diff --git a/src/class_diagram/generators/json/class_diagram_generator.cc b/src/class_diagram/generators/json/class_diagram_generator.cc
index f6ac941b..c900e67e 100644
--- a/src/class_diagram/generators/json/class_diagram_generator.cc
+++ b/src/class_diagram/generators/json/class_diagram_generator.cc
@@ -168,7 +168,11 @@ void generator::generate(const package &p, nlohmann::json &parent) const
         if (!uns.starts_with({p.full_name(false)})) {
             LOG_DBG("Generating package {}", p.name());
 
-            package_object["type"] = "namespace";
+            if (m_config.package_type() == config::package_type_t::kDirectory)
+                package_object["type"] = "directory";
+            else
+                package_object["type"] = "namespace";
+
             package_object["name"] = p.name();
             package_object["display_name"] = p.full_name(false);
         }
diff --git a/src/class_diagram/model/diagram.cc b/src/class_diagram/model/diagram.cc
index 56b37016..6e80776f 100644
--- a/src/class_diagram/model/diagram.cc
+++ b/src/class_diagram/model/diagram.cc
@@ -173,6 +173,15 @@ common::optional_ref<concept_> diagram::get_concept(
     return {};
 }
 
+bool diagram::add_package_fs(std::unique_ptr<common::model::package> &&p)
+{
+    LOG_DBG("Adding filesystem package: {}, {}", p->name(), p->full_name(true));
+
+    auto ns = p->get_namespace();
+
+    return add_element(ns, std::move(p));
+}
+
 bool diagram::add_package(std::unique_ptr<common::model::package> &&p)
 {
     LOG_DBG("Adding namespace package: {}, {}", p->name(), p->full_name(true));
@@ -182,6 +191,25 @@ bool diagram::add_package(std::unique_ptr<common::model::package> &&p)
     return add_element(ns, std::move(p));
 }
 
+bool diagram::add_class_fs(
+    const common::model::path &p, std::unique_ptr<class_> &&c)
+{
+    const auto base_name = c->name();
+    const auto full_name = c->full_name(false);
+    const auto id = c->id();
+    auto &cc = *c;
+
+    if (add_element(p, std::move(c))) {
+        classes_.push_back(std::ref(cc));
+        return true;
+    }
+    else {
+        LOG_WARN("Cannot add class {} with id {} due to: {}", base_name, id);
+    }
+
+    return false;
+}
+
 bool diagram::add_class(std::unique_ptr<class_> &&c)
 {
     const auto base_name = c->name();
@@ -221,7 +249,7 @@ bool diagram::add_class(std::unique_ptr<class_> &&c)
     }
     catch (const std::runtime_error &e) {
         LOG_WARN(
-            "Cannot add concept {} with id {} due to: {}", name, id, e.what());
+            "Cannot add class {} with id {} due to: {}", name, id, e.what());
         return false;
     }
 
diff --git a/src/class_diagram/model/diagram.h b/src/class_diagram/model/diagram.h
index cb0e39b5..5077905b 100644
--- a/src/class_diagram/model/diagram.h
+++ b/src/class_diagram/model/diagram.h
@@ -31,10 +31,15 @@
 
 namespace clanguml::class_diagram::model {
 
-class diagram : public clanguml::common::model::diagram,
-                public clanguml::common::model::nested_trait<
-                    clanguml::common::model::element,
-                    clanguml::common::model::namespace_> {
+using common::opt_ref;
+using common::model::diagram_element;
+using common::model::diagram_t;
+
+using nested_trait_ns =
+    clanguml::common::model::nested_trait<clanguml::common::model::element,
+        clanguml::common::model::namespace_>;
+
+class diagram : public common::model::diagram::diagram, public nested_trait_ns {
 public:
     diagram() = default;
 
@@ -43,13 +48,11 @@ public:
     diagram &operator=(const diagram &) = delete;
     diagram &operator=(diagram &&) = default;
 
-    common::model::diagram_t type() const override;
+    diagram_t type() const override;
 
-    common::optional_ref<common::model::diagram_element> get(
-        const std::string &full_name) const override;
+    opt_ref<diagram_element> get(const std::string &full_name) const override;
 
-    common::optional_ref<common::model::diagram_element> get(
-        clanguml::common::model::diagram_element::id_t id) const override;
+    opt_ref<diagram_element> get(diagram_element::id_t id) const override;
 
     const common::reference_vector<class_> &classes() const;
 
@@ -63,20 +66,20 @@ public:
 
     bool has_concept(const concept_ &e) const;
 
-    common::optional_ref<class_> get_class(const std::string &name) const;
+    opt_ref<class_> get_class(const std::string &name) const;
 
