diff --git a/CHANGELOG.md b/CHANGELOG.md
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,5 +1,11 @@
 # Changelog
 
+## [0.0.0.3] - 2023-04-29
+
+### Changed
+
+* Test case discovery now works even if the `Spec.hs` file is not at top level
+
 ## [0.0.0.2] - 2022-08-05
 
 ### Changed
diff --git a/src/Test/Syd/Discover.hs b/src/Test/Syd/Discover.hs
--- a/src/Test/Syd/Discover.hs
+++ b/src/Test/Syd/Discover.hs
@@ -1,10 +1,12 @@
 {-# LANGUAGE CPP #-}
+{-# LANGUAGE QuasiQuotes #-}
 {-# LANGUAGE RecordWildCards #-}
 {-# LANGUAGE ScopedTypeVariables #-}
 
 module Test.Syd.Discover where
 
 import Control.Monad.IO.Class
+import Data.Char
 import Data.List
 import Data.Maybe
 import Options.Applicative
@@ -16,13 +18,23 @@
 sydTestDiscover = do
   Arguments {..} <- getArguments
   specSourceFile <- resolveFile' argSource
-  -- We asume that the spec source is a top-level module.
-  let testDir = parent specSourceFile
-  specSourceFileRel <- stripProperPrefix testDir specSourceFile
-  otherSpecFiles <- mapMaybe parseSpecModule . sort . filter (\fp -> fp /= specSourceFileRel && isHaskellFile fp) <$> sourceFilesInNonHiddenDirsRecursively testDir
-  let output = makeSpecModule argSettings specSourceFileRel otherSpecFiles
+  let testBaseDir = findTestBaseDir specSourceFile
+      testDir = parent specSourceFile
+  testDirRelToBaseDirParent <- stripProperPrefix (parent testBaseDir) testDir
+  testDirRelToBaseDir <- if testBaseDir == testDir then pure [reldir|.|] else stripProperPrefix testBaseDir testDir
+  specSourceFileRel <- stripProperPrefix testBaseDir specSourceFile
+  -- traversing the files in the directory below the Spec file, appending the prefix from the test root to the Spec's location
+  otherSpecFilesRelativeToBaseDir <- fmap (\f -> testDirRelToBaseDir </> f) <$> sourceFilesInNonHiddenDirsRecursively testDirRelToBaseDirParent
+  let otherSpecFiles = mapMaybe parseSpecModule $ sort $ filter (\fp -> fp /= specSourceFileRel && isHaskellFile fp) otherSpecFilesRelativeToBaseDir
+      output = makeSpecModule argSettings specSourceFileRel otherSpecFiles
   writeFile argDestination output
 
+-- we're traversing up the file tree until we find a directory that doesn't start with an uppercase letter
+findTestBaseDir :: Path Abs a -> Path Abs Dir
+findTestBaseDir specSourceFile = if isUpper (head (toFilePath $ dirname directParent)) then findTestBaseDir directParent else directParent
+  where
+    directParent = parent specSourceFile
+
 data Arguments = Arguments
   { argSource :: FilePath,
     argIgnored :: FilePath,
@@ -55,7 +67,7 @@
 sourceFilesInNonHiddenDirsRecursively ::
   forall m.
   MonadIO m =>
-  Path Abs Dir ->
+  Path Rel Dir ->
   m [Path Rel File]
 sourceFilesInNonHiddenDirsRecursively =
   walkDirAccumRel (Just goWalk) goOutput
diff --git a/sydtest-discover.cabal b/sydtest-discover.cabal
--- a/sydtest-discover.cabal
+++ b/sydtest-discover.cabal
@@ -5,7 +5,7 @@
 -- see: https://github.com/sol/hpack
 
 name:           sydtest-discover
-version:        0.0.0.2
+version:        0.0.0.3
 synopsis:       Automatic test suite discovery for sydtest
 category:       Testing
 homepage:       https://github.com/NorfairKing/sydtest#readme