diff --git a/base/loading.jl b/base/loading.jl
index c1ddabda6c469..0f64415c5f042 100644
--- a/base/loading.jl
+++ b/base/loading.jl
@@ -423,6 +423,7 @@ function env_project_file(env::String)::Union{Bool,String}
         project_file === nothing || return project_file
     end
     if isdir(env)
+        project_file = true
         for proj in project_names
             maybe_project_file = joinpath(env, proj)
             if isfile_casesensitive(maybe_project_file)
@@ -430,7 +431,6 @@ function env_project_file(env::String)::Union{Bool,String}
                 break
             end
         end
-        project_file =true
     elseif basename(env) in project_names && isfile_casesensitive(env)
         project_file = env
     else
diff --git a/test/loading.jl b/test/loading.jl
index 7dd6ce2935be6..ed75a3d114b66 100644
--- a/test/loading.jl
+++ b/test/loading.jl
@@ -156,6 +156,17 @@ end
             [deps]
             This = "$this_uuid"
             """)
+
+            @test Base.env_project_file(joinpath(dir)) == project_file
+            @test Base.env_project_file(joinpath(project_file)) == project_file
+
+            @test Base.env_project_file(joinpath(dir, "This")) === false
+            @test Base.env_project_file(joinpath(project_file, "This")) === false
+
+            mkdir(joinpath(dir, "Inner"))
+            @test Base.env_project_file(joinpath(dir, "Inner")) === true
+            @test Base.env_project_file(joinpath(dir, "Inner", "Project.toml")) === false
+
             # look up various packages by name
             root = Base.identify_package("Root")
             this = Base.identify_package("This")