-    common::optional_ref<class_> get_class(
-        clanguml::common::model::diagram_element::id_t id) const;
+    opt_ref<class_> get_class(diagram_element::id_t id) const;
 
-    common::optional_ref<enum_> get_enum(const std::string &name) const;
+    opt_ref<enum_> get_enum(const std::string &name) const;
 
-    common::optional_ref<enum_> get_enum(
-        clanguml::common::model::diagram_element::id_t id) const;
+    opt_ref<enum_> get_enum(diagram_element::id_t id) const;
 
-    common::optional_ref<concept_> get_concept(const std::string &name) const;
+    opt_ref<concept_> get_concept(const std::string &name) const;
 
-    common::optional_ref<concept_> get_concept(
-        clanguml::common::model::diagram_element::id_t id) const;
+    opt_ref<concept_> get_concept(diagram_element::id_t id) const;
+
+    bool add_class_fs(
+        const common::model::path &p, std::unique_ptr<class_> &&c);
 
     bool add_class(std::unique_ptr<class_> &&c);
 
@@ -86,15 +89,15 @@ public:
 
     bool add_package(std::unique_ptr<common::model::package> &&p);
 
-    std::string to_alias(
-        clanguml::common::model::diagram_element::id_t id) const;
+    bool add_package_fs(std::unique_ptr<common::model::package> &&p);
+
+    std::string to_alias(diagram_element::id_t id) const;
 
     void get_parents(clanguml::common::reference_set<class_> &parents) const;
 
     friend void print_diagram_tree(const diagram &d, int level);
 
-    bool has_element(
-        clanguml::common::model::diagram_element::id_t id) const override;
+    bool has_element(diagram_element::id_t id) const override;
 
     inja::json context() const override;
 
diff --git a/src/class_diagram/visitor/translation_unit_visitor.cc b/src/class_diagram/visitor/translation_unit_visitor.cc
index 66d5a526..df42aae3 100644
--- a/src/class_diagram/visitor/translation_unit_visitor.cc
+++ b/src/class_diagram/visitor/translation_unit_visitor.cc
@@ -40,6 +40,9 @@ bool translation_unit_visitor::VisitNamespaceDecl(clang::NamespaceDecl *ns)
 {
     assert(ns != nullptr);
 
+    if (config().package_type() == config::package_type_t::kDirectory)
+        return true;
+
     if (ns->isAnonymousNamespace() || ns->isInline())
         return true;
 
@@ -741,11 +744,11 @@ bool translation_unit_visitor::VisitCXXRecordDecl(clang::CXXRecordDecl *cls)
     }
     forward_declarations_.erase(id);
 
-    if (diagram_.should_include(class_model)) {
+    if (diagram().should_include(class_model)) {
         LOG_DBG("Adding class {} with id {}", class_model.full_name(false),
             class_model.id());
 
-        diagram_.add_class(std::move(c_ptr));
+        add_class(std::move(c_ptr));
     }
     else {
         LOG_DBG("Skipping class {} with id {}", class_model.full_name(),
@@ -1320,7 +1323,7 @@ void translation_unit_visitor::process_method(
                 relationships.emplace_back(template_specialization_ptr->id(),
                     relationship_t::kDependency);
 
-                diagram().add_class(std::move(template_specialization_ptr));
+                add_class(std::move(template_specialization_ptr));
             }
         }
     }
@@ -1657,7 +1660,7 @@ void translation_unit_visitor::process_function_parameter(
                 relationships.emplace_back(template_specialization_ptr->id(),
                     relationship_t::kDependency);
 
-                diagram().add_class(std::move(template_specialization_ptr));
+                add_class(std::move(template_specialization_ptr));
             }
         }
 
@@ -1708,9 +1711,8 @@ void translation_unit_visitor::ensure_lambda_type_is_relative(
                 absolute_lambda_path_end -
                     (lambda_begin + lambda_prefix.size() - 1));
 
-        auto relative_lambda_path = util::path_to_url(std::filesystem::relative(
-            absolute_lambda_path, config().relative_to())
-                                                          .string());
+        auto relative_lambda_path = util::path_to_url(
+            config().make_path_relative(absolute_lambda_path).string());
 
         parameter_type = fmt::format("{}(lambda at {}{}",
             parameter_type.substr(0, lambda_begin), relative_lambda_path,
@@ -1972,7 +1974,7 @@ void translation_unit_visitor::process_field(
             // Add the template instantiation object to the diagram if it
             // matches the include pattern
             if (add_template_instantiation_to_diagram)
-                diagram().add_class(std::move(template_specialization_ptr));
+                add_class(std::move(template_specialization_ptr));
         }
     }
 
