diff --git a/flake-module.nix b/flake-module.nix
index 85383a3a..93d76710 100644
--- a/flake-module.nix
+++ b/flake-module.nix
@@ -177,19 +177,7 @@ in
                       #
                       # In future, we could just read `cabal.project`. See #76.
                       let
-                        # Like pkgs.haskell.lib.haskellPathsInDir' but with a few differences
-                        # - Allows top-level .cabal files
-                        haskellPathsInDir' = path:
-                          lib.filterAttrs (k: v: v != null) (lib.mapAttrs'
-                            (k: v:
-                              if v == "regular" && lib.strings.hasSuffix ".cabal" k
-                              then lib.nameValuePair (lib.strings.removeSuffix ".cabal" k) path
-                              else
-                                if v == "directory" && builtins.pathExists (path + "/${k}/${k}.cabal")
-                                then lib.nameValuePair k (path + "/${k}")
-                                else lib.nameValuePair k null
-                            )
-                            (builtins.readDir path));
+
                         errorNoDefault = msg:
                           builtins.throw '' 
                               haskell-flake: A default value for `packages` cannot be auto-detected:
@@ -199,7 +187,8 @@ in
                             '';
                         cabalPaths =
                           let
-                            cabalPaths = haskellPathsInDir' self;
+                            haskellPathsInDir = import ./nix/haskellPathsInDir.nix { inherit lib; };
+                            cabalPaths = haskellPathsInDir self;
                           in
                           if cabalPaths == { }
                           then
diff --git a/nix/haskellPathsInDir.nix b/nix/haskellPathsInDir.nix
new file mode 100644
index 00000000..e32c6313
--- /dev/null
+++ b/nix/haskellPathsInDir.nix
@@ -0,0 +1,46 @@
+# Like pkgs.haskell.lib.haskellPathsInDir' but with a few differences
+# - Allows top-level .cabal files
+# - Recurses into subdirectories
+# - Allows package.yaml files
+{ lib, ... }:
+
+path':
+
+let
+  parseCabalName = file:
+    lib.strings.removeSuffix ".cabal" file;
+  parseHpackName = file:
+    # TODO: this is a hack, we should use a proper parser
+    let
+      line = builtins.head (lib.strings.split "[[:space:]]*\n[[:space:]]*" (builtins.readFile file));
+      extract = xs: builtins.head (builtins.tail (builtins.tail xs));
+    in
+    extract (lib.strings.split "[[:space:]]*name[[:space:]]*:[[:space:]]*" line);
+  f = path: lib.mapAttrsToList
+    (k: v:
+      let
+        pass = [ ];
+        one = x: [ x ];
+      in
+      if v == "regular"
+      then
+        if lib.strings.hasSuffix ".cabal" k
+        then one (lib.nameValuePair (parseCabalName k) path)
+        else if k == "package.yaml"
+        then one (lib.nameValuePair (parseHpackName k) path)
+        else pass
+      else
+        if v == "directory"
+        then
+          if builtins.pathExists (path + "/${k}/${k}.cabal")
+          then
+            one (lib.nameValuePair k (path + "/${k}"))
+          else
+            if builtins.pathExists (path + "/${k}/package.yaml")
+            then one (lib.nameValuePair (parseHpackName (path + "/${k}/package.yaml")) (path + "/${k}"))
+            else f (path + "/${k}")
+        else pass
+    )
+    (builtins.readDir path);
+in
+lib.listToAttrs (lib.flatten (f path'))