diff --git a/crates/uv-distribution/src/metadata/lowering.rs b/crates/uv-distribution/src/metadata/lowering.rs
index 54782c083..c05ac4779 100644
--- a/crates/uv-distribution/src/metadata/lowering.rs
+++ b/crates/uv-distribution/src/metadata/lowering.rs
@@ -729,12 +729,14 @@ fn path_source(
             })
         } else {
             // Determine whether the project is a package or virtual.
+            // If the `package` option is unset, check if `tool.uv.package` is set
+            // on the path source (otherwise, default to `true`).
             let is_package = package.unwrap_or_else(|| {
                 let pyproject_path = install_path.join("pyproject.toml");
                 fs_err::read_to_string(&pyproject_path)
                     .ok()
                     .and_then(|contents| PyProjectToml::from_string(contents).ok())
-                    .map(|pyproject_toml| pyproject_toml.is_package())
+                    .and_then(|pyproject_toml| pyproject_toml.tool_uv_package())
                     .unwrap_or(true)
             });
 
diff --git a/crates/uv-workspace/src/pyproject.rs b/crates/uv-workspace/src/pyproject.rs
index 124a62881..aa64c601e 100644
--- a/crates/uv-workspace/src/pyproject.rs
+++ b/crates/uv-workspace/src/pyproject.rs
@@ -83,12 +83,7 @@ impl PyProjectToml {
     /// non-package ("virtual") project.
     pub fn is_package(&self) -> bool {
         // If `tool.uv.package` is set, defer to that explicit setting.
-        if let Some(is_package) = self
-            .tool
-            .as_ref()
-            .and_then(|tool| tool.uv.as_ref())
-            .and_then(|uv| uv.package)
-        {
+        if let Some(is_package) = self.tool_uv_package() {
             return is_package;
         }
 
@@ -96,6 +91,14 @@ impl PyProjectToml {
         self.build_system.is_some()
     }
 
+    /// Returns the value of `tool.uv.package` if set.
+    pub fn tool_uv_package(&self) -> Option<bool> {
+        self.tool
+            .as_ref()
+            .and_then(|tool| tool.uv.as_ref())
+            .and_then(|uv| uv.package)
+    }
+
     /// Returns `true` if the project uses a dynamic version.
     pub fn is_dynamic(&self) -> bool {
         self.project
diff --git a/crates/uv/tests/it/edit.rs b/crates/uv/tests/it/edit.rs
index ccc0cabf2..70b8d6e50 100644
--- a/crates/uv/tests/it/edit.rs
+++ b/crates/uv/tests/it/edit.rs
@@ -13381,7 +13381,9 @@ fn add_path_with_no_workspace() -> Result<()> {
 
     ----- stderr -----
     Resolved 2 packages in [TIME]
-    Audited in [TIME]
+    Prepared 1 package in [TIME]
+    Installed 1 package in [TIME]
+     + dep==0.1.0 (from file://[TEMP_DIR]/dep)
     ");
 
     let pyproject_toml = context.read("pyproject.toml");
@@ -13452,7 +13454,9 @@ fn add_path_outside_workspace_no_default() -> Result<()> {
     Using CPython 3.12.[X] interpreter at: [PYTHON-3.12]
     Creating virtual environment at: .venv
     Resolved 2 packages in [TIME]
-    Audited in [TIME]
+    Prepared 1 package in [TIME]
+    Installed 1 package in [TIME]
+     + dep==0.1.0 (from file://[TEMP_DIR]/external_dep)
     ");
 
     let pyproject_toml = fs_err::read_to_string(workspace_toml)?;
diff --git a/crates/uv/tests/it/lock.rs b/crates/uv/tests/it/lock.rs
index faf37a83a..75d81b4c0 100644
--- a/crates/uv/tests/it/lock.rs
+++ b/crates/uv/tests/it/lock.rs
@@ -7205,12 +7205,12 @@ fn lock_exclusion() -> Result<()> {
         ]
 
         [package.metadata]
-        requires-dist = [{ name = "project", virtual = "../" }]
+        requires-dist = [{ name = "project", directory = "../" }]
 
         [[package]]
         name = "project"
         version = "0.1.0"
-        source = { virtual = "../" }
+        source = { directory = "../" }
         "#
         );
     });
@@ -7793,7 +7793,7 @@ fn lock_dev_transitive() -> Result<()> {
         [package.metadata]
         requires-dist = [
             { name = "baz", editable = "baz" },
-            { name = "foo", virtual = "../foo" },
+            { name = "foo", directory = "../foo" },
             { name = "iniconfig", specifier = ">1" },
         ]
 
@@ -7815,7 +7815,7 @@ fn lock_dev_transitive() -> Result<()> {
         [[package]]
         name = "foo"
         version = "0.1.0"
-        source = { virtual = "../foo" }
+        source = { directory = "../foo" }
 
         [package.metadata]
 