@@ -2004,7 +2006,7 @@ void translation_unit_visitor::add_incomplete_forward_declarations()
 {
     for (auto &[id, c] : forward_declarations_) {
         if (diagram().should_include(c->full_name(false))) {
-            diagram().add_class(std::move(c));
+            add_class(std::move(c));
         }
     }
     forward_declarations_.clear();
@@ -2092,4 +2094,35 @@ bool translation_unit_visitor::has_processed_template_class(
     return util::contains(processed_template_qualified_names_, qualified_name);
 }
 
+void translation_unit_visitor::add_class(std::unique_ptr<class_> &&c)
+{
+    if ((config().generate_packages() &&
+            config().package_type() == config::package_type_t::kDirectory)) {
+        assert(!c->file().empty());
+
+        const auto file = config().make_path_relative(c->file());
+
+        common::model::path p{file, common::model::path_type::kFilesystem};
+        p.pop_back();
+
+        // Make sure all parent directories are already packages in the model
+        for (auto it = p.begin(); it != p.end(); it++) {
+            auto pkg = std::make_unique<common::model::package>(
+                config().using_namespace());
+            pkg->set_name(*it);
+            auto ns = common::model::path(p.begin(), it);
+            // ns.pop_back();
+            pkg->set_namespace(ns);
+            pkg->set_id(common::to_id(pkg->full_name(false)));
+
+            diagram().add_package_fs(std::move(pkg));
+        }
+
+        diagram().add_class_fs(p, std::move(c));
+    }
+    else {
+        diagram().add_class(std::move(c));
+    }
+}
+
 } // namespace clanguml::class_diagram::visitor
diff --git a/src/class_diagram/visitor/translation_unit_visitor.h b/src/class_diagram/visitor/translation_unit_visitor.h
index ae12cf50..3458db52 100644
--- a/src/class_diagram/visitor/translation_unit_visitor.h
+++ b/src/class_diagram/visitor/translation_unit_visitor.h
@@ -119,6 +119,8 @@ public:
     void finalize();
 
 private:
+    void add_class(std::unique_ptr<class_> &&c);
+
     bool should_include(const clang::NamedDecl *decl);
 
     std::unique_ptr<clanguml::class_diagram::model::class_>
diff --git a/src/common/model/diagram.h b/src/common/model/diagram.h
index b36a7ead..ab58529f 100644
--- a/src/common/model/diagram.h
+++ b/src/common/model/diagram.h
@@ -39,7 +39,7 @@ public:
 
     virtual diagram_t type() const = 0;
 
-    virtual common::optional_ref<clanguml::common::model::diagram_element> get(
+    virtual opt_ref<clanguml::common::model::diagram_element> get(
         const std::string &full_name) const = 0;
 
     virtual common::optional_ref<clanguml::common::model::diagram_element> get(
diff --git a/src/common/model/diagram_filter.cc b/src/common/model/diagram_filter.cc
index d3b1db31..3ab7080f 100644
--- a/src/common/model/diagram_filter.cc
+++ b/src/common/model/diagram_filter.cc
@@ -430,8 +430,8 @@ paths_filter::paths_filter(filter_t type, const std::filesystem::path &root,
             absolute_path = path;
 
         try {
-            absolute_path =
-                std::filesystem::canonical(absolute_path.lexically_normal());
+            absolute_path = absolute(absolute_path);
+            absolute_path = canonical(absolute_path.lexically_normal());
         }
         catch (std::filesystem::filesystem_error &e) {
             LOG_WARN("Cannot add non-existent path {} to paths filter",
@@ -539,7 +539,7 @@ void diagram_filter::init_filters(const config::diagram &c)
             filter_t::kInclusive, c.include().access));
 
         add_inclusive_filter(std::make_unique<paths_filter>(
-            filter_t::kInclusive, c.relative_to(), c.include().paths));
+            filter_t::kInclusive, c.root_directory(), c.include().paths));
 
         // Include any of these matches even if one them does not match
         std::vector<std::unique_ptr<filter_visitor>> element_filters;
@@ -623,7 +623,7 @@ void diagram_filter::init_filters(const config::diagram &c)
             filter_t::kExclusive, c.exclude().namespaces));
 
         add_exclusive_filter(std::make_unique<paths_filter>(
-            filter_t::kExclusive, c.relative_to(), c.exclude().paths));
+            filter_t::kExclusive, c.root_directory(), c.exclude().paths));
 
         add_exclusive_filter(std::make_unique<element_filter>(
             filter_t::kExclusive, c.exclude().elements));
diff --git a/src/common/model/namespace.h b/src/common/model/namespace.h
index 0f2cf8ca..f5786c5e 100644
--- a/src/common/model/namespace.h
+++ b/src/common/model/namespace.h
@@ -29,7 +29,7 @@ struct ns_path_separator {
     static constexpr std::string_view value = "::";
 };
 
-using namespace_ = path<ns_path_separator>;
+using namespace_ = path;
 
