diff --git a/cli/src/main/java/net/neoforged/jst/cli/intellij/ClasspathSetup.java b/cli/src/main/java/net/neoforged/jst/cli/intellij/ClasspathSetup.java
index ad19d4c..662e03f 100644
--- a/cli/src/main/java/net/neoforged/jst/cli/intellij/ClasspathSetup.java
+++ b/cli/src/main/java/net/neoforged/jst/cli/intellij/ClasspathSetup.java
@@ -104,7 +104,8 @@ public static void addLibrary(Logger logger, Path libraryPath, IntelliJEnvironme
         if (!Files.exists(libraryPath)) {
             throw new UncheckedIOException(new NoSuchFileException(libraryPath.toString()));
         }
-        ijEnv.addJarToClassPath(libraryPath);
+        if (Files.isDirectory(libraryPath)) ijEnv.addFolderToClasspath(libraryPath);
+        else ijEnv.addJarToClassPath(libraryPath);
         logger.debug("Added %s", libraryPath);
     }
 }
diff --git a/tests/data/accesstransformer/folder_classpath_entry/accesstransformer.cfg b/tests/data/accesstransformer/folder_classpath_entry/accesstransformer.cfg
new file mode 100644
index 0000000..14e8cc6
--- /dev/null
+++ b/tests/data/accesstransformer/folder_classpath_entry/accesstransformer.cfg
@@ -0,0 +1 @@
+public C1 get()La/b/c/Reference;
diff --git a/tests/data/accesstransformer/folder_classpath_entry/deps/a/b/c/Reference.java b/tests/data/accesstransformer/folder_classpath_entry/deps/a/b/c/Reference.java
new file mode 100644
index 0000000..3de7dfc
--- /dev/null
+++ b/tests/data/accesstransformer/folder_classpath_entry/deps/a/b/c/Reference.java
@@ -0,0 +1,5 @@
+package a.b.c;
+
+public record Reference(int a) {
+
+}
\ No newline at end of file
diff --git a/tests/data/accesstransformer/folder_classpath_entry/expected/C1.java b/tests/data/accesstransformer/folder_classpath_entry/expected/C1.java
new file mode 100644
index 0000000..dd66ac2
--- /dev/null
+++ b/tests/data/accesstransformer/folder_classpath_entry/expected/C1.java
@@ -0,0 +1,7 @@
+import a.b.c.Reference;
+
+public class C1 {
+    public Reference get() {
+        return new Reference(1);
+    }
+}
\ No newline at end of file
diff --git a/tests/data/accesstransformer/folder_classpath_entry/source/C1.java b/tests/data/accesstransformer/folder_classpath_entry/source/C1.java
new file mode 100644
index 0000000..3fe93a3
--- /dev/null
+++ b/tests/data/accesstransformer/folder_classpath_entry/source/C1.java
@@ -0,0 +1,7 @@
+import a.b.c.Reference;
+
+public class C1 {
+    private Reference get() {
+        return new Reference(1);
+    }
+}
\ No newline at end of file
diff --git a/tests/src/test/java/net/neoforged/jst/tests/EmbeddedTest.java b/tests/src/test/java/net/neoforged/jst/tests/EmbeddedTest.java
index 082c293..842fc84 100644
--- a/tests/src/test/java/net/neoforged/jst/tests/EmbeddedTest.java
+++ b/tests/src/test/java/net/neoforged/jst/tests/EmbeddedTest.java
@@ -1,5 +1,6 @@
 package net.neoforged.jst.tests;
 
+import com.intellij.util.ArrayUtil;
 import net.neoforged.jst.cli.Main;
 import org.assertj.core.util.CanIgnoreReturnValue;
 import org.junit.jupiter.api.BeforeEach;
@@ -286,6 +287,11 @@ void testImplicitConstructors() throws Exception {
         void testIllegal() throws Exception {
             runATTest("illegal");
         }
+
+        @Test
+        void testFolderClasspathEntries() throws Exception {
+            runATTest("folder_classpath_entry", "--classpath=" + testDataRoot.resolve("accesstransformer/folder_classpath_entry/deps"));
+        }
     }
 
     @Nested
@@ -350,10 +356,15 @@ protected final void runInterfaceInjectionTest(String testDirName, Path tempDir,
         }
     }
 
-    protected final void runATTest(String testDirName) throws Exception {
+    protected final void runATTest(String testDirName, final String... extraArgs) throws Exception {
         testDirName = "accesstransformer/" + testDirName;
         var atPath = testDataRoot.resolve(testDirName).resolve("accesstransformer.cfg");
-        runTest(testDirName, txt -> txt.replace(atPath.toAbsolutePath().toString(), "{atpath}"), "--enable-accesstransformers", "--access-transformer", atPath.toString());
+        runTest(testDirName, txt -> txt.replace(atPath.toAbsolutePath().toString(), "{atpath}"), ArrayUtil.mergeArrays(
+            new String[]{
+                "--enable-accesstransformers", "--access-transformer", atPath.toString()
+            },
+            extraArgs
+        ));
     }
 
     protected final void runParchmentTest(String testDirName, String mappingsFilename) throws Exception {