diff --git a/.github/workflows/build.yml b/.github/workflows/build.yml
index 283add8..a22f448 100644
--- a/.github/workflows/build.yml
+++ b/.github/workflows/build.yml
@@ -47,7 +47,7 @@ jobs:
         run: |
           set -euo pipefail
           latest_version="$(jq -r '.version' package.json)"
-          count_expected=21
+          count_expected=23
           count_actual="$(grep -c "setup-pixi@v$latest_version" README.md || true)"
           if [ "$count_actual" -ne "$count_expected" ]; then
             echo "::error file=README.md::Expected $count_expected mentions of \`setup-pixi@v$latest_version\` in README.md, but found $count_actual."
diff --git a/README.md b/README.md
index e5a1bb2..33277de 100644
--- a/README.md
+++ b/README.md
@@ -418,6 +418,27 @@ This can be overwritten by setting the `manifest-path` input argument.
     manifest-path: pyproject.toml
 ```
 
+### Working directory for monorepos
+
+If you're working with a monorepo where your pixi project is in a subdirectory, you can use the `working-directory` input to specify where pixi should look for manifest files (`pixi.toml` or `pyproject.toml`).
+
+```yml
+- uses: prefix-dev/setup-pixi@v0.9.3
+  with:
+    working-directory: ./packages/my-project
+```
+
+This will make pixi look for `pixi.toml` or `pyproject.toml` in the `./packages/my-project` directory instead of the repository root. All pixi commands will be executed from this working directory.
+
+You can combine `working-directory` with `manifest-path` if needed:
+
+```yml
+- uses: prefix-dev/setup-pixi@v0.9.3
+  with:
+    working-directory: ./packages/my-project
+    manifest-path: custom-pixi.toml
+```
+
 ### Only install pixi
 
 If you only want to install pixi and not install the current project, you can use the `run-install` option.
diff --git a/action.yml b/action.yml
index f691688..fcdf2fa 100644
--- a/action.yml
+++ b/action.yml
@@ -18,6 +18,10 @@ inputs:
       One of `q`, `default`, `v`, `vv`, or `vvv`.
   manifest-path:
     description: Path to the manifest file (i.e., `pixi.toml`) to use for the pixi CLI. Defaults to `pixi.toml`.
+  working-directory:
+    description: |
+      Working directory to use for pixi commands. If specified, pixi will look for manifest files (pixi.toml or pyproject.toml) 
+      in this directory instead of the repository root. Useful for monorepos where pixi projects are in subdirectories.
   run-install:
     description: Whether to run `pixi install` after installing pixi. Defaults to `true`.
   environments:
diff --git a/dist/index.js b/dist/index.js
index eb42f4a..536e615 100644
--- a/dist/index.js
+++ b/dist/index.js
@@ -80156,11 +80156,13 @@ var sha256 = (s) => {
 };
 var execute = (cmd) => {
   core.debug(`Executing: \`${cmd.toString()}\``);
-  return (0, import_exec.exec)(`"${cmd[0]}"`, cmd.slice(1));
+  return (0, import_exec.exec)(`"${cmd[0]}"`, cmd.slice(1), { cwd: options.workingDirectory });
 };
-var executeGetOutput = (cmd, options2) => {
+var executeGetOutput = (cmd, execOptions) => {
   core.debug(`Executing: \`${cmd.toString()}\``);
-  return (0, import_exec.getExecOutput)(`"${cmd[0]}"`, cmd.slice(1), options2);
+  const defaultOptions = { cwd: options.workingDirectory };
+  const mergedOptions = execOptions ? { ...defaultOptions, ...execOptions } : defaultOptions;
+  return (0, import_exec.getExecOutput)(`"${cmd[0]}"`, cmd.slice(1), mergedOptions);
 };
 var pixiCmd = (command, withManifestPath = true) => {
   let commandArray = [options.pixiBinPath].concat(command.split(" ").filter((x) => x !== ""));
@@ -80344,26 +80346,31 @@ var inferOptions = (inputs) => {
     inputs.pixiBinPath
   );
   const logLevel = inputs.logLevel ?? (core2.isDebug() ? "vv" : "default");
-  let manifestPath = pixiPath;
+  const workingDirectory = inputs.workingDirectory ? import_path.default.resolve(untildify(inputs.workingDirectory)) : process.cwd();
+  core2.debug(`Working directory: ${workingDirectory}`);
+  const pixiPathInWorkingDir = import_path.default.join(workingDirectory, pixiPath);
+  const pyprojectPathInWorkingDir = import_path.default.join(workingDirectory, pyprojectPath);
+  let manifestPath = pixiPathInWorkingDir;
   if (inputs.manifestPath) {
-    manifestPath = import_path.default.resolve(untildify(inputs.manifestPath));
