diff --git a/.gitignore b/.gitignore
index 62fbfaee1..07598ddfd 100644
--- a/.gitignore
+++ b/.gitignore
@@ -1,5 +1,6 @@
 /.bundle
 /pkg
+/test/mounted_app/test/dummy/log
 /test/test_app/log
 node_modules
 .byebug_history
diff --git a/lib/install/angular.rb b/lib/install/angular.rb
index 2f4de8db0..1535610e8 100644
--- a/lib/install/angular.rb
+++ b/lib/install/angular.rb
@@ -6,8 +6,10 @@
 say "Copying hello_angular app to #{Webpacker.config.source_path}"
 directory "#{__dir__}/examples/angular/hello_angular", "#{Webpacker.config.source_path}/hello_angular"
 
-say "Installing all angular dependencies"
-run "yarn add core-js zone.js rxjs @angular/core @angular/common @angular/compiler @angular/platform-browser @angular/platform-browser-dynamic"
+Dir.chdir(Rails.root) do
+  say "Installing all angular dependencies"
+  run "yarn add core-js zone.js rxjs @angular/core @angular/common @angular/compiler @angular/platform-browser @angular/platform-browser-dynamic"
+end
 
 if Rails::VERSION::MAJOR == 5 && Rails::VERSION::MINOR > 1
   say "You need to enable unsafe-eval rule.", :yellow
diff --git a/lib/install/coffee.rb b/lib/install/coffee.rb
index 0a402ec1c..800b743cd 100644
--- a/lib/install/coffee.rb
+++ b/lib/install/coffee.rb
@@ -19,7 +19,9 @@
 copy_file "#{__dir__}/examples/coffee/hello_coffee.coffee",
   "#{Webpacker.config.source_entry_path}/hello_coffee.coffee"
 
-say "Installing all Coffeescript dependencies"
-run "yarn add coffeescript@1.12.7 coffee-loader"
+Dir.chdir(Rails.root) do
+  say "Installing all Coffeescript dependencies"
+  run "yarn add coffeescript@1.12.7 coffee-loader"
+end
 
 say "Webpacker now supports Coffeescript 🎉", :green
diff --git a/lib/install/elm.rb b/lib/install/elm.rb
index 579a97df4..71399f0b4 100644
--- a/lib/install/elm.rb
+++ b/lib/install/elm.rb
@@ -20,11 +20,13 @@
 copy_file "#{__dir__}/examples/elm/Main.elm",
   "#{Webpacker.config.source_path}/Main.elm"
 
-say "Installing all Elm dependencies"
-run "yarn add elm elm-webpack-loader"
-run "yarn add --dev elm-hot-webpack-loader"
-run "yarn run elm init"
-run "yarn run elm make #{Webpacker.config.source_path}/Main.elm"
+Dir.chdir(Rails.root) do
+  say "Installing all Elm dependencies"
+  run "yarn add elm elm-webpack-loader"
+  run "yarn add --dev elm-hot-webpack-loader"
+  run "yarn run elm init"
+  run "yarn run elm make #{Webpacker.config.source_path}/Main.elm"
+end
 
 say "Updating webpack paths to include .elm file extension"
 insert_into_file Webpacker.config.config_path, "- .elm\n".indent(4), after: /\s+extensions:\n/
diff --git a/lib/install/erb.rb b/lib/install/erb.rb
index 6918896f1..c9333190b 100644
--- a/lib/install/erb.rb
+++ b/lib/install/erb.rb
@@ -19,7 +19,9 @@
 copy_file "#{__dir__}/examples/erb/hello_erb.js.erb",
   "#{Webpacker.config.source_entry_path}/hello_erb.js.erb"
 
-say "Installing all Erb dependencies"
-run "yarn add rails-erb-loader"
+Dir.chdir(Rails.root) do
+  say "Installing all Erb dependencies"
+  run "yarn add rails-erb-loader"
+end
 
 say "Webpacker now supports Erb in JS 🎉", :green
diff --git a/lib/install/react.rb b/lib/install/react.rb
index 5c0c6e9ff..6039b4478 100644
--- a/lib/install/react.rb
+++ b/lib/install/react.rb
@@ -14,7 +14,9 @@
 say "Updating webpack paths to include .jsx file extension"
 insert_into_file Webpacker.config.config_path, "- .jsx\n".indent(4), after: /\s+extensions:\n/
 