@@ -13651,7 +13651,7 @@ fn lock_narrowed_python_version_upper() -> Result<()> {
         [[package]]
         name = "dependency"
         version = "0.1.0"
-        source = { virtual = "dependency" }
+        source = { directory = "dependency" }
         dependencies = [
             { name = "iniconfig", marker = "python_full_version >= '3.10'" },
         ]
@@ -13677,7 +13677,7 @@ fn lock_narrowed_python_version_upper() -> Result<()> {
         ]
 
         [package.metadata]
-        requires-dist = [{ name = "dependency", marker = "python_full_version >= '3.10'", virtual = "dependency" }]
+        requires-dist = [{ name = "dependency", marker = "python_full_version >= '3.10'", directory = "dependency" }]
         "#
         );
     });
@@ -17173,10 +17173,10 @@ fn lock_implicit_virtual_project() -> Result<()> {
     Ok(())
 }
 
-/// Lock a project that has a path dependency that is implicitly virtual (by way of omitting
-/// `build-system`).
+/// Lock a project that has a path dependency that is implicitly non-virtual (despite
+/// omitting `build-system`).
 #[test]
-fn lock_implicit_virtual_path() -> Result<()> {
+fn lock_implicit_package_path() -> Result<()> {
     let context = TestContext::new("3.12");
 
     let pyproject_toml = context.temp_dir.child("pyproject.toml");
@@ -17243,7 +17243,7 @@ fn lock_implicit_virtual_path() -> Result<()> {
         [[package]]
         name = "child"
         version = "0.1.0"
-        source = { virtual = "child" }
+        source = { directory = "child" }
         dependencies = [
             { name = "iniconfig" },
         ]
@@ -17281,7 +17281,7 @@ fn lock_implicit_virtual_path() -> Result<()> {
         [package.metadata]
         requires-dist = [
             { name = "anyio", specifier = ">3" },
-            { name = "child", virtual = "child" },
+            { name = "child", directory = "child" },
         ]
 
         [[package]]
@@ -17317,20 +17317,21 @@ fn lock_implicit_virtual_path() -> Result<()> {
     Resolved 6 packages in [TIME]
     "###);
 
-    // Install from the lockfile. The virtual project should _not_ be installed.
-    uv_snapshot!(context.filters(), context.sync().arg("--frozen"), @r###"
+    // Install from the lockfile. The path dependency should be installed.
+    uv_snapshot!(context.filters(), context.sync().arg("--frozen"), @r"
     success: true
     exit_code: 0
     ----- stdout -----
 
     ----- stderr -----
-    Prepared 4 packages in [TIME]
-    Installed 4 packages in [TIME]
+    Prepared 5 packages in [TIME]
+    Installed 5 packages in [TIME]
      + anyio==4.3.0
+     + child==0.1.0 (from file://[TEMP_DIR]/child)
      + idna==3.6
      + iniconfig==2.0.0
      + sniffio==1.3.1
-    "###);
+    ");
 
     Ok(())
 }
diff --git a/crates/uv/tests/it/sync.rs b/crates/uv/tests/it/sync.rs
index 3544f1961..bb3546e22 100644
--- a/crates/uv/tests/it/sync.rs
+++ b/crates/uv/tests/it/sync.rs
@@ -5939,6 +5939,91 @@ fn sync_override_package() -> Result<()> {
      ~ project==0.0.0 (from file://[TEMP_DIR]/)
     ");
 
+    // Update the source `tool.uv` to `package = true`
+    let pyproject_toml = context.temp_dir.child("core").child("pyproject.toml");
+    pyproject_toml.write_str(
+        r#"
+        [project]
+        name = "core"
+        version = "0.1.0"
+        requires-python = ">=3.12"
+
+        [build-system]
+        requires = ["hatchling"]
+        build-backend = "hatchling.build"
+
+        [tool.uv]
+        package = true
+        "#,
+    )?;
+
+    // Mark the source as `package = false`.
+    let pyproject_toml = context.temp_dir.child("pyproject.toml");
+    pyproject_toml.write_str(
+        r#"
+        [project]
+        name = "project"
+        version = "0.0.0"
+        requires-python = ">=3.12"
+        dependencies = ["core"]
+
+        [build-system]
+        requires = ["hatchling"]
+        build-backend = "hatchling.build"
+
+        [tool.uv.sources]
+        core = { path = "./core", package = false }
+        "#,
+    )?;
+
+    // Syncing the project should _not_ install `core`.
+    uv_snapshot!(context.filters(), context.sync(), @r"
+    success: true
+    exit_code: 0
+    ----- stdout -----
+
+    ----- stderr -----
+    Resolved 2 packages in [TIME]
+    Prepared 1 package in [TIME]
+    Uninstalled 1 package in [TIME]
+    Installed 1 package in [TIME]
+     ~ project==0.0.0 (from file://[TEMP_DIR]/)
+    ");
+
+    // Remove the `package = false` mark.
+    let pyproject_toml = context.temp_dir.child("pyproject.toml");
+    pyproject_toml.write_str(
+        r#"
+        [project]
+        name = "project"
+        version = "0.0.0"
+        requires-python = ">=3.12"
+        dependencies = ["core"]
+
+        [build-system]
+        requires = ["hatchling"]
+        build-backend = "hatchling.build"
+
+        [tool.uv.sources]
+        core = { path = "./core" }
+        "#,
+    )?;
+
+    // Syncing the project _should_ install `core`.
+    uv_snapshot!(context.filters(), context.sync(), @r"
+    success: true
+    exit_code: 0
+    ----- stdout -----
+
+    ----- stderr -----
+    Resolved 2 packages in [TIME]
+    Prepared 2 packages in [TIME]
+    Uninstalled 1 package in [TIME]
+    Installed 2 packages in [TIME]
+     + core==0.1.0 (from file://[TEMP_DIR]/core)
+     ~ project==0.0.0 (from file://[TEMP_DIR]/)
+    ");
+
     Ok(())
 }
 
