diff --git a/src/build_settings.cpp b/src/build_settings.cpp
index d6b29709a..1bef4b6ad 100644
--- a/src/build_settings.cpp
+++ b/src/build_settings.cpp
@@ -1502,9 +1502,15 @@ gb_internal bool init_build_paths(String init_filename) {
 
 		if (build_context.metrics.os == TargetOs_windows) {
 			output_extension = STR_LIT("exe");
-		} else if (!str_eq(init_filename, str_lit(".")) && path_is_directory(last_path_element(init_filename))) {
-			// Add .bin extension to avoid collision
-			// with package directory name
+		} else if (str_eq(init_filename, str_lit("."))) {
+			// Avoid conflict in edge case where directory to be compiled is
+			// the same as the current directory's name
+			if (path_is_directory(last_path_element(get_current_directory()))) {
+				// Add .bin extension to avoid collision
+				// with package directory name
+				output_extension = STR_LIT("bin");
+			}
+		} else if (path_is_directory(last_path_element(init_filename))) {
 			output_extension = STR_LIT("bin");
 		}
 	} else if (build_context.build_mode == BuildMode_DynamicLibrary) {