diff --git a/python/src/com/jetbrains/python/sdk/add/v2/hatch/HatchViewModel.kt b/python/src/com/jetbrains/python/sdk/add/v2/hatch/HatchViewModel.kt
index 2fcad116dc24..90a32df1f05d 100644
--- a/python/src/com/jetbrains/python/sdk/add/v2/hatch/HatchViewModel.kt
+++ b/python/src/com/jetbrains/python/sdk/add/v2/hatch/HatchViewModel.kt
@@ -72,7 +72,7 @@ class HatchViewModel<P : PathHolder>(
     val projectPath = projectPathFlows.projectPathWithDefault.first()
     val hatchExecutablePath = (hatchExecutable as? BinOnEel)?.path
                               ?: return@withContext Result.failure(HatchUIError.HatchExecutablePathIsNotValid(hatchExecutable.toString()))
-    val hatchWorkingDirectory = if (projectPath.isDirectory()) projectPath else projectPath.parent
+    val hatchWorkingDirectory = generateSequence(projectPath) { it.parent }.firstOrNull { it.isDirectory() }
     val hatchService = hatchWorkingDirectory.getHatchService(hatchExecutablePath).getOr { return@withContext it }
 
     val hatchEnvironments = hatchService.findVirtualEnvironments().getOr { return@withContext it }