diff --git a/.changeset/proud-zebras-report.md b/.changeset/proud-zebras-report.md
new file mode 100644
index 00000000..946281c9
--- /dev/null
+++ b/.changeset/proud-zebras-report.md
@@ -0,0 +1,5 @@
+---
+'@graphprotocol/graph-cli': patch
+---
+
+Fix build files being placed outside the build directory
diff --git a/packages/cli/src/compiler/index.ts b/packages/cli/src/compiler/index.ts
index d2512dcc..1953928e 100644
--- a/packages/cli/src/compiler/index.ts
+++ b/packages/cli/src/compiler/index.ts
@@ -231,8 +231,8 @@ export default class Compiler {
     spinner: Spinner,
   ) {
     const absoluteSourceFile = path.resolve(sourceDir, maybeRelativeFile);
-    const relativeSourceFile = path.relative(sourceDir, absoluteSourceFile);
-    const targetFile = path.join(targetDir, relativeSourceFile);
+    const baseName = path.basename(absoluteSourceFile);
+    const targetFile = path.join(targetDir, baseName);
     step(spinner, 'Write subgraph file', this.displayPath(targetFile));
     fs.mkdirsSync(path.dirname(targetFile));
     fs.writeFileSync(targetFile, data);