diff --git a/packages/angular/src/generators/directive/directive.spec.ts b/packages/angular/src/generators/directive/directive.spec.ts
index 183eee863e683..767528d92924b 100644
--- a/packages/angular/src/generators/directive/directive.spec.ts
+++ b/packages/angular/src/generators/directive/directive.spec.ts
@@ -12,10 +12,11 @@ describe('directive generator', () => {
     addProjectConfiguration(tree, 'test', {
       root: 'test',
       sourceRoot: 'test/src',
+      projectType: 'application',
     });
 
     tree.write(
-      'test/src/test.module.ts',
+      'test/src/app/test.module.ts',
       `import {NgModule} from "@angular/core";
     @NgModule({
       imports: [],
@@ -33,11 +34,13 @@ describe('directive generator', () => {
     await generateDirectiveWithDefaultOptions(tree);
 
     // ASSERT
-    expect(tree.read('test/src/test.directive.ts', 'utf-8')).toMatchSnapshot();
     expect(
-      tree.read('test/src/test.directive.spec.ts', 'utf-8')
+      tree.read('test/src/app/test.directive.ts', 'utf-8')
     ).toMatchSnapshot();
-    expect(tree.read('test/src/test.module.ts', 'utf-8')).toMatchSnapshot();
+    expect(
+      tree.read('test/src/app/test.directive.spec.ts', 'utf-8')
+    ).toMatchSnapshot();
+    expect(tree.read('test/src/app/test.module.ts', 'utf-8')).toMatchSnapshot();
   });
 
   it('should import the directive correctly when flat=false', async () => {
@@ -48,12 +51,12 @@ describe('directive generator', () => {
 
     // ASSERT
     expect(
-      tree.read('test/src/test/test.directive.ts', 'utf-8')
+      tree.read('test/src/app/test/test.directive.ts', 'utf-8')
     ).toMatchSnapshot();
     expect(
-      tree.read('test/src/test/test.directive.spec.ts', 'utf-8')
+      tree.read('test/src/app/test/test.directive.spec.ts', 'utf-8')
     ).toMatchSnapshot();
-    expect(tree.read('test/src/test.module.ts', 'utf-8')).toMatchSnapshot();
+    expect(tree.read('test/src/app/test.module.ts', 'utf-8')).toMatchSnapshot();
   });
 
   it('should not import the directive when standalone=true', async () => {
@@ -63,11 +66,13 @@ describe('directive generator', () => {
     await generateDirectiveWithDefaultOptions(tree, { standalone: true });
 
     // ASSERT
-    expect(tree.read('test/src/test.directive.ts', 'utf-8')).toMatchSnapshot();
     expect(
-      tree.read('test/src/test.directive.spec.ts', 'utf-8')
+      tree.read('test/src/app/test.directive.ts', 'utf-8')
+    ).toMatchSnapshot();
+    expect(
+      tree.read('test/src/app/test.directive.spec.ts', 'utf-8')
     ).toMatchSnapshot();
-    expect(tree.read('test/src/test.module.ts', 'utf-8')).toMatchSnapshot();
+    expect(tree.read('test/src/app/test.module.ts', 'utf-8')).toMatchSnapshot();
   });
 
   it('should import the directive correctly when flat=false and path is nested deeper', async () => {
@@ -76,17 +81,20 @@ describe('directive generator', () => {
     // ACT
     await generateDirectiveWithDefaultOptions(tree, {
       flat: false,
-      path: 'test/src/my-directives',
+      path: 'test/src/app/my-directives',
     });
 
     // ASSERT
     expect(
-      tree.read('test/src/my-directives/test/test.directive.ts', 'utf-8')
+      tree.read('test/src/app/my-directives/test/test.directive.ts', 'utf-8')
     ).toMatchSnapshot();
     expect(
-      tree.read('test/src/my-directives/test/test.directive.spec.ts', 'utf-8')
+      tree.read(
+        'test/src/app/my-directives/test/test.directive.spec.ts',
+        'utf-8'
+      )
     ).toMatchSnapshot();
-    expect(tree.read('test/src/test.module.ts', 'utf-8')).toMatchSnapshot();
+    expect(tree.read('test/src/app/test.module.ts', 'utf-8')).toMatchSnapshot();
   });
 
   it('should export the directive correctly when flat=false and path is nested deeper', async () => {
@@ -95,18 +103,21 @@ describe('directive generator', () => {
     // ACT
     await generateDirectiveWithDefaultOptions(tree, {
       flat: false,
-      path: 'test/src/my-directives',
+      path: 'test/src/app/my-directives',
       export: true,
     });
 
