diff --git a/src/main/java/net/neoforged/moddevgradle/tasks/JarJar.java b/src/main/java/net/neoforged/moddevgradle/tasks/JarJar.java
index 02d3dfc7..ee0c91da 100644
--- a/src/main/java/net/neoforged/moddevgradle/tasks/JarJar.java
+++ b/src/main/java/net/neoforged/moddevgradle/tasks/JarJar.java
@@ -12,6 +12,7 @@
 import org.gradle.api.file.FileSystemOperations;
 import org.gradle.api.model.ObjectFactory;
 import org.gradle.api.tasks.InputFiles;
+import org.gradle.api.tasks.Internal;
 import org.gradle.api.tasks.Nested;
 import org.gradle.api.tasks.OutputDirectory;
 import org.gradle.api.tasks.SkipWhenEmpty;
@@ -56,12 +57,16 @@ public abstract class JarJar extends DefaultTask {
     @OutputDirectory
     public abstract DirectoryProperty getOutputDirectory();
 
+    @Internal
+    public abstract DirectoryProperty getBuildDirectory();
+
     private final FileSystemOperations fileSystemOperations;
 
     @Inject
     public JarJar(FileSystemOperations fileSystemOperations) {
         this.fileSystemOperations = fileSystemOperations;
         this.getOutputDirectory().convention(getProject().getLayout().getBuildDirectory().dir("generated/" + getName()));
+        this.getBuildDirectory().convention(getProject().getLayout().getBuildDirectory());
     }
 
     @TaskAction
@@ -69,14 +74,19 @@ protected void run() {
         List<ResolvedJarJarArtifact> includedJars = new ArrayList<>(getJarJarArtifacts().getResolvedArtifacts().get());
         fileSystemOperations.delete(spec -> spec.delete(getOutputDirectory()));
 
+        var buildDir = getBuildDirectory().getAsFile().get().toPath();
+
         var artifactFiles = new ArrayList<>(includedJars.stream().map(ResolvedJarJarArtifact::getFile).toList());
         // Now we have to handle pure file collection dependencies that do not have artifact ids
         for (var file : getInputFiles()) {
             if (!artifactFiles.contains(file)) {
+                // This is only intended for libraries built by this project, so this is a shoddy check
+                if (!file.toPath().startsWith(buildDir)) {
+                    throw new GradleException("Cannot embed file dependencies in the jar if they aren't in this projects build directory.");
+                }
+
                 // Create a hashcode to use as a version
                 var hashCode = hashFile(file);
-
-                // We only support file dependencies that are likely built by this project
                 includedJars.add(new ResolvedJarJarArtifact(
                         file,
                         file.getName(),
diff --git a/testproject/jijtest/build.gradle b/testproject/jijtest/build.gradle
index 76f457d9..5c19f694 100644
--- a/testproject/jijtest/build.gradle
+++ b/testproject/jijtest/build.gradle
@@ -2,10 +2,26 @@ plugins {
     id 'net.neoforged.moddev'
 }
 
+sourceSets {
+    service
+}
+
+def serviceJar = tasks.register("serviceJar", Jar) {
+    from(sourceSets.service.output)
+    archiveClassifier = "service"
+    manifest {
+        attributes(
+            'FMLModType': "LIBRARY"
+        )
+    }
+}
+
 dependencies {
+    implementation files(sourceSets.service.output)
     testImplementation 'org.junit.jupiter:junit-jupiter:5.10.2'
     testRuntimeOnly 'org.junit.platform:junit-platform-launcher'
     jarJar(project(":coremod"))
+    jarJar(files(serviceJar))
 
     jarJar("org.commonmark:commonmark") {
         version {
@@ -35,6 +51,9 @@ neoForge {
         coremod {
             dependency project(":coremod")
         }
+        service {
+            sourceSet sourceSets.service
+        }
     }
 
     unitTest {
diff --git a/testproject/jijtest/src/service/java/jijtestservice/Service.java b/testproject/jijtest/src/service/java/jijtestservice/Service.java
new file mode 100644
index 00000000..76b5b240
--- /dev/null
+++ b/testproject/jijtest/src/service/java/jijtestservice/Service.java
@@ -0,0 +1,5 @@
+package jijtestservice;
+
+public class Service {
+
+}
diff --git a/testproject/jijtest/src/service/resources/META-INF/MANIFEST.MF b/testproject/jijtest/src/service/resources/META-INF/MANIFEST.MF
new file mode 100644
index 00000000..eb6b1cfa
--- /dev/null
+++ b/testproject/jijtest/src/service/resources/META-INF/MANIFEST.MF
@@ -0,0 +1,3 @@
+Manifest-Version: 1.0
+Note: Dummy Manifest file only for in-dev runtime
+FMLModType: LIBRARY
diff --git a/testproject/jijtest/src/test/java/jijtest/CoreModTest.java b/testproject/jijtest/src/test/java/jijtest/CoreModTest.java
index e22b9bcb..277e0fd5 100644
--- a/testproject/jijtest/src/test/java/jijtest/CoreModTest.java
+++ b/testproject/jijtest/src/test/java/jijtest/CoreModTest.java
@@ -12,5 +12,10 @@ public class CoreModTest {
     void testPresenceOfCoreMod() throws Exception {
         var field = assertDoesNotThrow(() -> ItemStack.class.getField("CORE_MOD_MARKER"));
         assertTrue(field.getBoolean(null));
+
+        var obj = new jijtestservice.Service();
+        // ensures it is *not* a transforming classloader, meaning it was loaded in our parent layer
+        assertEquals("cpw.mods.cl.ModuleClassLoader", obj.getClass().getClassLoader().getClass().getName());
+        assertEquals("cpw.mods.modlauncher.TransformingClassLoader", getClass().getClassLoader().getClass().getName());
     }
 }