diff --git a/ext/node_resolver/resolution.rs b/ext/node_resolver/resolution.rs
index 25316c385e..f4b2e8056f 100644
--- a/ext/node_resolver/resolution.rs
+++ b/ext/node_resolver/resolution.rs
@@ -1370,15 +1370,37 @@ impl<TEnv: NodeResolverEnv> NodeResolver<TEnv> {
     &self,
     file_path: &Path,
   ) -> Result<Option<PackageJsonRc>, ClosestPkgJsonError> {
+    // we use this for deno compile using byonm because the script paths
+    // won't be in virtual file system, but the package.json paths will be
+    fn canonicalize_first_ancestor_exists(
+      dir_path: &Path,
+      env: &dyn NodeResolverEnv,
+    ) -> Result<Option<PathBuf>, std::io::Error> {
+      for ancestor in dir_path.ancestors() {
+        match env.realpath_sync(ancestor) {
+          Ok(dir_path) => return Ok(Some(dir_path)),
+          Err(err) if err.kind() == std::io::ErrorKind::NotFound => {
+            // keep searching
+          }
+          Err(err) => return Err(err),
+        }
+      }
+      Ok(None)
+    }
+
     let parent_dir = file_path.parent().unwrap();
-    let current_dir =
-      strip_unc_prefix(self.env.realpath_sync(parent_dir).map_err(
-        |source| CanonicalizingPkgJsonDirError {
-          dir_path: parent_dir.to_path_buf(),
-          source,
-        },
-      )?);
-    for current_dir in current_dir.ancestors() {
+    let Some(start_dir) = canonicalize_first_ancestor_exists(
+      parent_dir, &self.env,
+    )
+    .map_err(|source| CanonicalizingPkgJsonDirError {
+      dir_path: parent_dir.to_path_buf(),
+      source,
+    })?
+    else {
+      return Ok(None);
+    };
+    let start_dir = strip_unc_prefix(start_dir);
+    for current_dir in start_dir.ancestors() {
       let package_json_path = current_dir.join("package.json");
       if let Some(pkg_json) = self.load_package_json(&package_json_path)? {
         return Ok(Some(pkg_json));
diff --git a/tests/specs/compile/byonm_main_sub_dir/__test__.jsonc b/tests/specs/compile/byonm_main_sub_dir/__test__.jsonc
new file mode 100644
index 0000000000..aa225ddd13
--- /dev/null
+++ b/tests/specs/compile/byonm_main_sub_dir/__test__.jsonc
@@ -0,0 +1,28 @@
+{
+  "tempDir": true,
+  "envs": {
+    "DENO_FUTURE": "1"
+  },
+  "steps": [{
+    "args": "install",
+    "output": "[WILDCARD]"
+  }, {
+    "if": "unix",
+    "args": "compile --output main src/main.ts",
+    "output": "[WILDCARD]"
+  }, {
+    "if": "unix",
+    "commandName": "./main",
+    "args": [],
+    "output": "main.out"
+  }, {
+    "if": "windows",
+    "args": "compile --output main.exe src/main.ts",
+    "output": "[WILDCARD]"
+  }, {
+    "if": "windows",
+    "commandName": "./main.exe",
+    "args": [],
+    "output": "main.out"
+  }]
+}
diff --git a/tests/specs/compile/byonm_main_sub_dir/deno.json b/tests/specs/compile/byonm_main_sub_dir/deno.json
new file mode 100644
index 0000000000..6134d86d1c
--- /dev/null
+++ b/tests/specs/compile/byonm_main_sub_dir/deno.json
@@ -0,0 +1,3 @@
+{
+  "unstable": ["byonm"]
+}
diff --git a/tests/specs/compile/byonm_main_sub_dir/main.out b/tests/specs/compile/byonm_main_sub_dir/main.out
new file mode 100644
index 0000000000..00750edc07
--- /dev/null
+++ b/tests/specs/compile/byonm_main_sub_dir/main.out
@@ -0,0 +1 @@
+3
diff --git a/tests/specs/compile/byonm_main_sub_dir/package.json b/tests/specs/compile/byonm_main_sub_dir/package.json
new file mode 100644
index 0000000000..af0075a93a
--- /dev/null
+++ b/tests/specs/compile/byonm_main_sub_dir/package.json
@@ -0,0 +1,11 @@
+{
+  "name": "package",
+  "version": "1.0.0",
+  "description": "",
+  "keywords": [],
+  "author": "",
+  "license": "MIT",
+  "dependencies": {
+    "@denotest/add": "*"
+  }
+}
diff --git a/tests/specs/compile/byonm_main_sub_dir/src/main.ts b/tests/specs/compile/byonm_main_sub_dir/src/main.ts
new file mode 100644
index 0000000000..b75bbc03ed
--- /dev/null
+++ b/tests/specs/compile/byonm_main_sub_dir/src/main.ts
@@ -0,0 +1,2 @@
+import { add } from "@denotest/add";
+console.log(add(1, 2));