => ".." }.join("/")
+    } else {
+      rootPath
+    }
+  }
+
   """
   Whether this module or an ancestor contains the configured generate skip marker.
   """
   pub skipGenerate: Boolean! {
-    ws.findUp(name: skipGenerateFilename, from: path) != null
+    ws.findUp(name: skipGenerateFilename, from: rootPath) != null
   }
 
   """
   Manage this module's Python build configuration (pyproject.toml).
   """
   pub config: ModConfig! {
-    ModConfig(path: path, ws: ws)
+    ModConfig(path: rootPath, ws: ws)
   }
 
   """
@@ -39,7 +58,7 @@ type Mod {
     if (skipGenerate) {
       polyfill.workspace(ws).fork.changes
     } else {
-      polyfill.workspace(ws).moduleSource("/" + path).generate.changes
+      polyfill.workspace(ws).moduleSource("/" + rootPath).generate.changes
     }
   }
 }
diff --git a/python-sdk.dang b/python-sdk.dang
index 730f61e..4a9300c 100644
--- a/python-sdk.dang
+++ b/python-sdk.dang
@@ -2,6 +2,10 @@
 Manage Dagger modules that use the Python SDK.
 """
 type PythonSdk {
+  let legacyConfigPattern = "\"sdk\"\\s*:\\s*\\{[^}]*\"source\"\\s*:\\s*\"python\""
+  let tomlConfigPattern = "\\[runtime\\][^\\[]*source\\s*=\\s*\"python\""
+  let moduleConfigFilenames: [String!]! = ["dagger-module.toml", "dagger.json"]
+
   """
   Marker filename that skips generate when found at or above a Python SDK module root.
   """
@@ -13,29 +17,46 @@ type PythonSdk {
   pub targetRuntime: String! { "python" }
 
   """
-  Return every legacy dagger.json Dagger module whose sdk.source is "python".
-
-  This discovery path is obsolete for workspace-managed modules; the engine
-  owns the modules.<sdk>.as-sdk.modules source of truth.
+  Return every managed Python SDK module visible from the client's cwd: the
+  nearest enclosing module plus modules at or below the cwd. Discovery uses the
+  shared polyfill and intersects its results with the engine-owned as-SDK list.
   """
   pub modules(ws: Workspace!): [Mod!]! {
-    ws
-      .directory("/", include: ["**/dagger.json"])
-      .search(
-        pattern: "\"sdk\"\\s*:\\s*\\{[^}]*\"source\"\\s*:\\s*\"python\"",
-        globs: ["**/dagger.json"],
-        filesOnly: true,
-        multiline: true,
-        dotall: true,
-      )
-      .{{filePath}}
-      .map { configPath =>
-        mod(
-          ws,
-          if (configPath.filePath == "dagger.json") { "." } else { configPath.filePath.trimSuffix("/dagger.json") },
-          findUp: false,
-        )
+    let managed = currentModule.asSDK.modules.{{path}}
+    let cwd = normalizePath(ws.cwd)
+    polyfill.workspace(ws)
+      .findConfigDirs(moduleConfigFilenames, exclude: ["**/.venv/**", "**/site-packages/**"])
+      .map { dir => workspacePath(cwd, dir) }
+      .uniq
+      .filter { path => managed.filter { m => normalizePath(m.path) == path }.length > 0 }
+      .map { path => Mod(rootPath: path, ws: ws, skipGenerateFilename: skipGenerateFilename) }
+  }
+
+  let workspacePath(cwd: String!, path: String!): String! {
+    let base = if (cwd == ".") { [] } else { cwd.split("/") }
+    let segments = path.split("/").reduce(base) { acc, segment =>
+      if (segment == "..") {
+        acc.dropLast(1)
+      } else if (segment == "." or segment == "") {
+        acc
+      } else {
+        acc + [segment]
       }
+    }
+    if (segments.length == 0) { "." } else { segments.join("/") }
+  }
+
+  let normalizePath(path: String!): String! {
+    let normalized = path.trimPrefix("./").trimPrefix("/").trimSuffix("/")
+    if (normalized == "") { "." } else { normalized }
+  }
+
+  let pathDepth(path: String): Int! {
+    if (path == null) { -1 } else if (path == ".") { 0 } else { path.split("/").length }
+  }
+
+  let configDir(path: String!, filename: String!): String! {
+    normalizePath(path.trimPrefix("/").trimSuffix(filename))
   }
 