 }
 
diff --git a/src/common/model/package.h b/src/common/model/package.h
index a4d13837..c2163a2e 100644
--- a/src/common/model/package.h
+++ b/src/common/model/package.h
@@ -19,6 +19,7 @@
 
 #include "common/model/element.h"
 #include "common/model/nested_trait.h"
+#include "common/model/path.h"
 #include "common/model/stylable_element.h"
 #include "common/types.h"
 #include "util/util.h"
@@ -33,9 +34,9 @@ namespace clanguml::common::model {
 
 class package : public element,
                 public stylable_element,
-                public nested_trait<element, namespace_> {
+                public nested_trait<element, path> {
 public:
-    package(const common::model::namespace_ &using_namespace);
+    package(const common::model::path &using_namespace);
 
     package(const package &) = delete;
     package(package &&) = default;
diff --git a/src/common/model/path.h b/src/common/model/path.h
index 5bf0d030..577b24f0 100644
--- a/src/common/model/path.h
+++ b/src/common/model/path.h
@@ -25,41 +25,84 @@
 
 namespace clanguml::common::model {
 
-template <typename Sep> class path {
+enum class path_type { kNamespace, kFilesystem };
+
+class path {
+
+    const char *separator() const
+    {
+        switch (path_type_) {
+        case path_type::kNamespace:
+            return "::";
+        case path_type::kFilesystem:
+#ifdef _WIN32
+            return "\\";
+#else
+            return "/";
+#endif
+        }
+
+        return "::";
+    }
+
 public:
     using container_type = std::vector<std::string>;
 
-    path() = default;
+    path(path_type pt = path_type::kNamespace)
+        : path_type_{pt}
+    {
+    }
 
-    explicit path(const std::string &ns)
+    path(const std::string &ns, path_type pt = path_type::kNamespace)
+        : path_type_{pt}
     {
         if (ns.empty())
             return;
 
-        path_ = util::split(ns, Sep::value);
+        path_ = util::split(ns, separator());
     }
 
+    virtual ~path() = default;
+
     path(container_type::const_iterator begin,
-        container_type::const_iterator end)
+        container_type::const_iterator end,
+        path_type pt = path_type::kNamespace)
+        : path(pt)
     {
+        if (begin == end)
+            return;
+
         std::copy(begin, end, std::back_inserter(path_));
     }
 
     path(const path &right)
-        : path_{right.path_}
+        : path_type_{right.path_type_}
+        , path_{right.path_}
     {
     }
 
-    path &operator=(const path &right) = default;
+    path &operator=(const path &right)
+    {
+        if (path_type_ != right.path_type_)
+            throw std::runtime_error("");
+
+        path_type_ = right.path_type_;
+        path_ = right.path_;
+
+        return *this;
+    }
 
     path(path &&right) noexcept = default;
 
     path &operator=(path &&right) noexcept = default;
 
-    path(std::initializer_list<std::string> ns)
+    path(std::initializer_list<std::string> ns,
+        path_type pt = path_type::kNamespace)
+        : path(pt)
     {
-        if ((ns.size() == 1) && util::contains(*ns.begin(), Sep::value)) {
-            path_ = util::split(*ns.begin(), Sep::value);
+        if ((ns.size() == 1) &&
+            util::contains(*ns.begin(), std::string{separator()})) {
+            path_ = util::split(*ns.begin(), separator());
         }
         else if ((ns.size() == 1) && ns.begin()->empty()) {
         }
@@ -67,10 +110,13 @@ public:
             path_ = ns;
     }
 
-    explicit path(const std::vector<std::string> &ns)
+    explicit path(const std::vector<std::string> &ns,
+        path_type pt = path_type::kNamespace)
+        : path(pt)
     {
-        if ((ns.size() == 1) && util::contains(*ns.begin(), Sep::value)) {
-            path_ = util::split(*ns.begin(), Sep::value);
+        if ((ns.size() == 1) &&
+            util::contains(*ns.begin(), std::string{separator()})) {
+            path_ = util::split(*ns.begin(), separator());
         }
         else if ((ns.size() == 1) && ns.begin()->empty()) {
         }
@@ -78,19 +124,19 @@ public:
             path_ = ns;
     }
 
-    friend bool operator==(const path<Sep> &left, const path<Sep> &right)
+    friend bool operator==(const path &left, const path &right)
     {
         return left.path_ == right.path_;
     }
 