     // ASSERT
     expect(
-      tree.read('test/src/my-directives/test/test.directive.ts', 'utf-8')
+      tree.read('test/src/app/my-directives/test/test.directive.ts', 'utf-8')
     ).toMatchSnapshot();
     expect(
-      tree.read('test/src/my-directives/test/test.directive.spec.ts', 'utf-8')
+      tree.read(
+        'test/src/app/my-directives/test/test.directive.spec.ts',
+        'utf-8'
+      )
     ).toMatchSnapshot();
-    expect(tree.read('test/src/test.module.ts', 'utf-8')).toMatchSnapshot();
+    expect(tree.read('test/src/app/test.module.ts', 'utf-8')).toMatchSnapshot();
   });
 
   it('should not import the directive when skipImport=true', async () => {
@@ -115,18 +126,21 @@ describe('directive generator', () => {
     // ACT
     await generateDirectiveWithDefaultOptions(tree, {
       flat: false,
-      path: 'test/src/my-directives',
+      path: 'test/src/app/my-directives',
       skipImport: true,
     });
 
     // ASSERT
     expect(
-      tree.read('test/src/my-directives/test/test.directive.ts', 'utf-8')
+      tree.read('test/src/app/my-directives/test/test.directive.ts', 'utf-8')
     ).toMatchSnapshot();
     expect(
-      tree.read('test/src/my-directives/test/test.directive.spec.ts', 'utf-8')
+      tree.read(
+        'test/src/app/my-directives/test/test.directive.spec.ts',
+        'utf-8'
+      )
     ).toMatchSnapshot();
-    expect(tree.read('test/src/test.module.ts', 'utf-8')).toMatchSnapshot();
+    expect(tree.read('test/src/app/test.module.ts', 'utf-8')).toMatchSnapshot();
   });
 
   it('should not generate test file when skipTests=true', async () => {
@@ -135,18 +149,18 @@ describe('directive generator', () => {
     // ACT
     await generateDirectiveWithDefaultOptions(tree, {
       flat: false,
-      path: 'test/src/my-directives',
+      path: 'test/src/app/my-directives',
       skipTests: true,
     });
 
     // ASSERT
     expect(
-      tree.read('test/src/my-directives/test/test.directive.ts', 'utf-8')
+      tree.read('test/src/app/my-directives/test/test.directive.ts', 'utf-8')
     ).toMatchSnapshot();
     expect(
-      tree.exists('test/src/my-directives/test/test.directive.spec.ts')
+      tree.exists('test/src/app/my-directives/test/test.directive.spec.ts')
     ).toBeFalsy();
-    expect(tree.read('test/src/test.module.ts', 'utf-8')).toMatchSnapshot();
+    expect(tree.read('test/src/app/test.module.ts', 'utf-8')).toMatchSnapshot();
   });
 });
 
diff --git a/packages/angular/src/generators/directive/directive.ts b/packages/angular/src/generators/directive/directive.ts
index 26fe9d2655d9a..ddf161cbb14b3 100644
--- a/packages/angular/src/generators/directive/directive.ts
+++ b/packages/angular/src/generators/directive/directive.ts
@@ -1,58 +1,40 @@
-import type { ProjectConfiguration, Tree } from '@nrwl/devkit';
+import type { Tree } from '@nrwl/devkit';
 import {
   formatFiles,
   generateFiles,
-  getProjects,
   joinPathFragments,
   names,
-  readNxJson,
-  readProjectConfiguration,
 } from '@nrwl/devkit';
-import type { Schema } from './schema';
-import { checkPathUnderProjectRoot } from '../utils/path';
 import { addToNgModule, findModule } from '../utils';
-
-let tsModule: typeof import('typescript');
+import { normalizeOptions, validateOptions } from './lib';
+import type { Schema } from './schema';
 
 export async function directiveGenerator(tree: Tree, schema: Schema) {
-  const projects = getProjects(tree);
-  if (!projects.has(schema.project)) {
-    throw new Error(`Project "${schema.project}" does not exist!`);
-  }
-
-  checkPathUnderProjectRoot(tree, schema.project, schema.path);
+  validateOptions(tree, schema);
+  const options = normalizeOptions(tree, schema);
 
-  const project = readProjectConfiguration(
-    tree,
-    schema.project
-  ) as ProjectConfiguration & { prefix?: string };
-
-  const path = schema.path ?? `${project.sourceRoot}`;
-  const directiveNames = names(schema.name);
-  const selector =
-    schema.selector ??
-    buildSelector(tree, schema.name, schema.prefix ?? project.prefix);
+  const directiveNames = names(options.name);
 
-  const pathToGenerateFiles = schema.flat
+  const pathToGenerateFiles = options.flat
     ? './files/__directiveFileName__'
     : './files';
-  await generateFiles(
+  generateFiles(
     tree,
     joinPathFragments(__dirname, pathToGenerateFiles),
-    path,
+    options.path,
     {
-      selector,
+      selector: options.selector,
       directiveClassName: directiveNames.className,
       directiveFileName: directiveNames.fileName,
-      standalone: schema.standalone,
+      standalone: options.standalone,
       tpl: '',
     }
   );
 
