diff --git a/Cargo.lock b/Cargo.lock
index 845860f6..70861865 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -656,6 +656,7 @@ dependencies = [
  "color-eyre",
  "colored",
  "derive_more",
+ "dunce",
  "env_logger",
  "inquire",
  "interactive-clap",
@@ -1312,6 +1313,12 @@ version = "0.3.3"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "fea41bba32d969b513997752735605054bc0dfa92b4c56bf1189f2e174be7a10"
 
+[[package]]
+name = "dunce"
+version = "1.0.4"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "56ce8c6da7551ec6c462cbaf3bfbc75131ebbfa1c944aeaa9dab51ca1c5f0c3b"
+
 [[package]]
 name = "dyn-clone"
 version = "1.0.14"
diff --git a/cargo-near/Cargo.toml b/cargo-near/Cargo.toml
index 74774bfa..b26c3307 100644
--- a/cargo-near/Cargo.toml
+++ b/cargo-near/Cargo.toml
@@ -42,3 +42,4 @@ interactive-clap-derive = "0.2.5"
 near-cli-rs = { version = "0.5.2" }
 derive_more = "0.99.9"
 shell-words = "1.0.0"
+dunce = "1"
\ No newline at end of file
diff --git a/cargo-near/src/util/mod.rs b/cargo-near/src/util/mod.rs
index 7478bcd0..5c9ec441 100644
--- a/cargo-near/src/util/mod.rs
+++ b/cargo-near/src/util/mod.rs
@@ -55,7 +55,7 @@ where
     cmd.envs(env);
 
     if let Some(path) = working_dir {
-        let path = path.as_ref();
+        let path = force_canonicalize_dir(path.as_ref())?;
         log::debug!("Setting cargo working dir to '{}'", path);
         cmd.current_dir(path);
     }
@@ -241,8 +241,14 @@ pub(crate) fn compile_project(
 /// Create the directory if it doesn't exist, and return the absolute path to it.
 pub(crate) fn force_canonicalize_dir(dir: &Utf8Path) -> color_eyre::eyre::Result<Utf8PathBuf> {
     fs::create_dir_all(dir).wrap_err_with(|| format!("failed to create directory `{}`", dir))?;
-    dir.canonicalize_utf8()
-        .wrap_err_with(|| format!("failed to access output directory `{}`", dir))
+    // use canonicalize from `dunce` create instead of default one from std because it's compatible with Windows UNC paths
+    // and don't break cargo compilation on Windows
+    // https://github.com/rust-lang/rust/issues/42869
+    Utf8PathBuf::from_path_buf(
+        dunce::canonicalize(dir)
+            .wrap_err_with(|| format!("failed to canonicalize path: {} ", dir))?,
+    )
+    .map_err(|err| color_eyre::eyre::eyre!("failed to convert path {}", err.to_string_lossy()))
 }
 
 /// Copy a file to a destination.