diff --git a/src/nimble.nim b/src/nimble.nim
index b8e7ffb..0d93af9 100644
--- a/src/nimble.nim
+++ b/src/nimble.nim
@@ -4,7 +4,7 @@
 import system except TResult
 
 import httpclient, parseopt, os, osproc, pegs, tables, parseutils,
-       strtabs, json, algorithm, sets, uri
+       strtabs, json, algorithm, sets, uri, future, sequtils
 
 import strutils except toLower
 from unicode import toLower
@@ -198,11 +198,12 @@ proc removeRevDep(options: Options, pkg: PackageInfo) =
 
 proc install(packages: seq[PkgTuple],
              options: Options,
-             doPrompt = true): tuple[paths: seq[string], pkg: PackageInfo]
-proc processDeps(pkginfo: PackageInfo, options: Options): seq[string] =
+             doPrompt = true): tuple[deps: seq[PackageInfo], pkg: PackageInfo]
+proc processDeps(pkginfo: PackageInfo, options: Options): seq[PackageInfo] =
   ## Verifies and installs dependencies.
   ##
-  ## Returns the list of paths to pass to the compiler during build phase.
+  ## Returns the list of PackageInfo (for paths) to pass to the compiler
+  ## during build phase.
   result = @[]
   assert(not pkginfo.isMinimal, "processDeps needs pkginfo.requires")
   display("Verifying",
@@ -233,8 +234,8 @@ proc processDeps(pkginfo: PackageInfo, options: Options): seq[string] =
       if not found:
         display("Installing", $resolvedDep, priority = HighPriority)
         let toInstall = @[(resolvedDep.name, resolvedDep.ver)]
-        let (paths, installedPkg) = install(toInstall, options)
-        result.add(paths)
+        let (pkgs, installedPkg) = install(toInstall, options)
+        result.add(pkgs)
 
         pkg = installedPkg # For addRevDep
 
@@ -243,7 +244,12 @@ proc processDeps(pkginfo: PackageInfo, options: Options): seq[string] =
       else:
         display("Info:", "Dependency on $1 already satisfied" % $dep,
                 priority = HighPriority)
-        result.add(pkg.mypath.splitFile.dir)
+        if pkg.isLinked:
+          # TODO (#393): This can be optimised since the .nimble-link files have
+          # a secondary line that specifies the srcDir.
+          pkg = pkg.toFullInfo(options)
+
+        result.add(pkg)
         # Process the dependencies of this dependency.
         result.add(processDeps(pkg.toFullInfo(options), options))
       reverseDeps.add((pkg.name, pkg.specialVersion))
@@ -251,8 +257,7 @@ proc processDeps(pkginfo: PackageInfo, options: Options): seq[string] =
   # Check if two packages of the same name (but different version) are listed
   # in the path.
   var pkgsInPath: StringTableRef = newStringTable(modeCaseSensitive)
-  for p in result:
-    let pkgInfo = getPkgInfo(p, options)
+  for pkgInfo in result:
     if pkgsInPath.hasKey(pkgInfo.name) and
        pkgsInPath[pkgInfo.name] != pkgInfo.version:
       raise newException(NimbleError,
@@ -267,7 +272,8 @@ proc processDeps(pkginfo: PackageInfo, options: Options): seq[string] =
   for i in reverseDeps:
     addRevDep(options, i, pkginfo)
 
-proc buildFromDir(pkgInfo: PackageInfo, paths: seq[string], args: var seq[string]) =
+proc buildFromDir(pkgInfo: PackageInfo, paths: seq[string],
+                  args: var seq[string]) =
   ## Builds a package as specified by ``pkgInfo``.
   if pkgInfo.bin.len == 0:
     raise newException(NimbleError,
@@ -369,7 +375,10 @@ proc vcsRevisionInDir(dir: string): string =
       discard
 
 proc installFromDir(dir: string, requestedVer: VersionRange, options: Options,
-                    url: string): tuple[paths: seq[string], pkg: PackageInfo] =
+                    url: string): tuple[
+                      deps: seq[PackageInfo],
+                      pkg: PackageInfo
+                    ] =
   ## Returns where package has been installed to, together with paths
   ## to the packages this package depends on.
   ## The return value of this function is used by
@@ -385,7 +394,7 @@ proc installFromDir(dir: string, requestedVer: VersionRange, options: Options,
     pkgInfo.specialVersion = $requestedVer.spe
 