-say "Installing all react dependencies"
-run "yarn add react react-dom @babel/preset-react prop-types babel-plugin-transform-react-remove-prop-types"
+Dir.chdir(Rails.root) do
+  say "Installing all react dependencies"
+  run "yarn add react react-dom @babel/preset-react prop-types babel-plugin-transform-react-remove-prop-types"
+end
 
 say "Webpacker now supports react.js 🎉", :green
diff --git a/lib/install/stimulus.rb b/lib/install/stimulus.rb
index 94ee32a70..6ce522865 100644
--- a/lib/install/stimulus.rb
+++ b/lib/install/stimulus.rb
@@ -6,7 +6,9 @@
 say "Creating controllers directory"
 directory "#{__dir__}/examples/stimulus/controllers", "#{Webpacker.config.source_path}/controllers"
 
-say "Installing all Stimulus dependencies"
-run "yarn add stimulus"
+Dir.chdir(Rails.root) do
+  say "Installing all Stimulus dependencies"
+  run "yarn add stimulus"
+end
 
 say "Webpacker now supports Stimulus.js 🎉", :green
diff --git a/lib/install/template.rb b/lib/install/template.rb
index f079f4e05..43158f3ca 100644
--- a/lib/install/template.rb
+++ b/lib/install/template.rb
@@ -16,8 +16,9 @@
 
 apply "#{__dir__}/binstubs.rb"
 
-if File.exists?(".gitignore")
-  append_to_file ".gitignore" do
+git_ignore_path = Rails.root.join(".gitignore")
+if File.exists?(git_ignore_path)
+  append_to_file git_ignore_path do
     "\n"                   +
     "/public/packs\n"      +
     "/public/packs-test\n" +
@@ -28,16 +29,18 @@
   end
 end
 
-if Webpacker::VERSION =~ /^[0-9]+\.[0-9]+\.[0-9]+$/
-  say "Installing all JavaScript dependencies [#{Webpacker::VERSION}]"
-  run "yarn add @rails/webpacker@#{Webpacker::VERSION}"
-else
-  say "Installing all JavaScript dependencies [from prerelease rails/webpacker]"
-  run "yarn add @rails/webpacker@next"
-end
+Dir.chdir(Rails.root) do
+  if Webpacker::VERSION =~ /^[0-9]+\.[0-9]+\.[0-9]+$/
+    say "Installing all JavaScript dependencies [#{Webpacker::VERSION}]"
+    run "yarn add @rails/webpacker@#{Webpacker::VERSION}"
+  else
+    say "Installing all JavaScript dependencies [from prerelease rails/webpacker]"
+    run "yarn add @rails/webpacker@next"
+  end
 
-say "Installing dev server for live reloading"
-run "yarn add --dev webpack-dev-server"
+  say "Installing dev server for live reloading"
+  run "yarn add --dev webpack-dev-server"
+end
 
 insert_into_file Rails.root.join("package.json").to_s, before: /\n}\n*$/ do
   <<~JSON.chomp
diff --git a/lib/install/typescript.rb b/lib/install/typescript.rb
index 3273165f3..dfb9d12c9 100644
--- a/lib/install/typescript.rb
+++ b/lib/install/typescript.rb
@@ -33,7 +33,9 @@
 copy_file "#{__dir__}/examples/typescript/hello_typescript.ts",
   "#{Webpacker.config.source_entry_path}/hello_typescript.ts"
 
-say "Installing all typescript dependencies"
-run "yarn add typescript @babel/preset-typescript #{additional_packages}"
+Dir.chdir(Rails.root) do
+  say "Installing all typescript dependencies"
+  run "yarn add typescript @babel/preset-typescript #{additional_packages}"
+end
 
 say "Webpacker now supports typescript 🎉", :green
diff --git a/lib/install/vue.rb b/lib/install/vue.rb
index 8a18c531c..33800e3ed 100644
--- a/lib/install/vue.rb
+++ b/lib/install/vue.rb
@@ -32,8 +32,10 @@
 copy_file "#{__dir__}/examples/vue/app.vue",
   "#{Webpacker.config.source_path}/app.vue"
 