   """
@@ -71,42 +92,42 @@ type PythonSdk {
   """
   pub mod(ws: Workspace!, path: String! = ".", findUp: Boolean! = true): Mod! {
     let modPath = if (findUp) {
-      let foundConfigPath = ws.findUp("dagger.json", path)
-      if (foundConfigPath == null) {
+      let foundToml = ws.findUp("dagger-module.toml", path)
+      let foundJson = ws.findUp("dagger.json", path)
+      let tomlBase = if (foundToml == null) { null } else { configDir(foundToml, "dagger-module.toml") }
+      let jsonBase = if (foundJson == null) { null } else { configDir(foundJson, "dagger.json") }
+
+      if (tomlBase == null and jsonBase == null) {
         raise "no Dagger module found containing path: " + path
+      } else if (tomlBase != null and pathDepth(tomlBase) > pathDepth(jsonBase)) {
+        validateConfig(ws, tomlBase, "dagger-module.toml", tomlConfigPattern, path)
+      } else if (jsonBase != null) {
+        validateConfig(ws, jsonBase, "dagger.json", legacyConfigPattern, path)
       } else {
-        let configPath = foundConfigPath.trimPrefix("/")
-        if (
-          ws
-            .directory("/", include: [configPath])
-            .file(configPath)
-            .search(
-              pattern: "\"sdk\"\\s*:\\s*\\{[^}]*\"source\"\\s*:\\s*\"python\"",
-              multiline: true,
-              dotall: true,
-              limit: 1,
-            )
-            .{{id}}
-            .length == 0
-        ) {
-          raise "Dagger module does not use the Python SDK: " + path
-        } else if (configPath == "dagger.json") {
-          "."
-        } else {
-          configPath.trimSuffix("/dagger.json")
-        }
+        raise "no Dagger module found containing path: " + path
       }
     } else {
-      path.trimPrefix("/")
+      normalizePath(path)
     }
 
     Mod(
-      path: modPath,
+      rootPath: modPath,
       ws: ws,
       skipGenerateFilename: skipGenerateFilename,
     )
   }
 
+  let validateConfig(ws: Workspace!, base: String!, filename: String!, pattern: String!, requestedPath: String!): String! {
+    let configPath = if (base == ".") { filename } else { base + "/" + filename }
+    let matches = ws
+      .directory("/", include: [configPath])
+      .file(configPath)
+      .search(pattern: pattern, multiline: true, dotall: true, limit: 1)
+      .{{id}}
+      .length > 0
+    if (matches) { base } else { raise "Dagger module does not use the Python SDK: " + requestedPath }
+  }
+
   """
   Initialize Python-owned files for a new Dagger module.
 
@@ -191,22 +212,17 @@ type PythonSdk {
   }
 
   """
-  Generate all discovered legacy dagger.json Python SDK modules.
-
-  This discovery path is obsolete for workspace-managed modules; the engine
-  owns the modules.<sdk>.as-sdk.modules source of truth.
+  Generate every managed Python SDK module visible from the client's cwd.
 
   Modules with the generate skip marker are skipped.
   """
   pub generateAll(ws: Workspace!): Changeset! @generate {
     let pws = polyfill.workspace(ws)
 
-    currentModule.asSDK.modules
-      .{{path}}
-      .map { m => Mod(path: m.path, ws: ws, skipGenerateFilename: skipGenerateFilename) }
+    modules(ws)
       .filter { mod => mod.skipGenerate == false }
       .reduce(pws.fork) { fork, mod =>
-        fork.merge(pws.moduleSource("/" + mod.path).generate)
+        fork.merge(pws.moduleSource("/" + mod.rootPath).generate)
       }
       .changes
   }

From 1cabf0fc49d411cc46282c5460ae0cf26023b6c6 Mon Sep 17 00:00:00 2001
From: Guillaume de Rouville <guillaume@dagger.io>
Date: Tue, 21 Jul 2026 15:40:22 -0700
Subject: [PATCH 2/3] fix: read SDK modules from the passed workspace

Workspace inheritance into module dependencies is disabled on current engines.
Reading currentModule.asSDK therefore depends on ambient state that is absent
when this SDK runs from an @check function.

