diff --git a/changelogs/fragments/828-compose-project_src.yml b/changelogs/fragments/828-compose-project_src.yml
new file mode 100644
index 000000000..99736525b
--- /dev/null
+++ b/changelogs/fragments/828-compose-project_src.yml
@@ -0,0 +1,2 @@
+bugfixes:
+  - "docker_compose_v2* - allow ``project_src`` to be a relative path, by converting it to an absolute path before using it (https://github.com/ansible-collections/community.docker/issues/827, https://github.com/ansible-collections/community.docker/pull/828)."
diff --git a/plugins/module_utils/compose_v2.py b/plugins/module_utils/compose_v2.py
index dfe4df47c..be7101a0e 100644
--- a/plugins/module_utils/compose_v2.py
+++ b/plugins/module_utils/compose_v2.py
@@ -507,7 +507,7 @@ def __init__(self, client, min_version=MINIMUM_COMPOSE_VERSION):
         self.check_mode = self.client.check_mode
         parameters = self.client.module.params
 
-        self.project_src = parameters['project_src']
+        self.project_src = os.path.abspath(parameters['project_src'])
         self.project_name = parameters['project_name']
         self.files = parameters['files']
         self.env_files = parameters['env_files']