-    friend bool operator<(const path<Sep> &left, const path<Sep> &right)
+    friend bool operator<(const path &left, const path &right)
     {
-        return std::hash<path<Sep>>{}(left) < std::hash<path<Sep>>{}(right);
+        return left.to_string() < right.to_string();
     }
 
     std::string to_string() const
     {
-        return fmt::format("{}", fmt::join(path_, Sep::value));
+        return fmt::format("{}", fmt::join(path_, std::string{separator()}));
     }
 
     bool is_empty() const { return path_.empty(); }
@@ -190,7 +236,7 @@ public:
             return name;
 
         auto res = name;
-        auto ns_prefix = to_string() + std::string{Sep::value};
+        auto ns_prefix = to_string() + std::string{separator()};
 
         auto it = res.find(ns_prefix);
         while (it != std::string::npos) {
@@ -220,7 +266,10 @@ public:
     path::container_type::const_iterator begin() const { return path_.begin(); }
     path::container_type::const_iterator end() const { return path_.end(); }
 
+    path_type type() const { return path_type_; }
+
 private:
+    path_type path_type_;
     container_type path_;
 };
 
diff --git a/src/common/model/source_file.h b/src/common/model/source_file.h
index 4b802d05..11401239 100644
--- a/src/common/model/source_file.h
+++ b/src/common/model/source_file.h
@@ -46,7 +46,7 @@ struct fs_path_sep {
 #endif
 };
 
-using filesystem_path = common::model::path<fs_path_sep>;
+using filesystem_path = common::model::path;
 
 class source_file
     : public common::model::diagram_element,
@@ -60,7 +60,7 @@ public:
     {
         auto preferred = p;
         preferred.make_preferred();
-        set_path({preferred.parent_path().string()});
+        set_path({preferred.parent_path().string(), path_type::kFilesystem});
         set_name(preferred.filename().string());
         is_absolute_ = preferred.is_absolute();
         set_id(common::to_id(preferred));
@@ -126,7 +126,7 @@ public:
     }
 
 private:
-    filesystem_path path_;
+    filesystem_path path_{path_type::kFilesystem};
     source_file_t type_{source_file_t::kDirectory};
     bool is_absolute_{false};
 };
@@ -134,21 +134,24 @@ private:
 
 namespace std {
 
-template <> struct hash<clanguml::common::model::filesystem_path> {
-    std::size_t operator()(
-        const clanguml::common::model::filesystem_path &key) const
-    {
-        using clanguml::common::model::path;
+/*
+ template <> struct hash<clanguml::common::model::filesystem_path> {
+     std::size_t operator()(
+         const clanguml::common::model::filesystem_path &key) const
+     {
+         using clanguml::common::model::path;
 
-        std::size_t seed = key.size();
-        for (const auto &ns : key) {
-            seed ^=
-                std::hash<std::string>{}(ns) + clanguml::util::hash_seed(seed);
-        }
+         std::size_t seed = key.size();
+         for (const auto &ns : key) {
+             seed ^=
+                 std::hash<std::string>{}(ns) +
+                 clanguml::util::hash_seed(seed);
+         }
 
-        return seed;
-    }
-};
+         return seed;
+     }
+ };
+*/
 
 } // namespace std
 
diff --git a/src/common/types.h b/src/common/types.h
index 65a8d980..749812f9 100644
--- a/src/common/types.h
+++ b/src/common/types.h
@@ -129,6 +129,8 @@ private:
     T *value_{nullptr};
 };
 
+template <typename T> using opt_ref = optional_ref<T>;
+
 template <typename T>
 using reference_vector = std::vector<std::reference_wrapper<T>>;
 
diff --git a/src/config/config.cc b/src/config/config.cc
index c2cd7a8e..33c72478 100644
--- a/src/config/config.cc
+++ b/src/config/config.cc
@@ -107,6 +107,8 @@ void inheritable_diagram_options::inherit(
     exclude.override(parent.exclude);
     puml.override(parent.puml);
     generate_method_arguments.override(parent.generate_method_arguments);
+    generate_packages.override(parent.generate_packages);
+    package_type.override(parent.package_type);
     generate_links.override(parent.generate_links);
     generate_system_headers.override(parent.generate_system_headers);
     git.override(parent.git);
@@ -136,14 +138,20 @@ std::vector<std::string> diagram::get_translation_units() const
 {
     std::vector<std::string> translation_units{};
 
+    LOG_DBG("Looking for translation units in {}",
+        std::filesystem::current_path().string());
+
     for (const auto &g : glob()) {
         std::string glob_path =
-            fmt::format("{}/{}", relative_to().string(), g.c_str());
+            fmt::format("{}/{}", root_directory().string(), g.c_str());
+
+        LOG_DBG("Searching glob path {}", glob_path);
 
         auto matches = glob::glob(glob_path, true, false);
 
         for (const auto &match : matches) {
-            const auto path = std::filesystem::canonical(relative_to() / match);
+            const auto path =
+                std::filesystem::canonical(root_directory() / match);
             translation_units.emplace_back(path.string());
         }
     }
@@ -151,6 +159,17 @@ std::vector<std::string> diagram::get_translation_units() const
     return translation_units;
 }
 