Resolve the installed SDK from the explicit Workspace argument instead. Its
module source is the same workspace-root-relative path previously exposed as
the current module SDK path, so discovery semantics remain unchanged.

Signed-off-by: Guillaume de Rouville <guillaume@dagger.io>
---
 python-sdk.dang | 7 ++++---
 1 file changed, 4 insertions(+), 3 deletions(-)

diff --git a/python-sdk.dang b/python-sdk.dang
index 4a9300c..6f0ca99 100644
--- a/python-sdk.dang
+++ b/python-sdk.dang
@@ -19,16 +19,17 @@ type PythonSdk {
   """
   Return every managed Python SDK module visible from the client's cwd: the
   nearest enclosing module plus modules at or below the cwd. Discovery uses the
-  shared polyfill and intersects its results with the engine-owned as-SDK list.
+  shared polyfill and intersects its results with the SDK list on the passed
+  workspace.
   """
   pub modules(ws: Workspace!): [Mod!]! {
-    let managed = currentModule.asSDK.modules.{{path}}
+    let managed = ws.sdk(name: currentModule.name).modules.{{source}}
     let cwd = normalizePath(ws.cwd)
     polyfill.workspace(ws)
       .findConfigDirs(moduleConfigFilenames, exclude: ["**/.venv/**", "**/site-packages/**"])
       .map { dir => workspacePath(cwd, dir) }
       .uniq
-      .filter { path => managed.filter { m => normalizePath(m.path) == path }.length > 0 }
+      .filter { path => managed.filter { m => normalizePath(m.source) == path }.length > 0 }
       .map { path => Mod(rootPath: path, ws: ws, skipGenerateFilename: skipGenerateFilename) }
   }
 

From d644f300c7c19ec922d732a037405aa094256a65 Mon Sep 17 00:00:00 2001
From: Guillaume de Rouville <guillaume@dagger.io>
Date: Tue, 21 Jul 2026 15:40:32 -0700
Subject: [PATCH 3/3] fix: prefer the nearest mixed-format module config

Polyfill previously selected the first config filename found while walking up,
so mixed dagger.json and dagger-module.toml layouts could resolve to a farther
module based on filename order.

Pin the dagger/polyfill#4 fix and cover a managed Python module whose nearby
dagger.json is nested below an ancestor dagger-module.toml. Discovery from two
levels inside the module must select the nearby module and return "../..".

Signed-off-by: Guillaume de Rouville <guillaume@dagger.io>
---
 .../mixed-discovery/.dagger-python-sdk-skip-generate |  1 +
 .../mixed-discovery/ancestor/dagger-module.toml      |  4 ++++
 .../mixed-discovery/ancestor/work/app/dagger.json    |  7 +++++++
 .../ancestor/work/app/nested/deeper/.keep            |  1 +
 .../mixed-discovery/ancestor/work/app/pyproject.toml | 12 ++++++++++++
 .../work/app/src/mixed_discovery_app/__init__.py     |  6 ++++++
 .dagger/modules/e2e/main.dang                        |  8 ++++++++
 dagger.json                                          |  2 +-
 dagger.toml                                          |  3 +++
 9 files changed, 43 insertions(+), 1 deletion(-)
 create mode 100644 .dagger/modules/e2e/fixtures/mixed-discovery/.dagger-python-sdk-skip-generate
 create mode 100644 .dagger/modules/e2e/fixtures/mixed-discovery/ancestor/dagger-module.toml
 create mode 100644 .dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/dagger.json
 create mode 100644 .dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/nested/deeper/.keep
 create mode 100644 .dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/pyproject.toml
 create mode 100644 .dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/src/mixed_discovery_app/__init__.py