   # Dependencies need to be processed before the creation of the pkg dir.
-  result.paths = processDeps(pkgInfo, depsOptions)
+  result.deps = processDeps(pkgInfo, depsOptions)
 
   if options.depsOnly:
     result.pkg = pkgInfo
@@ -396,7 +405,9 @@ proc installFromDir(dir: string, requestedVer: VersionRange, options: Options,
 
   # Build before removing an existing package (if one exists). This way
   # if the build fails then the old package will still be installed.
-  if pkgInfo.bin.len > 0: buildFromDir(pkgInfo, result.paths, true)
+  if pkgInfo.bin.len > 0:
+    let paths = result.deps.map(dep => dep.getRealDir())
+    buildFromDir(pkgInfo, paths, true)
 
   let pkgDestDir = pkgInfo.getPkgDest(options)
   if existsDir(pkgDestDir) and existsFile(pkgDestDir / "nimblemeta.json"):
@@ -462,8 +473,8 @@ proc installFromDir(dir: string, requestedVer: VersionRange, options: Options,
   # processDeps).
   saveNimbleData(options)
 
-  # Return the paths to the dependencies of this package.
-  result.paths.add pkgDestDir
+  # Return the dependencies of this package (mainly for paths).
+  result.deps.add pkgInfo
   result.pkg = pkgInfo
   result.pkg.isInstalled = true
   result.pkg.myPath = dest
@@ -496,7 +507,7 @@ proc getDownloadInfo*(pv: PkgTuple, options: Options,
 
 proc install(packages: seq[PkgTuple],
              options: Options,
-             doPrompt = true): tuple[paths: seq[string], pkg: PackageInfo] =
+             doPrompt = true): tuple[deps: seq[PackageInfo], pkg: PackageInfo] =
   if packages == @[]:
     result = installFromDir(getCurrentDir(), newVRAny(), options, "")
   else:
@@ -530,7 +541,8 @@ proc install(packages: seq[PkgTuple],
 proc build(options: Options) =
   var pkgInfo = getPkgInfo(getCurrentDir(), options)
   nimScriptHint(pkgInfo)
-  let paths = processDeps(pkginfo, options)
+  let deps = processDeps(pkginfo, options)
+  let paths = deps.map(dep => dep.getRealDir())
   var args = options.action.compileOptions
   buildFromDir(pkgInfo, paths, args)
 
@@ -544,10 +556,10 @@ proc execBackend(options: Options) =
 
   var pkgInfo = getPkgInfo(getCurrentDir(), options)
   nimScriptHint(pkgInfo)
-  let paths = processDeps(pkginfo, options)
+  let deps = processDeps(pkginfo, options)
 
   var args = ""
-  for path in paths: args.add("--path:\"" & path & "\" ")
+  for dep in deps: args.add("--path:\"" & dep.getRealDir() & "\" ")
   for option in options.action.compileOptions:
     args.add("\"" & option & "\" ")
 
diff --git a/src/nimblepkg/common.nim b/src/nimblepkg/common.nim
index ffdd323..81bd0f9 100644
--- a/src/nimblepkg/common.nim
+++ b/src/nimblepkg/common.nim
@@ -18,6 +18,7 @@ when not defined(nimscript):
       isNimScript*: bool ## Determines if this pkg info was read from a nims file
       isMinimal*: bool
       isInstalled*: bool ## Determines if the pkg this info belongs to is installed
+      isLinked*: bool ## Determines if the pkg this info belongs to has been linked via `develop`
       postHooks*: HashSet[string] ## Useful to know so that Nimble doesn't execHook unnecessarily
       preHooks*: HashSet[string]
       name*: string
diff --git a/src/nimblepkg/packageinfo.nim b/src/nimblepkg/packageinfo.nim
index b2f0ea7..85821d5 100644
--- a/src/nimblepkg/packageinfo.nim
+++ b/src/nimblepkg/packageinfo.nim
@@ -66,7 +66,7 @@ proc getNameVersion*(pkgpath: string): tuple[name, version: string] =
   ##
   ## Also works for file paths like:
   ##   ``/home/user/.nimble/pkgs/package-0.1/package.nimble``
-  if pkgPath.splitFile.ext == ".nimble" or pkgPath.splitFile.ext == ".babel":
+  if pkgPath.splitFile.ext in [".nimble", ".nimble-link", ".babel"]:
     return getNameVersion(pkgPath.splitPath.head)
 