+std::filesystem::path diagram::root_directory() const
+{
+    return canonical(absolute(base_directory() / relative_to()));
+}
+
+std::filesystem::path diagram::make_path_relative(
+    const std::filesystem::path &p) const
+{
+    return relative(p, root_directory()).lexically_normal().string();
+}
+
 std::optional<std::string> diagram::get_together_group(
     const std::string &full_name) const
 {
diff --git a/src/config/config.h b/src/config/config.h
index 746332be..e728a66c 100644
--- a/src/config/config.h
+++ b/src/config/config.h
@@ -37,6 +37,8 @@ namespace config {
 
 enum class method_arguments { full, abbreviated, none };
 
+enum class package_type_t { kNamespace, kDirectory };
+
 std::string to_string(method_arguments ma);
 
 enum class comment_parser_t { plain, clang };
@@ -162,10 +164,17 @@ struct inheritable_diagram_options {
     option<method_arguments> generate_method_arguments{
         "generate_method_arguments", method_arguments::full};
     option<bool> generate_packages{"generate_packages", false};
+    option<package_type_t> package_type{
+        "package_type", package_type_t::kNamespace};
     option<generate_links_config> generate_links{"generate_links"};
     option<git_config> git{"git"};
     option<layout_hints> layout{"layout"};
+    // This is the absolute filesystem path to the directory containing
+    // the current .clang-uml config file - it is set automatically
     option<std::filesystem::path> base_directory{"__parent_path"};
+    // This is the relative path with respect to the `base_directory`,
+    // against which all matches are made, if not provided it defaults to the
+    // `base_directory`
     option<std::filesystem::path> relative_to{"relative_to"};
     option<bool> generate_system_headers{"generate_system_headers", false};
     option<relationship_hints_t> relationship_hints{"relationship_hints"};
@@ -190,6 +199,11 @@ struct diagram : public inheritable_diagram_options {
 
     std::vector<std::string> get_translation_units() const;
 
+    std::filesystem::path make_path_relative(
+        const std::filesystem::path &p) const;
+
+    std::filesystem::path root_directory() const;
+
     std::optional<std::string> get_together_group(
         const std::string &full_name) const;
 
diff --git a/src/config/yaml_decoders.cc b/src/config/yaml_decoders.cc
index fee09d3d..0ec9f095 100644
--- a/src/config/yaml_decoders.cc
+++ b/src/config/yaml_decoders.cc
@@ -34,6 +34,7 @@ using clanguml::config::layout_hint;
 using clanguml::config::location_t;
 using clanguml::config::method_arguments;
 using clanguml::config::package_diagram;
+using clanguml::config::package_type_t;
 using clanguml::config::plantuml;
 using clanguml::config::relationship_hint_t;
 using clanguml::config::sequence_diagram;
@@ -88,6 +89,22 @@ void get_option<method_arguments>(
     }
 }
 
+template <>
+void get_option<package_type_t>(
+    const Node &node, clanguml::config::option<package_type_t> &option)
+{
+    if (node[option.name]) {
+        const auto &val = node[option.name].as<std::string>();
+        if (val == "namespace")
+            option.set(package_type_t::kNamespace);
+        else if (val == "directory")
+            option.set(package_type_t::kDirectory);
+        else
+            throw std::runtime_error(
+                "Invalid generate_method_arguments value: " + val);
+    }
+}
+
 template <>
 void get_option<clanguml::config::comment_parser_t>(const Node &node,
     clanguml::config::option<clanguml::config::comment_parser_t> &option)
@@ -403,6 +420,7 @@ template <> struct convert<class_diagram> {
         get_option(node, rhs.include_relations_also_as_members);
         get_option(node, rhs.generate_method_arguments);
         get_option(node, rhs.generate_packages);
+        get_option(node, rhs.package_type);
         get_option(node, rhs.relationship_hints);
         get_option(node, rhs.type_aliases);
         get_option(node, rhs.relative_to);
@@ -597,6 +615,7 @@ template <> struct convert<config> {
         get_option(node, rhs.puml);
         get_option(node, rhs.generate_method_arguments);
         get_option(node, rhs.generate_packages);
+        get_option(node, rhs.package_type);
         get_option(node, rhs.generate_links);
         get_option(node, rhs.generate_system_headers);
         get_option(node, rhs.git);
diff --git a/src/include_diagram/model/diagram.cc b/src/include_diagram/model/diagram.cc
index 40b5e38a..cd2e71b5 100644
--- a/src/include_diagram/model/diagram.cc
+++ b/src/include_diagram/model/diagram.cc
@@ -60,7 +60,8 @@ void diagram::add_file(std::unique_ptr<common::model::source_file> &&f)
     if (!f->path().is_empty()) {
         // If the parent path is not empty, ensure relative parent directories
         // of this source_file are in the diagram
-        common::model::filesystem_path parent_path_so_far;
+        common::model::filesystem_path parent_path_so_far{
+            common::model::path_type::kFilesystem};
         for (const auto &directory : f->path()) {
             auto source_file_path = parent_path_so_far | directory;
             if (parent_path_so_far.is_empty())
@@ -83,6 +84,8 @@ void diagram::add_file(std::unique_ptr<common::model::source_file> &&f)
         }
     }
 
