diff --git a/packages/node/src/generators/application/application.legacy.spec.ts b/packages/node/src/generators/application/application.legacy.spec.ts
index 38616eb0d80f9e..9a56a513d9f22d 100644
--- a/packages/node/src/generators/application/application.legacy.spec.ts
+++ b/packages/node/src/generators/application/application.legacy.spec.ts
@@ -1,3 +1,5 @@
+import 'nx/src/internal-testing-utils/mock-project-graph';
+
 import {
   readNxJson,
   readProjectConfiguration,
diff --git a/packages/node/src/generators/e2e-project/e2e-project.spec.ts b/packages/node/src/generators/e2e-project/e2e-project.spec.ts
index 8b993a68b03b97..b2b142c03a6a52 100644
--- a/packages/node/src/generators/e2e-project/e2e-project.spec.ts
+++ b/packages/node/src/generators/e2e-project/e2e-project.spec.ts
@@ -1,3 +1,5 @@
+import 'nx/src/internal-testing-utils/mock-project-graph';
+
 import { Tree } from '@nx/devkit';
 import { createTreeWithEmptyWorkspace } from '@nx/devkit/testing';
 import { applicationGenerator } from '../application/application';
diff --git a/packages/node/src/generators/setup-docker/files/Dockerfile__tmpl__ b/packages/node/src/generators/setup-docker/files/Dockerfile__tmpl__
index f6752d0547dc5d..6203ee33f9f45e 100644
--- a/packages/node/src/generators/setup-docker/files/Dockerfile__tmpl__
+++ b/packages/node/src/generators/setup-docker/files/Dockerfile__tmpl__
@@ -14,7 +14,7 @@ WORKDIR /app
 RUN addgroup --system <%= project %> && \
           adduser --system -G <%= project %> <%= project %>
 
-COPY <%= buildLocation %> <%= project %>
+COPY <%= buildLocation %> <%= project %>/
 RUN chown -R <%= project %>:<%= project %> .
 
 # You can remove this install step if you build with `--bundle` option.
diff --git a/packages/node/src/generators/setup-docker/setup-docker.spec.ts b/packages/node/src/generators/setup-docker/setup-docker.spec.ts
index aa2e8a0c4dde47..8a1d4e4e853caf 100644
--- a/packages/node/src/generators/setup-docker/setup-docker.spec.ts
+++ b/packages/node/src/generators/setup-docker/setup-docker.spec.ts
@@ -1,16 +1,35 @@
-import { readProjectConfiguration, Tree } from '@nx/devkit';
+import 'nx/src/internal-testing-utils/mock-project-graph';
+
+import {
+  ProjectConfiguration,
+  readProjectConfiguration,
+  Tree,
+} from '@nx/devkit';
 import { createTreeWithEmptyWorkspace } from '@nx/devkit/testing';
-import { applicationGenerator } from '../application/application';
+
 describe('setupDockerGenerator', () => {
   let tree: Tree;
   beforeEach(async () => {
     tree = createTreeWithEmptyWorkspace();
+
+    jest.resetModules();
   });
 
   describe('integrated', () => {
     it('should create docker assets when --docker is passed', async () => {
+      const projectName = 'integreated-api';
+      // Since we mock the project graph, we need to mock the project configuration as well
+      mockReadCachedProjectConfiguration({
+        name: projectName,
+        root: projectName,
+      });
+
+      const { applicationGenerator } = await import(
+        '../application/application'
+      );
+
       await applicationGenerator(tree, {
-        name: 'api',
+        name: projectName,
         framework: 'express',
         e2eTestRunner: 'none',
         docker: true,
@@ -18,14 +37,16 @@ describe('setupDockerGenerator', () => {
         addPlugin: true,
       });
 
-      const project = readProjectConfiguration(tree, 'api');
+      const project = readProjectConfiguration(tree, projectName);
 
-      expect(tree.exists('api/Dockerfile')).toBeTruthy();
+      const dockerFile = tree.read(`${projectName}/Dockerfile`, 'utf8');
+      expect(tree.exists(`${projectName}/Dockerfile`)).toBeTruthy();
+      expect(dockerFile).toContain(`COPY dist/${projectName} ${projectName}/`);
       expect(project.targets).toEqual(
         expect.objectContaining({
           'docker-build': {
             dependsOn: ['build'],
-            command: 'docker build -f api/Dockerfile . -t api',
+            command: `docker build -f ${projectName}/Dockerfile . -t ${projectName}`,
           },
         })
       );
@@ -34,8 +55,14 @@ describe('setupDockerGenerator', () => {
 
   describe('standalone', () => {
     it('should create docker assets when --docker is passed', async () => {
+      const projectName = 'standalone-api';
+      mockReadCachedProjectConfiguration({ name: projectName, root: '' });
+
+      const { applicationGenerator } = await import(
+        '../application/application'
+      );
       await applicationGenerator(tree, {
-        name: 'api',
+        name: projectName,
         framework: 'fastify',
         rootProject: true,
         docker: true,
@@ -43,16 +70,39 @@ describe('setupDockerGenerator', () => {
         addPlugin: true,
       });
 