diff --git a/.dagger/modules/e2e/fixtures/mixed-discovery/.dagger-python-sdk-skip-generate b/.dagger/modules/e2e/fixtures/mixed-discovery/.dagger-python-sdk-skip-generate
new file mode 100644
index 0000000..8b13789
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/mixed-discovery/.dagger-python-sdk-skip-generate
@@ -0,0 +1 @@
+
diff --git a/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/dagger-module.toml b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/dagger-module.toml
new file mode 100644
index 0000000..036bad5
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/dagger-module.toml
@@ -0,0 +1,4 @@
+engineVersion = "v1.0.0-0"
+
+[runtime]
+source = "python"
diff --git a/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/dagger.json b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/dagger.json
new file mode 100644
index 0000000..02e020a
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/dagger.json
@@ -0,0 +1,7 @@
+{
+  "name": "mixed-discovery-app",
+  "engineVersion": "v1.0.0-0",
+  "sdk": {
+    "source": "python"
+  }
+}
diff --git a/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/nested/deeper/.keep b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/nested/deeper/.keep
new file mode 100644
index 0000000..8b13789
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/nested/deeper/.keep
@@ -0,0 +1 @@
+
diff --git a/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/pyproject.toml b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/pyproject.toml
new file mode 100644
index 0000000..cb28635
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/pyproject.toml
@@ -0,0 +1,12 @@
+[project]
+name = "mixed-discovery-app"
+version = "0.1.0"
+requires-python = ">=3.14"
+dependencies = ["dagger-io"]
+
+[build-system]
+requires = ["uv_build>=0.8.4,<0.9.0"]
+build-backend = "uv_build"
+
+[tool.uv.sources]
+dagger-io = { path = "sdk", editable = true }
diff --git a/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/src/mixed_discovery_app/__init__.py b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/src/mixed_discovery_app/__init__.py
new file mode 100644
index 0000000..e8b0dc4
--- /dev/null
+++ b/.dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app/src/mixed_discovery_app/__init__.py
@@ -0,0 +1,6 @@
+from dagger import object_type
+
+
+@object_type
+class MixedDiscoveryApp:
+    pass
diff --git a/.dagger/modules/e2e/main.dang b/.dagger/modules/e2e/main.dang
index 53b3a7a..a1932eb 100644
--- a/.dagger/modules/e2e/main.dang
+++ b/.dagger/modules/e2e/main.dang
@@ -14,6 +14,8 @@ type E2e {
   let configModulePath: String! = fixtureRoot + "/config/app"
   let configuredModulePath: String! = fixtureRoot + "/config/configured"
   let tomlModulePath: String! = fixtureRoot + "/toml/app"
+  let mixedDiscoveryModulePath: String! = fixtureRoot + "/mixed-discovery/ancestor/work/app"
+  let mixedDiscoveryNestedPath: String! = mixedDiscoveryModulePath + "/nested/deeper"
 
   let generatedMarkerPath: String! = "sdk/src/dagger/client/gen.py"
   let generatedMarkerContents: String! = "Code generated by dagger."
@@ -106,6 +108,12 @@ type E2e {
     assert(scoped.length == 1, "nested cwd should see only its nearest managed module")
     assert(contains(scopedRoots, lookupModulePath), "nested cwd resolved the wrong managed module")
     assert(contains(scopedPaths, ".."), "module path should be relative to the nested cwd")
+
+    let mixedWs = ws.directory("/").asWorkspace(cwd: mixedDiscoveryNestedPath)
+    let mixed = pythonSdk.modules(mixedWs).{{rootPath, path}}
+    assert(mixed.length == 1, "mixed-config cwd should see only its nearest managed module")
+    assert(contains(mixed.map { mod => mod.rootPath }, mixedDiscoveryModulePath), "mixed-config discovery chose the farther dagger-module.toml")
+    assert(contains(mixed.map { mod => mod.path }, "../.."), "mixed-config module path should be relative to the nested cwd")
     null
   }
 
diff --git a/dagger.json b/dagger.json
index dbfc94d..f92c506 100644
--- a/dagger.json
+++ b/dagger.json
@@ -8,7 +8,7 @@
     {
       "name": "polyfill",
       "source": "github.com/dagger/polyfill@main",
-      "pin": "b30eb839000fe179e5d0544a9b667b21817b8120"
+      "pin": "e90bbfc4843258a877a3a95b8db1571e7981e65f"
     }
   ]
 }
diff --git a/dagger.toml b/dagger.toml
index a7f4b83..47265a4 100644
--- a/dagger.toml
+++ b/dagger.toml
@@ -30,3 +30,6 @@ path = ".dagger/modules/e2e/fixtures/skip/app"
 
 [[modules.python-sdk.as-sdk.modules]]
 path = ".dagger/modules/e2e/fixtures/toml/app"
+
+[[modules.python-sdk.as-sdk.modules]]
+path = ".dagger/modules/e2e/fixtures/mixed-discovery/ancestor/work/app"