-say "Installing all Vue dependencies"
-run "yarn add vue vue-loader vue-template-compiler"
+Dir.chdir(Rails.root) do
+  say "Installing all Vue dependencies"
+  run "yarn add vue vue-loader vue-template-compiler"
+end
 
 if Rails::VERSION::MAJOR == 5 && Rails::VERSION::MINOR > 1
   say "You need to enable unsafe-eval rule.", :yellow
diff --git a/lib/tasks/installers.rake b/lib/tasks/installers.rake
index 96b658b27..e88372bfe 100644
--- a/lib/tasks/installers.rake
+++ b/lib/tasks/installers.rake
@@ -14,19 +14,21 @@ dependencies = {
   "Angular": [:typescript]
 }
 
-bin_path = ENV["BUNDLE_BIN"] || "./bin"
+bin_path = ENV["BUNDLE_BIN"] || Rails.root.join("bin")
 
 namespace :webpacker do
   namespace :install do
     installers.each do |name, task_name|
       desc "Install everything needed for #{name}"
-      task task_name => ["webpacker:verify_install"] do
+      task task_name => ["webpacker:verify_install"] do |task|
+        prefix = task.name.split(/#|webpacker:install/).first
+
         template = File.expand_path("../install/#{task_name}.rb", __dir__)
         base_path =
           if Rails::VERSION::MAJOR >= 5
-            "#{RbConfig.ruby} #{bin_path}/rails app:template"
+            "#{RbConfig.ruby} #{bin_path}/rails #{prefix}app:template"
           else
-            "#{RbConfig.ruby} #{bin_path}/rake rails:template"
+            "#{RbConfig.ruby} #{bin_path}/rake #{prefix}rails:template"
           end
 
         dependencies[name] ||= []
diff --git a/lib/tasks/webpacker/binstubs.rake b/lib/tasks/webpacker/binstubs.rake
index 19d71458a..645655205 100644
--- a/lib/tasks/webpacker/binstubs.rake
+++ b/lib/tasks/webpacker/binstubs.rake
@@ -1,13 +1,15 @@
 binstubs_template_path = File.expand_path("../../install/binstubs.rb", __dir__).freeze
-bin_path = ENV["BUNDLE_BIN"] || "./bin"
+bin_path = ENV["BUNDLE_BIN"] || Rails.root.join("bin")
 
 namespace :webpacker do
   desc "Installs Webpacker binstubs in this application"
-  task binstubs: [:check_node, :check_yarn] do
+  task binstubs: [:check_node, :check_yarn] do |task|
+    prefix = task.name.split(/#|webpacker:binstubs/).first
+
     if Rails::VERSION::MAJOR >= 5
-      exec "#{RbConfig.ruby} #{bin_path}/rails app:template LOCATION=#{binstubs_template_path}"
+      exec "#{RbConfig.ruby} #{bin_path}/rails #{prefix}app:template LOCATION=#{binstubs_template_path}"
     else
-      exec "#{RbConfig.ruby} #{bin_path}/rake rails:template LOCATION=#{binstubs_template_path}"
+      exec "#{RbConfig.ruby} #{bin_path}/rake #{prefix}rails:template LOCATION=#{binstubs_template_path}"
     end
   end
 end
diff --git a/lib/tasks/webpacker/check_binstubs.rake b/lib/tasks/webpacker/check_binstubs.rake
index 81731940a..17db6b4b2 100644
--- a/lib/tasks/webpacker/check_binstubs.rake
+++ b/lib/tasks/webpacker/check_binstubs.rake
@@ -1,7 +1,7 @@
 namespace :webpacker do
   desc "Verifies that webpack & webpack-dev-server are present."
   task :check_binstubs do
-    unless File.exist?("bin/webpack")
+    unless File.exist?(Rails.root.join("bin/webpack"))
       $stderr.puts "webpack binstubs not found.\n"\
            "Have you run rails webpacker:install ?\n"\
            "Make sure the bin directory or binstubs are not included in .gitignore\n"\
diff --git a/lib/tasks/webpacker/compile.rake b/lib/tasks/webpacker/compile.rake
index f2b02cd46..a970f8df2 100644
--- a/lib/tasks/webpacker/compile.rake
+++ b/lib/tasks/webpacker/compile.rake
@@ -10,8 +10,10 @@ end
 def enhance_assets_precompile
   # yarn:install was added in Rails 5.1
   deps = yarn_install_available? ? [] : ["webpacker:yarn_install"]
-  Rake::Task["assets:precompile"].enhance(deps) do
-    Rake::Task["webpacker:compile"].invoke
+  Rake::Task["assets:precompile"].enhance(deps) do |task|
+    prefix = task.name.split(/#|assets:precompile/).first
+
+    Rake::Task["#{prefix}webpacker:compile"].invoke
   end
 end
 