diff --git a/docs/concepts/projects/config.md b/docs/concepts/projects/config.md
index 8efb667a1..34b62c01a 100644
--- a/docs/concepts/projects/config.md
+++ b/docs/concepts/projects/config.md
@@ -116,8 +116,9 @@ with the default build system.
     the presence of a `[build-system]` table is not required in other packages. For legacy reasons,
     if a build system is not defined, then `setuptools.build_meta:__legacy__` is used to build the
     package. Packages you depend on may not explicitly declare their build system but are still
-    installable. Similarly, if you add a dependency on a local package or install it with `uv pip`,
-    uv will always attempt to build and install it.
+    installable. Similarly, if you [add a dependency on a local project](./dependencies.md#path)
+    or install it with `uv pip`, uv will attempt to build and install it regardless of the presence
+    of a `[build-system]` table.
 
 ### Build system options
 
diff --git a/docs/concepts/projects/dependencies.md b/docs/concepts/projects/dependencies.md
index 022db4d7e..bf11e7174 100644
--- a/docs/concepts/projects/dependencies.md
+++ b/docs/concepts/projects/dependencies.md
@@ -410,33 +410,28 @@ $ uv add ~/projects/bar/
 
 !!! important
 
-    An [editable installation](#editable-dependencies) is not used for path dependencies by
-    default. An editable installation may be requested for project directories:
+    When using a directory as a path dependency, uv will attempt to build and install the target as
+    a package by default. See the [virtual dependency](#virtual-dependencies) documentation for
+    details.
 
-    ```console
-    $ uv add --editable ../projects/bar/
-    ```
+An [editable installation](#editable-dependencies) is not used for path dependencies by default. An
+editable installation may be requested for project directories:
 
-    Which will result in a `pyproject.toml` with:
+```console
+$ uv add --editable ../projects/bar/
+```
 
-    ```toml title="pyproject.toml"
-    [project]
-    dependencies = ["bar"]
+Which will result in a `pyproject.toml` with:
 
-    [tool.uv.sources]
-    bar = { path = "../projects/bar", editable = true }
-    ```
+```toml title="pyproject.toml"
+[project]
+dependencies = ["bar"]
 
-    Similarly, if a project is marked as a [non-package](./config.md#build-systems), but you'd
-    like to install it in the environment as a package, set `package = true` on the source:
+[tool.uv.sources]
+bar = { path = "../projects/bar", editable = true }
+```
 
-    ```toml title="pyproject.toml"
-    [project]
-    dependencies = ["bar"]
-
-    [tool.uv.sources]
-    bar = { path = "../projects/bar", package = true }
-    ```
+!!! tip
 
     For multiple packages in the same repository, [_workspaces_](./workspaces.md) may be a better
     fit.
@@ -808,6 +803,39 @@ Or, to opt-out of using an editable dependency in a workspace:
 $ uv add --no-editable ./path/foo
 ```
 
+## Virtual dependencies
+
+uv allows dependencies to be "virtual", in which the dependency itself is not installed as a
+[package](./config.md#project-packaging), but its dependencies are.
+
+By default, only workspace members without build systems declared are virtual.
+
+A dependency with a [`path` source](#path) is not virtual unless it explicitly sets
+[`tool.uv.package = false`](../../reference/settings.md#package). Unlike working _in_ the dependent
+project with uv, the package will be built even if a [build system](./config.md#build-systems) is
+not declared.
+
+To treat a dependency as virtual, set `package = false` on the source:
+
+```toml title="pyproject.toml"
+[project]
+dependencies = ["bar"]
+
+[tool.uv.sources]
+bar = { path = "../projects/bar", package = false }
+```
+
+Similarly, if a dependency sets `tool.uv.package = false`, it can be overridden by declaring
+`package = true` on the source:
+
+```toml title="pyproject.toml"
+[project]
+dependencies = ["bar"]
+
+[tool.uv.sources]
+bar = { path = "../projects/bar", package = true }
+```
+
 ## Dependency specifiers
 
 uv uses standard