-      const project = readProjectConfiguration(tree, 'api');
-      expect(tree.exists('Dockerfile')).toBeTruthy();
+      const project = readProjectConfiguration(tree, projectName);
+      const dockerFile = tree.read(`Dockerfile`, 'utf8');
+
+      expect(tree.exists(`Dockerfile`)).toBeTruthy();
+      expect(dockerFile).toContain(`COPY dist/${projectName} ${projectName}/`);
       expect(project.targets).toEqual(
         expect.objectContaining({
           'docker-build': {
             dependsOn: ['build'],
-            command: 'docker build -f Dockerfile . -t api',
+            command: `docker build -f Dockerfile . -t ${projectName}`,
           },
         })
       );
     });
   });
 });
+
+const mockReadCachedProjectConfiguration = (
+  projectConfig: ProjectConfiguration
+) => {
+  jest.mock('nx/src/project-graph/project-graph', () => {
+    return {
+      ...jest.requireActual('nx/src/project-graph/project-graph'),
+      readCachedProjectConfiguration: jest.fn(() => {
+        return {
+          root: projectConfig.root,
+          targets: {
+            build: {
+              outputs: [`dist/${projectConfig.name}`],
+            },
+          },
+        };
+      }),
+    };
+  });
+};
diff --git a/packages/node/src/generators/setup-docker/setup-docker.ts b/packages/node/src/generators/setup-docker/setup-docker.ts
index 5176b71fe9d1d2..582a389cbc8229 100644
--- a/packages/node/src/generators/setup-docker/setup-docker.ts
+++ b/packages/node/src/generators/setup-docker/setup-docker.ts
@@ -13,6 +13,8 @@ import {
 
 import { SetUpDockerOptions } from './schema';
 import { join } from 'path';
+import { interpolate } from 'nx/src/tasks-runner/utils';
+import { readCachedProjectConfiguration } from 'nx/src/project-graph/project-graph';
 
 function normalizeOptions(
   tree: Tree,
@@ -27,21 +29,38 @@ function normalizeOptions(
 }
 
 function addDocker(tree: Tree, options: SetUpDockerOptions) {
-  const project = readProjectConfiguration(tree, options.project);
-  if (!project || !options.targetName) {
+  // Inferred targets are only available in the project graph
+  const projectConfig = readCachedProjectConfiguration(options.project);
+
+  if (
+    !projectConfig ||
+    !projectConfig.targets ||
+    !projectConfig.targets[options.buildTarget]
+  ) {
     return;
   }
 
-  if (tree.exists(joinPathFragments(project.root, 'DockerFile'))) {
+  // Returns an string like {workspaceRoot}/dist/apps/{projectName}
+  const tokenizedOutputPath =
+    projectConfig.targets[`${options.buildTarget}`]?.outputs?.[0];
+  if (tree.exists(joinPathFragments(projectConfig.root, 'DockerFile'))) {
     logger.info(
-      `Skipping setup since a Dockerfile already exists inside ${project.root}`
+      `Skipping setup since a Dockerfile already exists inside ${projectConfig.root}`
+    );
+  } else if (!tokenizedOutputPath) {
+    logger.error(
+      `Skipping setup since the output path for the build target ${options.buildTarget} is not defined.`
     );
   } else {
-    const outputPath =
-      project.targets[`${options.buildTarget}`]?.options.outputPath;
-    generateFiles(tree, join(__dirname, './files'), project.root, {
+    const outputPath = interpolate(tokenizedOutputPath, {
+      projectName: projectConfig.name,
+      projectRoot: projectConfig.root,
+      workspaceRoot: '',
+    });
+
+    generateFiles(tree, join(__dirname, './files'), projectConfig.root, {
       tmpl: '',
-      app: project.sourceRoot,
+      app: projectConfig.sourceRoot,
       buildLocation: outputPath,
       project: options.project,
     });