diff --git a/packages/playwright-ct-core/src/devServer.ts b/packages/playwright-ct-core/src/devServer.ts
index 8362502cc9..88d21fbf5d 100644
--- a/packages/playwright-ct-core/src/devServer.ts
+++ b/packages/playwright-ct-core/src/devServer.ts
@@ -44,7 +44,7 @@ export async function runDevServer(configFile: string, registerSourceFile: strin
   const componentRegistry: ComponentRegistry = new Map();
   await populateComponentsFromTests(componentRegistry);
 
-  const dirs = resolveDirs(config.configDir, config.config);
+  const dirs = await resolveDirs(config.configDir, config.config);
   const registerSource = injectedSource + '\n' + await fs.promises.readFile(registerSourceFile, 'utf-8');
   const viteConfig = await createConfig(dirs, config.config, frameworkPluginFactory, false);
   viteConfig.plugins.push({
diff --git a/packages/playwright-ct-core/src/vitePlugin.ts b/packages/playwright-ct-core/src/vitePlugin.ts
index 734fd70459..a1809676b4 100644
--- a/packages/playwright-ct-core/src/vitePlugin.ts
+++ b/packages/playwright-ct-core/src/vitePlugin.ts
@@ -64,7 +64,7 @@ export function createPlugin(
         }
       }
 
-      const dirs = resolveDirs(configDir, config);
+      const dirs = await resolveDirs(configDir, config);
       const buildInfoFile = path.join(dirs.outDir, 'metainfo.json');
 
       let buildExists = false;
diff --git a/packages/playwright-ct-core/src/viteUtils.ts b/packages/playwright-ct-core/src/viteUtils.ts
index 266487f94d..249537b4a7 100644
--- a/packages/playwright-ct-core/src/viteUtils.ts
+++ b/packages/playwright-ct-core/src/viteUtils.ts
@@ -38,13 +38,13 @@ export type ComponentDirs = {
   templateDir: string;
 };
 
-export function resolveDirs(configDir: string, config: FullConfig): ComponentDirs {
+export async function resolveDirs(configDir: string, config: FullConfig): Promise<ComponentDirs> {
   const use = config.projects[0].use as CtConfig;
   // FIXME: use build plugin to determine html location to resolve this.
   // TemplateDir must be relative, otherwise we can't move the final index.html into its target location post-build.
   // This regressed in https://github.com/microsoft/playwright/pull/26526
   const relativeTemplateDir = use.ctTemplateDir || 'playwright';
-  const templateDir = path.join(configDir, relativeTemplateDir);
+  const templateDir = await fs.promises.realpath(path.normalize(path.join(configDir, relativeTemplateDir)));
   const outDir = use.ctCacheDir ? path.resolve(configDir, use.ctCacheDir) : path.resolve(templateDir, '.cache');
   return {
     configDir,