diff --git a/lib/tasks/webpacker/info.rake b/lib/tasks/webpacker/info.rake
index 3a44a12d9..df9b9fb94 100644
--- a/lib/tasks/webpacker/info.rake
+++ b/lib/tasks/webpacker/info.rake
@@ -3,17 +3,19 @@ require "webpacker/version"
 namespace :webpacker do
   desc "Provide information on Webpacker's environment"
   task :info do
-    $stdout.puts "Ruby: #{`ruby --version`}"
-    $stdout.puts "Rails: #{Rails.version}"
-    $stdout.puts "Webpacker: #{Webpacker::VERSION}"
-    $stdout.puts "Node: #{`node --version`}"
-    $stdout.puts "Yarn: #{`yarn --version`}"
+    Dir.chdir(Rails.root) do
+      $stdout.puts "Ruby: #{`ruby --version`}"
+      $stdout.puts "Rails: #{Rails.version}"
+      $stdout.puts "Webpacker: #{Webpacker::VERSION}"
+      $stdout.puts "Node: #{`node --version`}"
+      $stdout.puts "Yarn: #{`yarn --version`}"
 
-    $stdout.puts "\n"
-    $stdout.puts "@rails/webpacker: \n#{`npm list @rails/webpacker version`}"
+      $stdout.puts "\n"
+      $stdout.puts "@rails/webpacker: \n#{`npm list @rails/webpacker version`}"
 
-    $stdout.puts "Is bin/webpack present?: #{File.exist? 'bin/webpack'}"
-    $stdout.puts "Is bin/webpack-dev-server present?: #{File.exist? 'bin/webpack-dev-server'}"
-    $stdout.puts "Is bin/yarn present?: #{File.exist? 'bin/yarn'}"
+      $stdout.puts "Is bin/webpack present?: #{File.exist? 'bin/webpack'}"
+      $stdout.puts "Is bin/webpack-dev-server present?: #{File.exist? 'bin/webpack-dev-server'}"
+      $stdout.puts "Is bin/yarn present?: #{File.exist? 'bin/yarn'}"
+    end
   end
 end
diff --git a/lib/tasks/webpacker/install.rake b/lib/tasks/webpacker/install.rake
index a5a78e215..c47a867cd 100644
--- a/lib/tasks/webpacker/install.rake
+++ b/lib/tasks/webpacker/install.rake
@@ -1,13 +1,15 @@
 install_template_path = File.expand_path("../../install/template.rb", __dir__).freeze
-bin_path = ENV["BUNDLE_BIN"] || "./bin"
+bin_path = ENV["BUNDLE_BIN"] || Rails.root.join("bin")
 