+    manifestPath = import_path.default.isAbsolute(inputs.manifestPath) ? import_path.default.resolve(untildify(inputs.manifestPath)) : import_path.default.resolve(workingDirectory, untildify(inputs.manifestPath));
   } else {
-    if ((0, import_fs.existsSync)(pixiPath)) {
-      manifestPath = pixiPath;
-    } else if ((0, import_fs.existsSync)(pyprojectPath)) {
+    if ((0, import_fs.existsSync)(pixiPathInWorkingDir)) {
+      manifestPath = pixiPathInWorkingDir;
+      core2.debug(`Found pixi.toml at: ${manifestPath}`);
+    } else if ((0, import_fs.existsSync)(pyprojectPathInWorkingDir)) {
       try {
-        const fileContent = (0, import_fs.readFileSync)(pyprojectPath, "utf-8");
+        const fileContent = (0, import_fs.readFileSync)(pyprojectPathInWorkingDir, "utf-8");
         const parsedContent = parse3(fileContent);
         if (parsedContent.tool && typeof parsedContent.tool === "object" && "pixi" in parsedContent.tool) {
-          core2.debug(`The tool.pixi table found, using ${pyprojectPath} as manifest file.`);
-          manifestPath = pyprojectPath;
+          core2.debug(`The tool.pixi table found, using ${pyprojectPathInWorkingDir} as manifest file.`);
+          manifestPath = pyprojectPathInWorkingDir;
         }
       } catch (error3) {
-        core2.error(`Error while trying to read ${pyprojectPath} file.`);
+        core2.error(`Error while trying to read ${pyprojectPathInWorkingDir} file.`);
         core2.error(error3);
       }
     } else if (runInstall) {
-      core2.warning(`Could not find any manifest file. Defaulting to ${pixiPath}.`);
+      core2.warning(`Could not find any manifest file in ${workingDirectory}. Defaulting to ${pixiPathInWorkingDir}.`);
     }
   }
   const pixiLockFile = import_path.default.join(import_path.default.dirname(manifestPath), "pixi.lock");
@@ -80417,6 +80424,7 @@ var inferOptions = (inputs) => {
     downloadPixi: downloadPixi2,
     logLevel,
     manifestPath,
+    workingDirectory,
     pixiLockFile,
     runInstall,
     environments: inputs.environments,
@@ -80447,6 +80455,7 @@ var getOptions = () => {
       "log-level must be one of `q`, `default`, `v`, `vv`, `vvv`."
     ),
     manifestPath: parseOrUndefined("manifest-path", string2()),
+    workingDirectory: parseOrUndefined("working-directory", string2()),
     runInstall: parseOrUndefinedJSON("run-install", boolean2()),
     environments: parseOrUndefinedList("environments", string2()),
     activateEnvironment: parseOrUndefined("activate-environment", string2()),
@@ -80522,7 +80531,7 @@ var generateProjectCacheKey = async (cacheKeyPrefix) => {
     core3.debug(`lockfilePathSha: ${lockfilePathSha}`);
     const environments = sha256(options.environments?.join(" ") ?? "");
     core3.debug(`environments: ${environments}`);
-    const cwdSha = sha256(process.cwd());
+    const cwdSha = sha256(options.workingDirectory);
     core3.debug(`cwdSha: ${cwdSha}`);
     const sha = sha256(lockfileSha + environments + pixiSha2 + lockfilePathSha + cwdSha);
     core3.debug(`sha: ${sha}`);
diff --git a/dist/post.js b/dist/post.js
index 734f2bf..0ed20f6 100644
--- a/dist/post.js
+++ b/dist/post.js
@@ -30014,26 +30014,31 @@ var inferOptions = (inputs) => {
     inputs.pixiBinPath
   );
   const logLevel = inputs.logLevel ?? (core2.isDebug() ? "vv" : "default");
-  let manifestPath = pixiPath;
+  const workingDirectory = inputs.workingDirectory ? import_path.default.resolve(untildify(inputs.workingDirectory)) : process.cwd();
+  core2.debug(`Working directory: ${workingDirectory}`);
+  const pixiPathInWorkingDir = import_path.default.join(workingDirectory, pixiPath);
+  const pyprojectPathInWorkingDir = import_path.default.join(workingDirectory, pyprojectPath);
+  let manifestPath = pixiPathInWorkingDir;
   if (inputs.manifestPath) {
-    manifestPath = import_path.default.resolve(untildify(inputs.manifestPath));
+    manifestPath = import_path.default.isAbsolute(inputs.manifestPath) ? import_path.default.resolve(untildify(inputs.manifestPath)) : import_path.default.resolve(workingDirectory, untildify(inputs.manifestPath));
   } else {
-    if ((0, import_fs.existsSync)(pixiPath)) {
-      manifestPath = pixiPath;
-    } else if ((0, import_fs.existsSync)(pyprojectPath)) {
+    if ((0, import_fs.existsSync)(pixiPathInWorkingDir)) {