+    assert(p.type() == common::model::path_type::kFilesystem);
+
     add_element(p, std::move(f));
 }
 
diff --git a/src/sequence_diagram/generators/json/sequence_diagram_generator.cc b/src/sequence_diagram/generators/json/sequence_diagram_generator.cc
index 46e75723..2f89cca4 100644
--- a/src/sequence_diagram/generators/json/sequence_diagram_generator.cc
+++ b/src/sequence_diagram/generators/json/sequence_diagram_generator.cc
@@ -550,8 +550,7 @@ common::id_t generator::generate_participant(
 
         nlohmann::json j = function_participant;
         j["name"] = util::path_to_url(
-            std::filesystem::relative(function_participant.file(),
-                std::filesystem::canonical(m_config.relative_to()).string()));
+            m_config.make_path_relative(function_participant.file()).string());
 
         participant_id = common::to_id(function_participant.file_relative());
 
diff --git a/src/sequence_diagram/generators/plantuml/sequence_diagram_generator.cc b/src/sequence_diagram/generators/plantuml/sequence_diagram_generator.cc
index e1284905..82a40fc9 100644
--- a/src/sequence_diagram/generators/plantuml/sequence_diagram_generator.cc
+++ b/src/sequence_diagram/generators/plantuml/sequence_diagram_generator.cc
@@ -329,11 +329,8 @@ void generator::generate_participant(
         if (is_participant_generated(file_id))
             return;
 
-        const auto &relative_to =
-            std::filesystem::canonical(m_config.relative_to());
-
         auto participant_name = util::path_to_url(std::filesystem::relative(
-            std::filesystem::path{file_path}, relative_to)
+            std::filesystem::path{file_path}, m_config.root_directory())
                                                       .string());
 
