diff --git a/newsfragments/relative-host-path-resolution-bind-volume.bugfix b/newsfragments/relative-host-path-resolution-bind-volume.bugfix
new file mode 100644
index 0000000..0bee858
--- /dev/null
+++ b/newsfragments/relative-host-path-resolution-bind-volume.bugfix
@@ -0,0 +1 @@
+Fixed relative host path resolution for volume bind mount source
diff --git a/podman_compose.py b/podman_compose.py
index ffbc1ae..c01b80c 100755
--- a/podman_compose.py
+++ b/podman_compose.py
@@ -395,6 +395,7 @@ async def assert_volume(compose, mount_dict):
                 os.makedirs(mount_src, exist_ok=True)
             except OSError:
                 pass
+        mount_dict["source"] = mount_src
         return
     if mount_dict["type"] != "volume" or not vol or not vol.get("name"):
         return
diff --git a/tests/integration/selinux/test_podman_compose_selinux.py b/tests/integration/selinux/test_podman_compose_selinux.py
index 2c04d18..24db7f4 100644
--- a/tests/integration/selinux/test_podman_compose_selinux.py
+++ b/tests/integration/selinux/test_podman_compose_selinux.py
@@ -36,8 +36,9 @@ class TestPodmanCompose(unittest.TestCase, RunSubprocessMixin):
                 "selinux_container1_1",
             ])
             inspect_out = json.loads(out)
-            create_command_list = inspect_out[0].get("Config", []).get("CreateCommand", {})
-            self.assertIn('./host_test_text.txt:/test_text.txt:z', create_command_list)
+            create_command_list = inspect_out[0].get("Config", []).get("CreateCommand", [])
+            host_path = os.path.join(test_path(), "selinux", "host_test_text.txt")
+            self.assertIn(f'{host_path}:/test_text.txt:z', create_command_list)
 
             out, _ = self.run_subprocess_assert_returncode([
                 "podman",
@@ -45,8 +46,9 @@ class TestPodmanCompose(unittest.TestCase, RunSubprocessMixin):
                 "selinux_container2_1",
             ])
             inspect_out = json.loads(out)
-            create_command_list = inspect_out[0].get("Config", []).get("CreateCommand", {})
-            self.assertIn('./host_test_text.txt:/test_text.txt', create_command_list)
+            create_command_list = inspect_out[0].get("Config", []).get("CreateCommand", [])
+            host_path = os.path.join(test_path(), "selinux", "host_test_text.txt")
+            self.assertIn(f'{host_path}:/test_text.txt', create_command_list)
         finally:
             out, _ = self.run_subprocess_assert_returncode([
                 podman_compose_path(),
diff --git a/tests/unit/test_container_to_args.py b/tests/unit/test_container_to_args.py
index ee07b92..acf6195 100644
--- a/tests/unit/test_container_to_args.py
+++ b/tests/unit/test_container_to_args.py
@@ -529,10 +529,24 @@ class TestContainerToArgs(unittest.IsolatedAsyncioTestCase):
         )
 
     @parameterized.expand([
-        (False, "z", ["--mount", "type=bind,source=./foo,destination=/mnt,z"]),
-        (False, "Z", ["--mount", "type=bind,source=./foo,destination=/mnt,Z"]),
-        (True, "z", ["-v", "./foo:/mnt:z"]),
-        (True, "Z", ["-v", "./foo:/mnt:Z"]),
+        (
+            False,
+            "z",
+            [
+                "--mount",
+                f"type=bind,source={get_test_file_path('test_dirname/foo')},destination=/mnt,z",
+            ],
+        ),
+        (
+            False,
+            "Z",
+            [
+                "--mount",
+                f"type=bind,source={get_test_file_path('test_dirname/foo')},destination=/mnt,Z",
+            ],
+        ),
+        (True, "z", ["-v", f"{get_test_file_path('test_dirname/foo')}:/mnt:z"]),
+        (True, "Z", ["-v", f"{get_test_file_path('test_dirname/foo')}:/mnt:Z"]),
     ])
     async def test_selinux_volume(self, prefer_volume, selinux_type, expected_additional_args):
         c = create_compose_mock()
@@ -567,6 +581,62 @@ class TestContainerToArgs(unittest.IsolatedAsyncioTestCase):
             ],
         )
 
+    @parameterized.expand([
+        (
+            "absolute_path",
+            get_test_file_path('test_dirname/foo'),
+            [
+                "--mount",
+                f"type=bind,source={get_test_file_path('test_dirname/foo')},destination=/mnt",
+            ],
+        ),
+        (
+            "relative_path",
+            './foo',
+            [
+                "--mount",
+                f"type=bind,source={get_test_file_path('test_dirname/foo')},destination=/mnt",
+            ],
+        ),
+        (
+            "home_dir",
+            '~/test_dirname/foo',
+            [
+                "--mount",
+                f"type=bind,source={os.path.expanduser('~/test_dirname/foo')},destination=/mnt",
+            ],
+        ),
+    ])
+    async def test_volumes_bind_mount_source(
+        self, test_name: str, mount_source: str, expected_additional_args: list
+    ) -> None:
+        c = create_compose_mock()
+        cnt = get_minimal_container()
+
+        # This is supposed to happen during `_parse_compose_file`
+        # but that is probably getting skipped during testing
+        cnt["_service"] = cnt["service_name"]
+
+        cnt["volumes"] = [
+            {
+                "type": "bind",
+                "source": f"{mount_source}",
+                "target": "/mnt",
+            }
+        ]
+
+        args = await container_to_args(c, cnt)
+        self.assertEqual(
+            args,
+            [
+                "--name=project_name_service_name1",
+                "-d",
+                *expected_additional_args,
+                "--network=bridge:alias=service_name",
+                "busybox",
+            ],
+        )
+
     @parameterized.expand([
         ("not_compat", False, "test_project_name", "test_project_name_network1"),
         ("compat_no_dash", True, "test_project_name", "test_project_name_network1"),