diff --git a/pkgs/racket-test/tests/setup/bad%coll/m.rkt b/pkgs/racket-test/tests/setup/bad%coll/m.rkt
new file mode 100644
index 0000000000..4b553d8438
--- /dev/null
+++ b/pkgs/racket-test/tests/setup/bad%coll/m.rkt
@@ -0,0 +1,2 @@
+#lang racket
+"The enclosing directory is not a valid collection-path name"
diff --git a/pkgs/racket-test/tests/setup/path-to-collects.rkt b/pkgs/racket-test/tests/setup/path-to-collects.rkt
new file mode 100644
index 0000000000..32af26df9c
--- /dev/null
+++ b/pkgs/racket-test/tests/setup/path-to-collects.rkt
@@ -0,0 +1,26 @@
+#lang racket/base
+(require setup/collects
+         rackunit
+         setup/dirs
+         racket/path)
+
+(check-equal? '(lib "racket/base.rkt")
+              (path->module-path (build-path (find-collects-dir) "racket" "base.rkt")))
+(check-equal? '(collects #"racket" #"base.rkt")
+              (path->collects-relative (build-path (find-collects-dir) "racket" "base.rkt")))
+
+(check-equal? '(lib "planet/private/nonesuch.rkt")
+              (path->module-path (build-path (find-collects-dir) "planet" "private" "nonesuch.rkt")))
+(check-equal? '(collects #"planet" #"private" #"nonesuch.rkt")
+              (path->collects-relative (build-path (find-collects-dir) "planet" "private" "nonesuch.rkt")))
+
+(check-equal? (build-path (find-collects-dir) "planet" "private" "none!such.rkt")
+              (path->module-path (build-path (find-collects-dir) "planet" "private" "none!such.rkt")))
+(check-equal? '(collects #"planet" #"private" #"none!such.rkt")
+              (path->collects-relative (build-path (find-collects-dir) "planet" "private" "none!such.rkt")))
+
+(define here (collection-file-path "path-to-collects.rkt" "tests/setup"))
+(check-equal? (build-path here "bad%coll" "m.rkt")
+              (path->module-path (build-path here "bad%coll" "m.rkt")))
+(check-equal? (build-path here "bad%coll" "m.rkt")
+              (path->collects-relative (build-path here "bad%coll" "m.rkt")))
diff --git a/racket/collects/setup/collects.rkt b/racket/collects/setup/collects.rkt
index 56b9e38280..7fc57da973 100644
--- a/racket/collects/setup/collects.rkt
+++ b/racket/collects/setup/collects.rkt
@@ -1,6 +1,7 @@
 #lang racket/base
 (require racket/list
          racket/string
+         setup/collection-name
          pkg/path)
 
 (provide path->module-path
@@ -28,6 +29,9 @@
                             (cons pkg-collect l)
                             l)))
       (define c-p (and (pair? new-c-l)
+                       (or (not (eq? mode 'module-path))
+                           (module-path? (car p-l)))
+                       (andmap collection-name-element? new-c-l)
                        (apply collection-file-path (car p-l) new-c-l
                               #:fail (lambda (msg) #f))))
       (and c-p
@@ -36,7 +40,8 @@
      [else #f]))
   (define p-l (reverse (explode-path simple-p)))
   (or (and ((length p-l) . > . 2)
-           (regexp-match? #rx#"^[-a-zA-Z0-9_+%.]*$" (path-element->bytes (car p-l)))
+           (or (not (eq? mode 'module-path))
+               (module-path? (path-element->string (car p-l))))
            ;; Try using path suffixes as library names, checking whether
            ;; `collection-file-path' locates the same path.
            (let ([file (path-element->string (car p-l))])
@@ -44,7 +49,7 @@
                (cond
                 [(null? p-l) #f]
                 [(null? (cdr p-l)) #f]
-                [(regexp-match? #rx#"^[-a-zA-Z0-9_+%]*$" (path-element->bytes (car p-l)))
+                [(collection-name-element? (path-element->string (car p-l)))
                  (define new-c-l (cons (path-element->string (car p-l)) c-l))
                  (define c-p (apply collection-file-path file new-c-l #:fail (lambda (msg) #f)))
                  (if (and c-p