+      manifestPath = pixiPathInWorkingDir;
+      core2.debug(`Found pixi.toml at: ${manifestPath}`);
+    } else if ((0, import_fs.existsSync)(pyprojectPathInWorkingDir)) {
       try {
-        const fileContent = (0, import_fs.readFileSync)(pyprojectPath, "utf-8");
+        const fileContent = (0, import_fs.readFileSync)(pyprojectPathInWorkingDir, "utf-8");
         const parsedContent = parse3(fileContent);
         if (parsedContent.tool && typeof parsedContent.tool === "object" && "pixi" in parsedContent.tool) {
-          core2.debug(`The tool.pixi table found, using ${pyprojectPath} as manifest file.`);
-          manifestPath = pyprojectPath;
+          core2.debug(`The tool.pixi table found, using ${pyprojectPathInWorkingDir} as manifest file.`);
+          manifestPath = pyprojectPathInWorkingDir;
         }
       } catch (error2) {
-        core2.error(`Error while trying to read ${pyprojectPath} file.`);
+        core2.error(`Error while trying to read ${pyprojectPathInWorkingDir} file.`);
         core2.error(error2);
       }
     } else if (runInstall) {
-      core2.warning(`Could not find any manifest file. Defaulting to ${pixiPath}.`);
+      core2.warning(`Could not find any manifest file in ${workingDirectory}. Defaulting to ${pixiPathInWorkingDir}.`);
     }
   }
   const pixiLockFile = import_path.default.join(import_path.default.dirname(manifestPath), "pixi.lock");
@@ -30087,6 +30092,7 @@ var inferOptions = (inputs) => {
     downloadPixi,
     logLevel,
     manifestPath,
+    workingDirectory,
     pixiLockFile,
     runInstall,
     environments: inputs.environments,
@@ -30117,6 +30123,7 @@ var getOptions = () => {
       "log-level must be one of `q`, `default`, `v`, `vv`, `vvv`."
     ),
     manifestPath: parseOrUndefined("manifest-path", string2()),
+    workingDirectory: parseOrUndefined("working-directory", string2()),
     runInstall: parseOrUndefinedJSON("run-install", boolean2()),
     environments: parseOrUndefinedList("environments", string2()),
     activateEnvironment: parseOrUndefined("activate-environment", string2()),
diff --git a/src/cache.ts b/src/cache.ts
index ab75b6e..6b42c62 100644
--- a/src/cache.ts
+++ b/src/cache.ts
@@ -32,8 +32,8 @@ export const generateProjectCacheKey = async (cacheKeyPrefix: string) => {
     core.debug(`lockfilePathSha: ${lockfilePathSha}`)
     const environments = sha256(options.environments?.join(' ') ?? '')
     core.debug(`environments: ${environments}`)
-    // since the lockfile path is not necessarily absolute, we need to include the cwd in the cache key
-    const cwdSha = sha256(process.cwd())
+    // since the lockfile path is not necessarily absolute, we need to include the working directory in the cache key
+    const cwdSha = sha256(options.workingDirectory)
     core.debug(`cwdSha: ${cwdSha}`)
     const sha = sha256(lockfileSha + environments + pixiSha + lockfilePathSha + cwdSha)
     core.debug(`sha: ${sha}`)
diff --git a/src/options.ts b/src/options.ts
index 879b762..2728652 100644
--- a/src/options.ts
+++ b/src/options.ts
@@ -15,6 +15,7 @@ type Inputs = Readonly<{
   pixiUrlHeaders?: NodeJS.Dict<string>
   logLevel?: LogLevel
   manifestPath?: string
+  workingDirectory?: string
   runInstall?: boolean
   environments?: string[]
   activateEnvironment?: string
@@ -80,6 +81,7 @@ export type Options = Readonly<{
   downloadPixi: boolean
   logLevel: LogLevel
   manifestPath: string
+  workingDirectory: string
   pixiLockFile: string
   runInstall: boolean
   environments?: string[]
@@ -281,29 +283,41 @@ const inferOptions = (inputs: Inputs): Options => {
     inputs.pixiBinPath
   )
   const logLevel = inputs.logLevel ?? (core.isDebug() ? 'vv' : 'default')
-  // infer manifest path from inputs or default to pixi.toml or pyproject.toml depending on what is present in the repo.
-  let manifestPath = pixiPath // default
+
+  // Determine the working directory - resolve to absolute path if provided
+  const workingDirectory = inputs.workingDirectory ? path.resolve(untildify(inputs.workingDirectory)) : process.cwd()
+  core.debug(`Working directory: ${workingDirectory}`)
+
+  // infer manifest path from inputs or default to pixi.toml or pyproject.toml depending on what is present in the working directory.
