diff --git a/tools/ci/test_build_system_cmake.sh b/tools/ci/test_build_system_cmake.sh
index e777c6c78..1495d57ad 100755
--- a/tools/ci/test_build_system_cmake.sh
+++ b/tools/ci/test_build_system_cmake.sh
@@ -576,6 +576,16 @@ endmenu\n" >> ${IDF_PATH}/Kconfig
         || failure "Version on worktree should have been properly resolved"
     git worktree remove ../esp-idf-template-test
 
+    print_status "idf.py fallback to build system target"
+    clean_build_dir
+    msg="Custom target is running"
+    echo "" >> CMakeLists.txt
+    echo "add_custom_target(custom_target COMMAND \${CMAKE_COMMAND} -E echo \"${msg}\")" >> CMakeLists.txt
+    idf.py custom_target 1>log.txt || failure "Could not invoke idf.py with custom target"
+    grep "${msg}" log.txt 1>/dev/null || failure "Custom target did not produce expected output"
+    git checkout CMakeLists.txt
+    rm -f log.txt
+
     print_status "All tests completed"
     if [ -n "${FAILURES}" ]; then
         echo "Some failures were detected:"
diff --git a/tools/idf_py_actions/core_ext.py b/tools/idf_py_actions/core_ext.py
index 03a52377e..b728dd4e9 100644
--- a/tools/idf_py_actions/core_ext.py
+++ b/tools/idf_py_actions/core_ext.py
@@ -45,7 +45,7 @@ def action_extensions(base_actions, project_path):
         ensure_build_directory(args, ctx.info_name)
 
         try:
-            subprocess.check_output(GENERATORS[args.generator]["dry_run"] + [target_name], cwd=args.cwd)
+            subprocess.check_output(GENERATORS[args.generator]["dry_run"] + [target_name], cwd=args.build_dir)
 
         except Exception:
             raise FatalError(