diff --git a/src/builtins/path.cpp b/src/builtins/path.cpp
index 33ccc4ee3..82b1dd7f7 100644
--- a/src/builtins/path.cpp
+++ b/src/builtins/path.cpp
@@ -631,7 +631,28 @@ static int path_real(parser_t &parser, io_streams_t &streams, int argc, const wc
         auto real = wrealpath(*arg);
 
         if (!real) {
-            continue;
+            // The path doesn't exist, so we go up until we find
+            // something that does.
+            wcstring next = *arg;
+            // First add $PWD if we're relative
+            if (!next.empty() && next[0] != L'/') {
+                next = wgetcwd() + L"/" + next;
+            }
+            auto rest = wbasename(next);
+            while(!next.empty() && next != L"/") {
+                next = wdirname(next);
+                real = wrealpath(next);
+                if (real) {
+                    next.push_back(L'/');
+                    next.append(rest);
+                    real = normalize_path(next, false);
+                    break;
+                }
+                rest = wbasename(next) + L'/' + rest;
+            }
+            if (!real) {
+                continue;
+            }
         }
 
         // Return 0 if we found a realpath.
diff --git a/tests/checks/path.fish b/tests/checks/path.fish
index f53b6c191..1a8de987b 100644
--- a/tests/checks/path.fish
+++ b/tests/checks/path.fish
@@ -110,3 +110,14 @@ path real bin//sh | string match -r -- 'bin/bash$'
 # The "//" is squashed, and the symlink is resolved.
 # sh here is bash
 # CHECK: bin/bash
+
+# `path real` with nonexistent paths
+set -l path (path real foo/bar)
+string match -rq "^"(string escape --style=regex -- $PWD)'/' -- $path
+and echo It matches pwd!
+# CHECK: It matches pwd!
+string replace -r "^"(string escape --style=regex -- $PWD)'/' "" -- $path
+# CHECK: foo/bar
+
+path real /banana//terracota/terracota/booooo/../pie
+# CHECK: /banana/terracota/terracota/pie