         ostr << "participant \"" << render_name(participant_name) << "\" as "
diff --git a/tests/t00061/.clang-uml b/tests/t00061/.clang-uml
index 9643fb5c..aa1a3ec6 100644
--- a/tests/t00061/.clang-uml
+++ b/tests/t00061/.clang-uml
@@ -3,7 +3,7 @@ output_directory: puml
 diagrams:
   t00061_class:
     type: class
-    relative_to: ../../tests/t00061
+    relative_to: ../../../tests/t00061
     glob:
       - t00061.cc
     include:
diff --git a/tests/t00065/.clang-uml b/tests/t00065/.clang-uml
new file mode 100644
index 00000000..4c7143fb
--- /dev/null
+++ b/tests/t00065/.clang-uml
@@ -0,0 +1,15 @@
+compilation_database_dir: ..
+output_directory: puml
+diagrams:
+  t00065_class:
+    type: class
+    glob:
+      - t00065.cc
+    relative_to: ../../../tests/t00065
+    generate_packages: true
+    package_type: directory
+    include:
+      namespaces:
+        - clanguml::t00065
+    using_namespace:
+      - clanguml::t00065
\ No newline at end of file
diff --git a/tests/t00065/module1/module1.h b/tests/t00065/module1/module1.h
new file mode 100644
index 00000000..ee61d62f
--- /dev/null
+++ b/tests/t00065/module1/module1.h
@@ -0,0 +1,11 @@
+#include "submodule1a/submodule1a.h"
+
+#pragma once
+
+namespace clanguml {
+namespace t00065 {
+struct A {
+    detail::AImpl *pimpl;
+};
+}
+}
\ No newline at end of file
diff --git a/tests/t00065/module1/submodule1a/submodule1a.h b/tests/t00065/module1/submodule1a/submodule1a.h
new file mode 100644
index 00000000..41bad1bb
--- /dev/null
+++ b/tests/t00065/module1/submodule1a/submodule1a.h
@@ -0,0 +1,9 @@
+#pragma once
+
+namespace clanguml {
+namespace t00065 {
+namespace detail {
+struct AImpl { };
+}
+}
+}
\ No newline at end of file
diff --git a/tests/t00065/module2/module2.h b/tests/t00065/module2/module2.h
new file mode 100644
index 00000000..6e90e697
--- /dev/null
+++ b/tests/t00065/module2/module2.h
@@ -0,0 +1,7 @@
+#pragma once
+
+namespace clanguml {
+namespace t00065 {
+struct B { };
+}
+}
\ No newline at end of file
diff --git a/tests/t00065/t00065.cc b/tests/t00065/t00065.cc
new file mode 100644
index 00000000..667316d1
--- /dev/null
+++ b/tests/t00065/t00065.cc
@@ -0,0 +1,10 @@
+#include "module1/module1.h"
+#include "module2/module2.h"
+
+namespace clanguml {
+namespace t00065 {
+struct R {
+    A *a;
+};
+}
+}
\ No newline at end of file
diff --git a/tests/t00065/test_case.h b/tests/t00065/test_case.h
new file mode 100644
index 00000000..a90d050e
--- /dev/null
+++ b/tests/t00065/test_case.h
@@ -0,0 +1,83 @@
+/**
+ * tests/t00065/test_case.h
+ *
+ * Copyright (c) 2021-2023 Bartek Kryza <bkryza@gmail.com>
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *     http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+TEST_CASE("t00065", "[test-case][class]")
+{
+    auto [config, db] = load_config("t00065");
+
+    auto diagram = config.diagrams["t00065_class"];
+
+    REQUIRE(diagram->name == "t00065_class");
+
+    auto model = generate_class_diagram(*db, diagram);
+
+    REQUIRE(model->name() == "t00065_class");
+
+    {
+        auto puml = generate_class_puml(diagram, *model);
+        AliasMatcher _A(puml);
+
+        REQUIRE_THAT(puml, StartsWith("@startuml"));
+        REQUIRE_THAT(puml, EndsWith("@enduml\n"));
+
+        // Check if all classes exist
+        //    REQUIRE_THAT(puml, IsClass(_A("AAA")));
+
+        // Check if class templates exist
+        // REQUIRE_THAT(puml, IsClassTemplate("A", "T,P,CMP,int N"));
+
+        // Check concepts
+        // REQUIRE_THAT(puml, IsConcept(_A("AConcept<T>")));
+        // REQUIRE_THAT(puml,
+        //    IsConceptRequirement(
+        //        _A("AConcept<T,P>"), "sizeof (T) > sizeof (P)"));
+
+        // Check if all enums exist
+        // REQUIRE_THAT(puml, IsEnum(_A("Lights")));
+
+        // Check if all inner classes exist
+        // REQUIRE_THAT(puml, IsInnerClass(_A("A"), _A("AA")));
+
+        // Check if all inheritance relationships exist
+        // REQUIRE_THAT(puml, IsBaseClass(_A("Base"), _A("Child")));
+
+        // Check if all methods exist
+        // REQUIRE_THAT(puml, (IsMethod<Public, Const>("foo")));
+
+        // Check if all fields exist
+        // REQUIRE_THAT(puml, (IsField<Private>("private_member", "int")));
+
+        // Check if all relationships exist
+        // REQUIRE_THAT(puml, IsAssociation(_A("D"), _A("A"), "-as"));
+        // REQUIRE_THAT(puml, IsDependency(_A("R"), _A("B")));
+        // REQUIRE_THAT(puml, IsAggregation(_A("R"), _A("D"), "-ag"));
+        // REQUIRE_THAT(puml, IsComposition(_A("R"), _A("D"), "-ac"));
+        // REQUIRE_THAT(puml, IsInstantiation(_A("ABCD::F<T>"), _A("F<int>")));
+
+        save_puml(
+            config.output_directory() + "/" + diagram->name + ".puml", puml);
+    }
+
+    {
+        auto j = generate_class_json(diagram, *model);
+
+        using namespace json;
+
+        save_json(config.output_directory() + "/" + diagram->name + ".json", j);
+    }
+}
\ No newline at end of file
diff --git a/tests/t20017/.clang-uml b/tests/t20017/.clang-uml
index 860e217d..0d9947d3 100644
--- a/tests/t20017/.clang-uml
+++ b/tests/t20017/.clang-uml
@@ -4,9 +4,9 @@ diagrams:
   t20017_sequence:
     type: sequence
     combine_free_functions_into_file_participants: true
-    relative_to: ../../tests/t20017
+    relative_to: ../../../tests/t20017
     glob:
-      - ../../tests/t20017/t20017.cc
+      - t20017.cc
     include:
       namespaces:
         - clanguml::t20017
diff --git a/tests/test_cases.cc b/tests/test_cases.cc
index 6313f195..98f03746 100644
--- a/tests/test_cases.cc
+++ b/tests/test_cases.cc
@@ -301,6 +301,7 @@ using namespace clanguml::test::matchers;
 #include "t00062/test_case.h"
 #include "t00063/test_case.h"
 #include "t00064/test_case.h"
+#include "t00065/test_case.h"
 
 ///
 /// Sequence diagram tests