diff --git a/bake/bake.go b/bake/bake.go
index e50fda4dc..2ccb66e95 100644
--- a/bake/bake.go
+++ b/bake/bake.go
@@ -449,8 +449,7 @@ func (t *Target) rebaseContextPaths() {
 			t.Context = &contextPath
 		}
 	} else if t.hasDefaultContextBase {
-		contextPath := rebaseContextPath(t.defaultContextBase, ".")
-		t.Context = &contextPath
+		t.useDefaultContextBase = true
 	}
 	for k, v := range t.Contexts {
 		if base, ok := t.contextsBase[k]; ok {
@@ -755,6 +754,9 @@ func (c Config) ResolveTarget(name string, overrides map[string]map[string]Overr
 	t.Inherits = nil
 	if t.Context == nil {
 		s := "."
+		if t.useDefaultContextBase {
+			s = rebaseContextPath(t.defaultContextBase, ".")
+		}
 		t.Context = &s
 	}
 	if t.Dockerfile == nil || (t.Dockerfile != nil && *t.Dockerfile == "") {
@@ -849,6 +851,7 @@ type Target struct {
 
 	defaultContextBase    string
 	hasDefaultContextBase bool
+	useDefaultContextBase bool
 	contextBase           string
 	hasContextBase        bool
 	contextsBase          map[string]string
@@ -973,6 +976,7 @@ func (t *Target) Merge(t2 *Target) {
 	if t2.hasDefaultContextBase {
 		t.defaultContextBase = t2.defaultContextBase
 		t.hasDefaultContextBase = true
+		t.useDefaultContextBase = t2.useDefaultContextBase
 	}
 	if t2.Context != nil {
 		t.Context = t2.Context
diff --git a/bake/bake_test.go b/bake/bake_test.go
index 3e3b516b1..49cd0e242 100644
--- a/bake/bake_test.go
+++ b/bake/bake_test.go
@@ -869,6 +869,55 @@ target "other" {
 	require.Equal(t, filepath.ToSlash(filepath.Clean("two")), *m["other"].Context)
 }
 
+func TestInheritedContextRebase(t *testing.T) {
+	t.Run("same file", func(t *testing.T) {
+		fp := File{
+			Name: filepath.Join("subdir", "docker-bake.hcl"),
+			Data: []byte(`
+target "base" {
+  context = "basectx"
+}
+
+target "app" {
+  inherits = ["base"]
+  tags = ["app:latest"]
+}`),
+		}
+
+		m, _, err := ReadTargets(context.TODO(), []File{fp}, []string{"app"}, nil, nil, nil, &EntitlementConf{}, ParseOpt{
+			FileRelativePaths: true,
+		})
+		require.NoError(t, err)
+
+		require.Equal(t, filepath.ToSlash(filepath.Clean("subdir/basectx")), *m["app"].Context)
+	})
+
+	t.Run("cross file", func(t *testing.T) {
+		fp1 := File{
+			Name: filepath.Join("one", "docker-bake.hcl"),
+			Data: []byte(`
+target "base" {
+  context = "basectx"
+}`),
+		}
+		fp2 := File{
+			Name: filepath.Join("two", "docker-bake.hcl"),
+			Data: []byte(`
+target "app" {
+  inherits = ["base"]
+  tags = ["app:latest"]
+}`),
+		}
+
+		m, _, err := ReadTargets(context.TODO(), []File{fp1, fp2}, []string{"app"}, nil, nil, nil, &EntitlementConf{}, ParseOpt{
+			FileRelativePaths: true,
+		})
+		require.NoError(t, err)
+
+		require.Equal(t, filepath.ToSlash(filepath.Clean("one/basectx")), *m["app"].Context)
+	})
+}
+
 func TestOverridesNotRebased(t *testing.T) {
 	fp := File{
 		Name: filepath.Join("subdir", "docker-bake.hcl"),