diff --git a/pkgs/racket-pkgs/racket-doc/pkg/scribblings/pkg.scrbl b/pkgs/racket-pkgs/racket-doc/pkg/scribblings/pkg.scrbl
index b2696b4716..9899dffc27 100644
--- a/pkgs/racket-pkgs/racket-doc/pkg/scribblings/pkg.scrbl
+++ b/pkgs/racket-pkgs/racket-doc/pkg/scribblings/pkg.scrbl
@@ -125,7 +125,7 @@ but the @filepath{.plt} format does not accommodate a
 
 A package source is inferred to refer to a file
 only when it has a suffix matching a valid archive format
-and when it does not start
+and when it starts with @litchar{file://} or does not start
 with alphabetic characters followed by @litchar{://}. The inferred
 package name is the filename without its suffix.}
 
@@ -135,7 +135,8 @@ directory. The @tech{checksum} is not present. For example,
 
 A package source is inferred to refer
 to a directory only when it does not have a file-archive suffix, does
-not match the grammar of a package name, and does not start
+not match the grammar of a package name, and either starts with starts 
+with @litchar{file://} or does not start
 with alphabetic characters followed by @litchar{://}. The inferred
 package name is the directory name.}
 
diff --git a/pkgs/racket-pkgs/racket-test/tests/pkg/tests-name.rkt b/pkgs/racket-pkgs/racket-test/tests/pkg/tests-name.rkt
index a958792111..daef5840bf 100644
--- a/pkgs/racket-pkgs/racket-test/tests/pkg/tests-name.rkt
+++ b/pkgs/racket-pkgs/racket-test/tests/pkg/tests-name.rkt
@@ -72,6 +72,11 @@
   (check-equal-values? (package-source->name+type "fish/master" 'github) (values #f 'github))
   (check-equal-values? (package-source->name+type "github://github.com/racket/fish.more/release" 'github) (values #f 'github))
 
+  (check-equal-values? (package-source->name+type "file://fish.plt" #f) (values "fish" 'file))
+  (check-equal-values? (package-source->name+type "file:///root/fish.plt" #f) (values "fish" 'file))
+  (check-equal-values? (package-source->name+type "file://fish" #f) (values "fish" 'dir))
+  (check-equal-values? (package-source->name+type "file:///root/fish" #f) (values "fish" 'dir))
+
   (check-equal-values? (package-source->name+type "random://racket-lang.org/fish.plt" #f) (values #f #f))
 
   (void))
diff --git a/racket/collects/pkg/name.rkt b/racket/collects/pkg/name.rkt
index ca176df26b..fc85199b04 100644
--- a/racket/collects/pkg/name.rkt
+++ b/racket/collects/pkg/name.rkt
@@ -40,6 +40,25 @@
   ;; returns (values inferred-name inferred-type);
   ;; if `type' is given it should be returned, but name can be #f;
   ;; type should not be #f for a non-#f name
+  (define (parse-path s)
+    (cond
+     [(if type
+          (eq? type 'file)
+          (and (path-string? s)
+               (regexp-match rx:archive s)))
+      (define-values (base name+ext dir?) (split-path s))
+      (define name (extract-archive-name name+ext))
+      (values name 'file)]
+     [(if type
+          (or (eq? type 'dir) 
+              (eq? type 'link)
+              (eq? type 'static-link))
+          (path-string? s))
+      (define-values (base name dir?) (split-path s))
+      (define dir-name (and (path? name) (path->string name)))
+      (values (validate-name dir-name) (or type (and dir-name (if link-dirs? 'link 'dir))))]
+     [else
+      (values #f #f)]))
   (cond
    [(if type
         (eq? type 'name)
@@ -87,26 +106,14 @@
               (values (validate-name (last-non-empty p)) 'dir-url)]))
           (values #f #f)))
     (values (validate-name name) (or type (and name-type)))]
+   [(and (not type)
+         (regexp-match #rx"^file://(.*)$" s))
+    => (lambda (m) (parse-path (cadr m)))]
    [(and (not type)
          (regexp-match? #rx"^[a-zA-Z]*://" s))
     (values #f #f)]
-   [(if type
-        (eq? type 'file)
-        (and (path-string? s)
-             (regexp-match rx:archive s)))
-    (define-values (base name+ext dir?) (split-path s))
-    (define name (extract-archive-name name+ext))
-    (values name 'file)]
-   [(if type
-        (or (eq? type 'dir) 
-            (eq? type 'link)
-            (eq? type 'static-link))
-        (path-string? s))
-    (define-values (base name dir?) (split-path s))
-    (define dir-name (and (path? name) (path->string name)))
-    (values (validate-name dir-name) (or type (and dir-name (if link-dirs? 'link 'dir))))]
    [else
-    (values #f #f)]))
+    (parse-path s)]))
 
 (define (package-source->name s [given-type #f])
   (define-values (name type) (package-source->name+type s given-type))