diff --git a/src/assembly/manifest.ts b/src/assembly/manifest.ts
index ba003da7..aab88a54 100644
--- a/src/assembly/manifest.ts
+++ b/src/assembly/manifest.ts
@@ -140,7 +140,11 @@ export class AssemblyManifestReader {
                 let template: CloudFormationTemplate;
                 const templateFile = path.join(this.directory, assetPath);
                 try {
-                    template = fs.readJSONSync(path.resolve(this.directory, templateFile));
+                    const resolvedPath = path.isAbsolute(this.directory)
+                        ? path.resolve(this.directory, templateFile)
+                        : templateFile;
+
+                    template = fs.readJSONSync(resolvedPath);
                 } catch (e) {
                     throw new Error(`Failed to read CloudFormation template at path: ${templateFile}: ${e}`);
                 }
diff --git a/tests/assembly/manifest.test.ts b/tests/assembly/manifest.test.ts
index 2878b9c2..057201f8 100644
--- a/tests/assembly/manifest.test.ts
+++ b/tests/assembly/manifest.test.ts
@@ -296,7 +296,7 @@ describe('cloud assembly manifest reader', () => {
 
             expect(() => {
                 AssemblyManifestReader.fromDirectory(path.dirname(manifestFile));
-            }).toThrow(/no such file or directory * '\/tmp\/foo\/bar\/does\/not\/exist\/MyNestedStack.template.json'/);
+            }).toThrow(/no such file or directory* '\/tmp\/foo\/bar\/does\/not\/exist\/MyNestedStack.template.json'/);
         });
     });
 });
diff --git a/tests/cdk-resource.test.ts b/tests/cdk-resource.test.ts
index f2e57f01..f76da3fd 100644
--- a/tests/cdk-resource.test.ts
+++ b/tests/cdk-resource.test.ts
@@ -1,4 +1,6 @@
 import * as path from 'path';
+import { NestedStack } from 'aws-cdk-lib/core';
+import * as s3 from 'aws-cdk-lib/aws-s3';
 import * as ecs from 'aws-cdk-lib/aws-ecs';
 import * as route53 from 'aws-cdk-lib/aws-route53';
 import * as events from 'aws-cdk-lib/aws-events';
@@ -10,19 +12,16 @@ import { setMocks, testApp } from './mocks';
 import { MockResourceArgs } from '@pulumi/pulumi/runtime';
 import { Construct } from 'constructs';
 
-beforeAll(() => {
-    process.env.AWS_REGION = 'us-east-2';
-});
-afterAll(() => {
-    process.env.AWS_REGION = undefined;
-});
-
 describe('CDK Construct tests', () => {
     let resources: MockResourceArgs[] = [];
     beforeAll(() => {
+        process.env.AWS_REGION = 'us-east-2';
         resources = [];
         setMocks(resources);
     });
+    afterAll(() => {
+        process.env.AWS_REGION = undefined;
+    });
     // DynamoDB table was previously mapped to the `aws` provider
     // otherwise this level of testing wouldn't be necessary.
     // We also don't need to do this type of testing for _every_ resource
@@ -202,14 +201,36 @@ describe('CDK Construct tests', () => {
             ]),
         });
     });
+
+    test('nested stack', async () => {
+        await testApp(
+            (scope: Construct) => {
+                const nestedStack = new NestedStack(scope, 'Nesty');
+                const bucket = new s3.Bucket(nestedStack, 'bucket');
+            },
+            {
+                appOptions: {
+                    props: {
+                        outdir: 'cdk.out',
+                    },
+                },
+            },
+        );
+        const nested = resources.find((res) => res.type === 'aws-native:s3:Bucket');
+        expect(nested).toBeDefined();
+    });
 });
 
 describe('logicalId tests', () => {
     let resources: MockResourceArgs[] = [];
     beforeEach(() => {
+        process.env.AWS_REGION = 'us-east-2';
         resources = [];
         setMocks(resources);
     });
+    afterAll(() => {
+        process.env.AWS_REGION = undefined;
+    });
     test('logicalId is generated without hash for resources', async () => {
         await testApp((scope: Construct) => {
             new dynamodb.Table(scope, 'Table', {
diff --git a/tests/mocks.ts b/tests/mocks.ts
index b84af60b..49814005 100644
--- a/tests/mocks.ts
+++ b/tests/mocks.ts
@@ -8,7 +8,7 @@ import {
     FileAssetSource,
     ISynthesisSession,
 } from 'aws-cdk-lib/core';
-import { AppComponent, AppOptions } from '../src/types';
+import { AppComponent, AppOptions, AppResourceOptions } from '../src/types';
 import { MockCallArgs, MockCallResult, MockResourceArgs } from '@pulumi/pulumi/runtime';
 import { Construct } from 'constructs';
 import { App, Stack } from '../src/stack';
@@ -37,11 +37,7 @@ export class MockAppComponent extends pulumi.ComponentResource implements AppCom
     }
 }
 
-export async function testApp(
-    fn: (scope: Construct) => void,
-    options?: pulumi.ComponentResourceOptions,
-    withEnv?: boolean,
-) {
+export async function testApp(fn: (scope: Construct) => void, options?: AppResourceOptions, withEnv?: boolean) {
     const env = withEnv ? { account: '12345678912', region: 'us-east-1' } : undefined;
     class TestStack extends Stack {
         constructor(app: App, id: string) {