 namespace :webpacker do
   desc "Install Webpacker in this application"
-  task install: [:check_node, :check_yarn] do
+  task install: [:check_node, :check_yarn] do |task|
+    prefix = task.name.split(/#|webpacker:install/).first
+
     if Rails::VERSION::MAJOR >= 5
-      exec "#{RbConfig.ruby} #{bin_path}/rails app:template LOCATION=#{install_template_path}"
+      exec "#{RbConfig.ruby} #{bin_path}/rails #{prefix}app:template LOCATION=#{install_template_path}"
     else
-      exec "#{RbConfig.ruby} #{bin_path}/rake rails:template LOCATION=#{install_template_path}"
+      exec "#{RbConfig.ruby} #{bin_path}/rake #{prefix}rails:template LOCATION=#{install_template_path}"
     end
   end
 end
diff --git a/lib/tasks/webpacker/verify_install.rake b/lib/tasks/webpacker/verify_install.rake
index d81090c25..4f4ca6189 100644
--- a/lib/tasks/webpacker/verify_install.rake
+++ b/lib/tasks/webpacker/verify_install.rake
@@ -4,7 +4,8 @@ namespace :webpacker do
   desc "Verifies if Webpacker is installed"
   task verify_install: [:check_node, :check_yarn, :check_binstubs] do
     unless Webpacker.config.config_path.exist?
-      $stderr.puts "Configuration config/webpacker.yml file not found. \n"\
+      path = Webpacker.config.config_path.relative_path_from(Pathname.new(pwd)).to_s
+      $stderr.puts "Configuration #{path} file not found. \n"\
            "Make sure webpacker:install is run successfully before " \
            "running dependent tasks"
       exit!
diff --git a/lib/tasks/webpacker/yarn_install.rake b/lib/tasks/webpacker/yarn_install.rake
index af5bea542..fbd2e94d5 100644
--- a/lib/tasks/webpacker/yarn_install.rake
+++ b/lib/tasks/webpacker/yarn_install.rake
@@ -5,6 +5,8 @@ namespace :webpacker do
     node_env = ENV.fetch("NODE_ENV") do
       valid_node_envs.include?(Rails.env) ? Rails.env : "production"
     end
-    system({ "NODE_ENV" => node_env }, "yarn install --no-progress --frozen-lockfile")
+    Dir.chdir(Rails.root) do
+      system({ "NODE_ENV" => node_env }, "yarn install --no-progress --frozen-lockfile")
+    end
   end
 end
diff --git a/test/engine_rake_tasks_test.rb b/test/engine_rake_tasks_test.rb
new file mode 100644
index 000000000..a1a288a52
--- /dev/null
+++ b/test/engine_rake_tasks_test.rb
@@ -0,0 +1,39 @@
+require "test_helper"
+
+class EngineRakeTasksTest < Minitest::Test
+  def setup
+    remove_webpack_binstubs
+  end
+
+  def teardown
+    remove_webpack_binstubs
+  end
+
+  def test_task_mounted
+    output = Dir.chdir(mounted_app_path) { `rake -T` }
+    assert_includes output, "app:webpacker"
+  end
+
+  def test_binstubs
+    Dir.chdir(mounted_app_path) { `bundle exec rake app:webpacker:binstubs` }
+    webpack_binstub_paths.each { |path| assert File.exist?(path) }
+  end
+
+  private
+    def mounted_app_path
+      File.expand_path("mounted_app", __dir__)
+    end
+
+    def webpack_binstub_paths
+      [
+        "#{mounted_app_path}/test/dummy/bin/webpack",
+        "#{mounted_app_path}/test/dummy/bin/webpack-dev-server",
+      ]
+    end
+
+    def remove_webpack_binstubs
+      webpack_binstub_paths.each do |path|
+        File.delete(path) if File.exist?(path)
+      end
+    end
+end
diff --git a/test/mounted_app/Rakefile b/test/mounted_app/Rakefile
new file mode 100644
index 000000000..fe4151add
--- /dev/null
+++ b/test/mounted_app/Rakefile
@@ -0,0 +1,4 @@
+require "bundler/setup"
+
+APP_RAKEFILE = File.expand_path("test/dummy/Rakefile", __dir__)
+load "rails/tasks/engine.rake"
diff --git a/test/mounted_app/test/dummy/Rakefile b/test/mounted_app/test/dummy/Rakefile
new file mode 100644
index 000000000..d1baef069
--- /dev/null
+++ b/test/mounted_app/test/dummy/Rakefile
@@ -0,0 +1,3 @@
+require_relative "config/application"
+
+Rails.application.load_tasks
diff --git a/test/mounted_app/test/dummy/bin/rails b/test/mounted_app/test/dummy/bin/rails
new file mode 100755
