diff --git a/cabal-dev.cabal b/cabal-dev.cabal
--- a/cabal-dev.cabal
+++ b/cabal-dev.cabal
@@ -1,5 +1,5 @@
 Name:                cabal-dev
-Version:             0.7.1
+Version:             0.7.2
 Synopsis:            Manage sandboxed Haskell build environments
 
 Description:         cabal-dev is a tool for managing development builds of
@@ -115,7 +115,7 @@
 
     Build-depends:
       bytestring >= 0.9 && < 0.10,
-      directory >= 1.0 && < 1.2,
+      directory >= 1.0 && < 1.3,
       filepath >= 1.1 && < 1.3,
       Cabal >= 1.8.0.6 && < 1.11,
       HTTP >= 4000.0.9 && < 4000.2,
diff --git a/src/Distribution/Dev/InvokeCabal.hs b/src/Distribution/Dev/InvokeCabal.hs
--- a/src/Distribution/Dev/InvokeCabal.hs
+++ b/src/Distribution/Dev/InvokeCabal.hs
@@ -44,8 +44,10 @@
                                            , pkgConf
                                            , sandbox
                                            )
-import System.Directory ( canonicalizePath, getAppUserDataDirectory )
+import Distribution.Dev.Utilities          ( ensureAbsolute )
 
+import System.Directory ( getAppUserDataDirectory )
+
 actions :: String -> CommandActions
 actions act = CommandActions
               { cmdDesc = "Invoke cabal-install with the development configuration"
@@ -121,7 +123,7 @@
                              res <- programFindLocation p v
                              case res of
                                Nothing -> return Nothing
-                               Just loc -> Just `fmap` canonicalizePath loc
+                               Just loc -> Just `fmap` ensureAbsolute loc
                          }
     where
       p = simpleProgram "ghc-pkg-6_8-compat"
diff --git a/src/Distribution/Dev/Sandbox.hs b/src/Distribution/Dev/Sandbox.hs
--- a/src/Distribution/Dev/Sandbox.hs
+++ b/src/Distribution/Dev/Sandbox.hs
@@ -21,7 +21,7 @@
 import Data.Version              ( Version, showVersion )
 import Distribution.Simple.Utils ( debug )
 import Distribution.Verbosity    ( Verbosity )
-import System.Directory          ( canonicalizePath, createDirectoryIfMissing
+import System.Directory          ( createDirectoryIfMissing
                                  , doesFileExist, copyFile )
 import System.FilePath           ( (</>) )
 
@@ -32,6 +32,7 @@
 
 import qualified Distribution.Dev.Flags as F
     ( getVerbosity, Config, getSandbox, sandboxSpecified )
+import Distribution.Dev.Utilities ( ensureAbsolute )
 
 import Paths_cabal_dev ( getDataFileName )
 
@@ -75,7 +76,8 @@
 
 newSandbox :: Verbosity -> FilePath -> IO (Sandbox UnknownVersion)
 newSandbox v relSandboxDir = do
-  sandboxDir <- canonicalizePath relSandboxDir
+  debug v $ "Using " ++ relSandboxDir ++ " as the relative cabal-dev sandbox"
+  sandboxDir <- ensureAbsolute relSandboxDir
   debug v $ "Using " ++ sandboxDir ++ " as the cabal-dev sandbox"
   vista32Workaround_createDirectoryIfMissing True sandboxDir
   let sb = UnknownVersion sandboxDir