diff --git a/.yarn/versions/575ebbc8.yml b/.yarn/versions/575ebbc8.yml
new file mode 100644
index 000000000000..c54fa28f6d6d
--- /dev/null
+++ b/.yarn/versions/575ebbc8.yml
@@ -0,0 +1,24 @@
+releases:
+  "@yarnpkg/cli": prerelease
+  "@yarnpkg/plugin-node-modules": prerelease
+  "@yarnpkg/pnpify": prerelease
+
+declined:
+  - "@yarnpkg/plugin-constraints"
+  - "@yarnpkg/plugin-dlx"
+  - "@yarnpkg/plugin-essentials"
+  - "@yarnpkg/plugin-init"
+  - "@yarnpkg/plugin-interactive-tools"
+  - "@yarnpkg/plugin-npm-cli"
+  - "@yarnpkg/plugin-pack"
+  - "@yarnpkg/plugin-patch"
+  - "@yarnpkg/plugin-pnp"
+  - "@yarnpkg/plugin-stage"
+  - "@yarnpkg/plugin-typescript"
+  - "@yarnpkg/plugin-version"
+  - "@yarnpkg/plugin-workspace-tools"
+  - vscode-zipfs
+  - "@yarnpkg/builder"
+  - "@yarnpkg/core"
+  - "@yarnpkg/doctor"
+  - "@yarnpkg/pnp"
diff --git a/packages/acceptance-tests/pkg-tests-specs/sources/features/pnpLoose.test.js b/packages/acceptance-tests/pkg-tests-specs/sources/features/pnpLoose.test.js
index 19b03e004f11..e566abca487e 100644
--- a/packages/acceptance-tests/pkg-tests-specs/sources/features/pnpLoose.test.js
+++ b/packages/acceptance-tests/pkg-tests-specs/sources/features/pnpLoose.test.js
@@ -46,6 +46,29 @@ describe(`Features`, () => {
       ),
     );
 
+    test(
+      `it should allow resolutions to top-level hoisting candidates (even if they have peer dependencies)`,
+      makeTemporaryEnv(
+        {
+          dependencies: {
+            [`no-deps`]: `1.0.0`,
+            [`forward-peer-deps`]: `1.0.0`,
+          },
+        },
+        {
+          pnpMode: `loose`,
+        },
+        async ({path, run, source}) => {
+          await run(`install`);
+
+          await expect(source(`require('peer-deps')`)).resolves.toMatchObject({
+            name: `peer-deps`,
+            version: `1.0.0`,
+          });
+        },
+      ),
+    );
+
     test(
       `it should log an exception if a dependency tries to require something it doesn't own but that can be accessed through hoisting`,
       makeTemporaryEnv(
diff --git a/packages/plugin-node-modules/sources/PnpLooseLinker.ts b/packages/plugin-node-modules/sources/PnpLooseLinker.ts
index 576e610a8db0..24887d84adea 100644
--- a/packages/plugin-node-modules/sources/PnpLooseLinker.ts
+++ b/packages/plugin-node-modules/sources/PnpLooseLinker.ts
@@ -1,9 +1,9 @@
-import {LinkOptions, MinimalLinkOptions, Package}                                                  from '@yarnpkg/core';
-import {VirtualFS, ZipOpenFS, ppath, PortablePath, npath, Filename}                                from '@yarnpkg/fslib';
-import {getLibzipPromise}                                                                          from '@yarnpkg/libzip';
-import {PnpInstaller, PnpLinker}                                                                   from '@yarnpkg/plugin-pnp';
-import {NodeModulesPackageNode, buildNodeModulesTree}                                              from '@yarnpkg/pnpify';
-import {PnpSettings, makeRuntimeApi, PackageInformation, PhysicalPackageLocator, DependencyTarget} from '@yarnpkg/pnp';
+import {LinkOptions, structUtils}                      from '@yarnpkg/core';
+import {VirtualFS, ZipOpenFS, ppath, npath, Filename}  from '@yarnpkg/fslib';
+import {getLibzipPromise}                              from '@yarnpkg/libzip';
+import {PnpInstaller, PnpLinker}                       from '@yarnpkg/plugin-pnp';
+import {NodeModulesPackageNode, buildNodeModulesTree}  from '@yarnpkg/pnpify';
+import {PnpSettings, makeRuntimeApi, DependencyTarget} from '@yarnpkg/pnp';
 
 export class PnpLooseLinker extends PnpLinker {
   protected mode = `loose`;
@@ -35,14 +35,13 @@ class PnpLooseInstaller extends PnpInstaller {
     pnpSettings.fallbackPool = fallbackPool;
 
     const registerFallback = (name: string, entry: NodeModulesPackageNode) => {
-      const locator = pnp.findPackageLocator(`${npath.fromPortablePath(entry.target)}/`);
-      if (locator === null)
-        throw new Error(`Assertion failed: Expected the target to map to a locator`);
+      const locator = structUtils.parseLocator(entry.locator);
+      const identStr = structUtils.stringifyIdent(locator);
 
-      if (locator.name === name) {
+      if (identStr === name) {
         fallbackPool.set(name, locator.reference);
       } else {
-        fallbackPool.set(name, [locator.name, locator.reference]);
+        fallbackPool.set(name, [identStr, locator.reference]);
       }
     };
 
diff --git a/packages/yarnpkg-pnpify/sources/buildNodeModulesTree.ts b/packages/yarnpkg-pnpify/sources/buildNodeModulesTree.ts
index cb4c8113673a..0fce03459938 100644
--- a/packages/yarnpkg-pnpify/sources/buildNodeModulesTree.ts
+++ b/packages/yarnpkg-pnpify/sources/buildNodeModulesTree.ts
@@ -17,6 +17,7 @@ export type NodeModulesBaseNode = {
 // The entry for a package within a node_modules
 export type NodeModulesPackageNode = {
   locator: LocatorKey,
+  // The source path. Note that the virtual paths have been resolved/lost!
   target: PortablePath,
   // Hard links are copies of the target; soft links are symlinks to it
   linkType: LinkType,