index 000000000..fc42e555b
--- /dev/null
+++ b/test/mounted_app/test/dummy/bin/rails
@@ -0,0 +1,3 @@
+#!/usr/bin/env ruby
+APP_PATH = File.expand_path("../config/application", __dir__)
+require "rails/commands"
diff --git a/test/mounted_app/test/dummy/bin/rake b/test/mounted_app/test/dummy/bin/rake
new file mode 100755
index 000000000..580915dc8
--- /dev/null
+++ b/test/mounted_app/test/dummy/bin/rake
@@ -0,0 +1,3 @@
+#!/usr/bin/env ruby
+require "rake"
+Rake.application.run
diff --git a/test/mounted_app/test/dummy/config.ru b/test/mounted_app/test/dummy/config.ru
new file mode 100644
index 000000000..8987d1c00
--- /dev/null
+++ b/test/mounted_app/test/dummy/config.ru
@@ -0,0 +1,5 @@
+# This file allows the `Rails.root` to be correctly determined.
+
+require_relative "config/environment"
+
+run Rails.application
diff --git a/test/mounted_app/test/dummy/config/application.rb b/test/mounted_app/test/dummy/config/application.rb
new file mode 100644
index 000000000..24f516874
--- /dev/null
+++ b/test/mounted_app/test/dummy/config/application.rb
@@ -0,0 +1,10 @@
+require "action_controller/railtie"
+require "action_view/railtie"
+require "webpacker"
+
+module TestDummyApp
+  class Application < Rails::Application
+    config.secret_key_base = "abcdef"
+    config.eager_load = true
+  end
+end
diff --git a/test/mounted_app/test/dummy/config/environment.rb b/test/mounted_app/test/dummy/config/environment.rb
new file mode 100644
index 000000000..73a3979b0
--- /dev/null
+++ b/test/mounted_app/test/dummy/config/environment.rb
@@ -0,0 +1,3 @@
+require_relative "application"
+
+Rails.application.initialize!
diff --git a/test/mounted_app/test/dummy/config/webpacker.yml b/test/mounted_app/test/dummy/config/webpacker.yml
new file mode 100644
index 000000000..b8ef6d6c7
--- /dev/null
+++ b/test/mounted_app/test/dummy/config/webpacker.yml
@@ -0,0 +1,75 @@
+# Note: You must restart bin/webpack-dev-server for changes to take effect
+
+default: &default
+  source_path: app/javascript
+  source_entry_path: packs
+  public_output_path: packs
+  cache_path: tmp/cache/webpacker
+
+  # Additional paths webpack should lookup modules
+  # ['app/assets', 'engine/foo/app/assets']
+  additional_paths:
+    - app/assets
+    - /etc/yarn
+
+  # Reload manifest.json on all requests so we reload latest compiled packs
+  cache_manifest: false
+
+  extensions:
+    - .js
+    - .sass
+    - .scss
+    - .css
+    - .module.sass
+    - .module.scss
+    - .module.css
+    - .png
+    - .svg
+    - .gif
+    - .jpeg
+    - .jpg
+
+development:
+  <<: *default
+  compile: true
+
+  # Reference: https://webpack.js.org/configuration/dev-server/
+  dev_server:
+    https: false
+    host: localhost
+    port: 3035
+    public: localhost:3035
+    hmr: false
+    # Inline should be set to true if using HMR
+    inline: true
+    overlay: true
+    disable_host_check: true
+    use_local_ip: false
+
+test:
+  <<: *default
+  compile: true
+
+  # Compile test packs to a separate directory
+  public_output_path: packs-test
+
+production:
+  <<: *default
+
+  # Production depends on precompilation of packs prior to booting for performance.
+  compile: false
+
+  # Cache manifest.json for performance
+  cache_manifest: true
+
+staging:
+  <<: *default
+
+  # Production depends on precompilation of packs prior to booting for performance.
+  compile: false
+
+  # Cache manifest.json for performance
+  cache_manifest: true
+
+  # Compile staging packs to a separate directory
+  public_output_path: packs-staging
diff --git a/test/mounted_app/test/dummy/package.json b/test/mounted_app/test/dummy/package.json
new file mode 100644
index 000000000..d32a2dc50
--- /dev/null
+++ b/test/mounted_app/test/dummy/package.json
@@ -0,0 +1,7 @@
+{
+  "private": true,
+  "dependencies": {
+    "@rails/webpacker": "file:../../../../"
+  },
+  "license": "MIT"
+}