+  const pixiPathInWorkingDir = path.join(workingDirectory, pixiPath)
+  const pyprojectPathInWorkingDir = path.join(workingDirectory, pyprojectPath)
+
+  let manifestPath = pixiPathInWorkingDir // default
   if (inputs.manifestPath) {
-    manifestPath = path.resolve(untildify(inputs.manifestPath))
+    // If manifest path is provided, resolve it relative to working directory if it's not absolute
+    manifestPath = path.isAbsolute(inputs.manifestPath)
+      ? path.resolve(untildify(inputs.manifestPath))
+      : path.resolve(workingDirectory, untildify(inputs.manifestPath))
   } else {
-    if (existsSync(pixiPath)) {
-      manifestPath = pixiPath
-    } else if (existsSync(pyprojectPath)) {
+    if (existsSync(pixiPathInWorkingDir)) {
+      manifestPath = pixiPathInWorkingDir
+      core.debug(`Found pixi.toml at: ${manifestPath}`)
+    } else if (existsSync(pyprojectPathInWorkingDir)) {
       try {
-        const fileContent = readFileSync(pyprojectPath, 'utf-8')
+        const fileContent = readFileSync(pyprojectPathInWorkingDir, 'utf-8')
         const parsedContent: Record<string, unknown> = parse(fileContent)
 
         // Test if the tool.pixi table is present in the pyproject.toml file, if so, use it as the manifest file.
         if (parsedContent.tool && typeof parsedContent.tool === 'object' && 'pixi' in parsedContent.tool) {
-          core.debug(`The tool.pixi table found, using ${pyprojectPath} as manifest file.`)
-          manifestPath = pyprojectPath
+          core.debug(`The tool.pixi table found, using ${pyprojectPathInWorkingDir} as manifest file.`)
+          manifestPath = pyprojectPathInWorkingDir
         }
       } catch (error) {
-        core.error(`Error while trying to read ${pyprojectPath} file.`)
+        core.error(`Error while trying to read ${pyprojectPathInWorkingDir} file.`)
         core.error(error as Error)
       }
     } else if (runInstall) {
-      core.warning(`Could not find any manifest file. Defaulting to ${pixiPath}.`)
+      core.warning(`Could not find any manifest file in ${workingDirectory}. Defaulting to ${pixiPathInWorkingDir}.`)
     }
   }
 
@@ -372,6 +386,7 @@ const inferOptions = (inputs: Inputs): Options => {
     downloadPixi,
     logLevel,
     manifestPath,
+    workingDirectory,
     pixiLockFile,
     runInstall,
     environments: inputs.environments,
@@ -410,6 +425,7 @@ const getOptions = () => {
       'log-level must be one of `q`, `default`, `v`, `vv`, `vvv`.'
     ),
     manifestPath: parseOrUndefined('manifest-path', z.string()),
+    workingDirectory: parseOrUndefined('working-directory', z.string()),
     runInstall: parseOrUndefinedJSON('run-install', z.boolean()),
     environments: parseOrUndefinedList('environments', z.string()),
     activateEnvironment: parseOrUndefined('activate-environment', z.string()),
diff --git a/src/util.ts b/src/util.ts
index d2b1028..d51e2ad 100644
--- a/src/util.ts
+++ b/src/util.ts
@@ -82,14 +82,16 @@ export const execute = (cmd: string[]) => {
   core.debug(`Executing: \`${cmd.toString()}\``)
   // needs escaping if cmd[0] contains spaces
   // https://github.com/prefix-dev/setup-pixi/issues/184#issuecomment-2765724843
-  return exec(`"${cmd[0]}"`, cmd.slice(1))
+  return exec(`"${cmd[0]}"`, cmd.slice(1), { cwd: options.workingDirectory })
 }
 
-export const executeGetOutput = (cmd: string[], options?: ExecOptions) => {
+export const executeGetOutput = (cmd: string[], execOptions?: ExecOptions) => {
   core.debug(`Executing: \`${cmd.toString()}\``)
   // needs escaping if cmd[0] contains spaces
   // https://github.com/prefix-dev/setup-pixi/issues/184#issuecomment-2765724843
-  return getExecOutput(`"${cmd[0]}"`, cmd.slice(1), options)
+  const defaultOptions = { cwd: options.workingDirectory }
+  const mergedOptions = execOptions ? { ...defaultOptions, ...execOptions } : defaultOptions
+  return getExecOutput(`"${cmd[0]}"`, cmd.slice(1), mergedOptions)
 }
 
 export const pixiCmd = (command: string, withManifestPath = true) => {