   result.name = ""
@@ -281,7 +281,7 @@ proc findNimbleFile*(dir: string; error: bool): string =
     if kind in {pcFile, pcLinkToFile}:
       let ext = path.splitFile.ext
       case ext
-      of ".babel", ".nimble":
+      of ".babel", ".nimble", ".nimble-link":
         result = path
         inc hits
       else: discard
@@ -293,8 +293,16 @@ proc findNimbleFile*(dir: string; error: bool): string =
       raise newException(NimbleError,
           "Specified directory does not contain a .nimble file.")
     else:
-      display("Warning:", "No .nimble file found for " & dir, Warning,
-              HighPriority)
+      display("Warning:", "No .nimble or .nimble-link file found for " &
+              dir, Warning, HighPriority)
+
+  if result.splitFile.ext == ".nimble-link":
+    # Return the path of the real .nimble file.
+    let lines = readFile(result).splitLines()
+    result = lines[0]
+    if not fileExists(result):
+      raiseNimbleError("The .nimble-link file is pointing to a missing" &
+                       " file: " & result)
 
 proc getInstalledPkgsMin*(libsDir: string, options: Options):
         seq[tuple[pkginfo: PackageInfo, meta: MetaData]] =
@@ -309,13 +317,15 @@ proc getInstalledPkgsMin*(libsDir: string, options: Options):
       let nimbleFile = findNimbleFile(path, false)
       if nimbleFile != "":
         let meta = readMetaData(path)
-        let (name, version) = getNameVersion(nimbleFile)
+        let (name, version) = getNameVersion(path)
         var pkg = initPackageInfo(nimbleFile)
         pkg.name = name
         pkg.version = version
         pkg.specialVersion = version
         pkg.isMinimal = true
         pkg.isInstalled = true
+        pkg.isLinked =
+          cmpPaths(nimbleFile.splitFile().dir, path) != 0
         result.add((pkg, meta))
 
 proc withinRange*(pkgInfo: PackageInfo, verRange: VersionRange): bool =
@@ -369,7 +379,7 @@ proc findAllPkgs*(pkglist: seq[tuple[pkgInfo: PackageInfo, meta: MetaData]],
 
 proc getRealDir*(pkgInfo: PackageInfo): string =
   ## Returns the directory containing the package source files.
-  if pkgInfo.srcDir != "" and not pkgInfo.isInstalled:
+  if pkgInfo.srcDir != "" and (not pkgInfo.isInstalled or pkgInfo.isLinked):
     result = pkgInfo.mypath.splitFile.dir / pkgInfo.srcDir
   else:
     result = pkgInfo.mypath.splitFile.dir
@@ -515,6 +525,8 @@ when isMainModule:
       ("package", "#head")
   doAssert getNameVersion("/home/user/.nimble/libs/package-#branch-with-dashes") ==
       ("package", "#branch-with-dashes")
+  # readPackageInfo (and possibly more) depends on this not raising.
+  doAssert getNameVersion("/home/user/.nimble/libs/package") == ("package", "")
 