-  if (schema.skipTests) {
+  if (options.skipTests) {
     const pathToSpecFile = joinPathFragments(
-      path,
-      `${!schema.flat ? `${directiveNames.fileName}/` : ``}${
+      options.path,
+      `${!options.flat ? `${directiveNames.fileName}/` : ``}${
         directiveNames.fileName
       }.directive.spec.ts`
     );
@@ -60,31 +42,24 @@ export async function directiveGenerator(tree: Tree, schema: Schema) {
     tree.delete(pathToSpecFile);
   }
 
-  if (!schema.skipImport && !schema.standalone) {
-    const modulePath = findModule(tree, path, schema.module);
+  if (!options.skipImport && !options.standalone) {
+    const modulePath = findModule(tree, options.path, options.module);
     addToNgModule(
       tree,
-      path,
+      options.path,
       modulePath,
       directiveNames.fileName,
       `${directiveNames.className}Directive`,
       `${directiveNames.fileName}.directive`,
       'declarations',
-      schema.flat,
-      schema.export
+      options.flat,
+      options.export
     );
   }
 
-  if (!schema.skipFormat) {
+  if (!options.skipFormat) {
     await formatFiles(tree);
   }
 }
 
-function buildSelector(tree: Tree, name: string, prefix: string) {
-  let selector = names(name).fileName;
-  const selectorPrefix = names(prefix ?? readNxJson(tree).npmScope).fileName;
-
-  return names(`${selectorPrefix}-${selector}`).propertyName;
-}
-
 export default directiveGenerator;
diff --git a/packages/angular/src/generators/directive/lib/index.ts b/packages/angular/src/generators/directive/lib/index.ts
new file mode 100644
index 0000000000000..da94c6f89ca24
--- /dev/null
+++ b/packages/angular/src/generators/directive/lib/index.ts
@@ -0,0 +1,2 @@
+export * from './normalize-options';
+export * from './validate-options';
diff --git a/packages/angular/src/generators/directive/lib/normalize-options.ts b/packages/angular/src/generators/directive/lib/normalize-options.ts
new file mode 100644
index 0000000000000..0de3c9bfed870
--- /dev/null
+++ b/packages/angular/src/generators/directive/lib/normalize-options.ts
@@ -0,0 +1,54 @@
+import type { ProjectConfiguration, Tree } from '@nrwl/devkit';
+import {
+  joinPathFragments,
+  names,
+  readNxJson,
+  readProjectConfiguration,
+} from '@nrwl/devkit';
+import { parseName } from '../../utils/names';
+import type { Schema } from '../schema';
+
+export function normalizeOptions(tree: Tree, options: Schema) {
+  const { prefix, projectType, root, sourceRoot } = readProjectConfiguration(
+    tree,
+    options.project
+  ) as ProjectConfiguration & { prefix?: string };
+
+  const projectSourceRoot = sourceRoot ?? joinPathFragments(root, 'src');
+  const { name, path: namePath } = parseName(options.name);
+
+  const path =
+    options.path ??
+    joinPathFragments(
+      projectSourceRoot,
+      projectType === 'application' ? 'app' : 'lib',
+      namePath
+    );
+
+  const selector =
+    options.selector ?? buildSelector(tree, name, options.prefix, prefix);
+
+  return {
+    ...options,
+    name,
+    path,
+    projectRoot: root,
+    projectSourceRoot,
+    selector,
+  };
+}
+
+function buildSelector(
+  tree: Tree,
+  name: string,
+  prefix: string,
+  projectPrefix: string
+): string {
+  let selector = name;
+  prefix ??= projectPrefix ?? readNxJson(tree).npmScope;
+  if (prefix) {
+    selector = `${prefix}-${selector}`;
+  }
+
+  return names(selector).propertyName;
+}
diff --git a/packages/angular/src/generators/directive/lib/validate-options.ts b/packages/angular/src/generators/directive/lib/validate-options.ts
new file mode 100644
index 0000000000000..a73bcccdc8878
--- /dev/null
+++ b/packages/angular/src/generators/directive/lib/validate-options.ts
@@ -0,0 +1,13 @@
+import type { Tree } from '@nrwl/devkit';
+import { getProjects } from '@nrwl/devkit';
+import { checkPathUnderProjectRoot } from '../../utils/path';
+import type { Schema } from '../schema';
+
+export function validateOptions(tree: Tree, options: Schema): void {
+  const projects = getProjects(tree);
+  if (!projects.has(options.project)) {
+    throw new Error(`Project "${options.project}" does not exist!`);
+  }
+
+  checkPathUnderProjectRoot(tree, options.project, options.path);
+}
diff --git a/packages/angular/src/generators/utils/names.ts b/packages/angular/src/generators/utils/names.ts
new file mode 100644
index 0000000000000..ec0afe5f72e9b
--- /dev/null
+++ b/packages/angular/src/generators/utils/names.ts
@@ -0,0 +1,11 @@
+import { normalizePath } from '@nrwl/devkit';
+
+export type NameInfo = { name: string; path: string };
+
+export function parseName(rawName: string): NameInfo {
+  const parsedName = normalizePath(rawName).split('/');
+  const name = parsedName.pop();
+  const path = parsedName.join('/');
+
+  return { name, path };
+}