   doAssert toValidPackageName("foo__bar") == "foo_bar"
   doAssert toValidPackageName("jhbasdh!£$@%#^_&*_()qwe") == "jhbasdh_qwe"
diff --git a/src/nimblepkg/packageparser.nim b/src/nimblepkg/packageparser.nim
index b69bd75..befa513 100644
--- a/src/nimblepkg/packageparser.nim
+++ b/src/nimblepkg/packageparser.nim
@@ -292,6 +292,11 @@ proc readPackageInfo(nf: NimbleFile, options: Options,
       result.version = minimalInfo.version
       result.isNimScript = true
       result.isMinimal = true
+
+      # It's possible this proc will receive a .nimble-link file eventually,
+      # I added this assert to hopefully make this error clear for everyone.
+      let msg = "No version detected. Received nimble-link?"
+      assert result.version.len > 0, msg
     else:
       try:
         readPackageInfoFromNims(nf, options, result)
@@ -386,6 +391,8 @@ proc getInstalledPkgs*(libsDir: string, options: Options):
           raise exc
 
         pkg.isInstalled = true
+        pkg.isLinked =
+          cmpPaths(nimbleFile.splitFile().dir, path) != 0
         result.add((pkg, meta))
 
 proc isNimScript*(nf: string, options: Options): bool =
@@ -393,7 +400,9 @@ proc isNimScript*(nf: string, options: Options): bool =
 
 proc toFullInfo*(pkg: PackageInfo, options: Options): PackageInfo =
   if pkg.isMinimal:
-    return getPkgInfoFromFile(pkg.mypath, options)
+    result = getPkgInfoFromFile(pkg.mypath, options)
+    result.isInstalled = pkg.isInstalled
+    result.isLinked = pkg.isLinked
   else:
     return pkg
 
diff --git a/tests/develop/dependent/dependent.nimble b/tests/develop/dependent/dependent.nimble
new file mode 100644
index 0000000..7bab4b7
--- /dev/null
+++ b/tests/develop/dependent/dependent.nimble
@@ -0,0 +1,12 @@
+# Package
+
+version       = "1.0"
+author        = "Dominik Picheta"
+description   = "dependent"
+license       = "MIT"
+
+srcDir = "src"
+
+# Dependencies
+
+requires "nim >= 0.16.0", "srcdirtest"
diff --git a/tests/develop/dependent/src/dependent.nim b/tests/develop/dependent/src/dependent.nim
new file mode 100644
index 0000000..37231ba
--- /dev/null
+++ b/tests/develop/dependent/src/dependent.nim
@@ -0,0 +1,3 @@
+import srcdirtest
+
+doAssert foo() == "correct"
\ No newline at end of file
diff --git a/tests/develop/srcdirtest/src/srcdirtest.nim b/tests/develop/srcdirtest/src/srcdirtest.nim
index 53c687a..54b5b46 100644
--- a/tests/develop/srcdirtest/src/srcdirtest.nim
+++ b/tests/develop/srcdirtest/src/srcdirtest.nim
@@ -1 +1,4 @@
+proc foo*(): string =
+  return "correct"
+
 echo("hello")
\ No newline at end of file
diff --git a/tests/tester.nim b/tests/tester.nim
index af544f9..b835ec8 100644
--- a/tests/tester.nim
+++ b/tests/tester.nim
@@ -24,10 +24,11 @@ test "can compile with --os:windows":
 template cd*(dir: string, body: untyped) =
   ## Sets the current dir to ``dir``, executes ``body`` and restores the
   ## previous working dir.
-  let lastDir = getCurrentDir()
-  setCurrentDir(dir)
-  body
-  setCurrentDir(lastDir)
+  block:
+    let lastDir = getCurrentDir()
+    setCurrentDir(dir)
+    body
+    setCurrentDir(lastDir)
 
 proc execNimble(args: varargs[string]): tuple[output: string, exitCode: int] =
   var quotedArgs = @args
@@ -500,4 +501,10 @@ suite "develop feature":
       let split = readFile(path).splitLines()
       check split.len == 2
       check split[0].endsWith("develop/srcdirtest/srcdirtest.nimble")
-      check split[1].endsWith("develop/srcdirtest/src")
\ No newline at end of file
+      check split[1].endsWith("develop/srcdirtest/src")
+
+    cd "develop/dependent":
+      let (output, exitCode) = execNimble("c", "-r", "src/dependent")
+      checkpoint output
+      check(output.processOutput.inLines("hello"))
+      check exitCode == QuitSuccess
\ No newline at end of file