diff --git a/project/operations.go b/project/operations.go
index e6ecabd..8ff9427 100644
--- a/project/operations.go
+++ b/project/operations.go
@@ -6,6 +6,7 @@
 
 import (
 	"fmt"
+	"hash/fnv"
 	"io"
 	"io/ioutil"
 	"os"
@@ -371,11 +372,7 @@
 	}
 	// If it was nested project it might have been moved with its parent project
 	if op.source != op.destination {
-		path, perm := filepath.Dir(op.destination), os.FileMode(0755)
-		if err := os.MkdirAll(path, perm); err != nil {
-			return fmtError(err)
-		}
-		if err := osutil.Rename(op.source, op.destination); err != nil {
+		if err := renameDir(jirix, op.source, op.destination); err != nil {
 			return fmtError(err)
 		}
 	}
@@ -930,3 +927,41 @@
 	}
 	return nil
 }
+
+func renameDir(jirix *jiri.X, src, dst string) error {
+	// Parent directory permissions
+	perm := os.FileMode(0755)
+	swapDir := jirix.SwapDir()
+
+	// Hash src path as swap dir name
+	h := fnv.New32a()
+	h.Write([]byte(src))
+	tmp := filepath.Join(swapDir, fmt.Sprintf("%d", h.Sum32()))
+
+	// Ensure .jiri_root/swap exists
+	if err := os.MkdirAll(swapDir, perm); err != nil {
+		return err
+	}
+
+	// Move src -> tmp
+	if err := osutil.Rename(src, tmp); err != nil {
+		return err
+	}
+
+	// Ensure the dst's parent exists, it may have
+	// been within src
+	parentDir := filepath.Dir(dst)
+	if err := os.MkdirAll(parentDir, perm); err != nil {
+		return err
+	}
+
+	// Move tmp -> dst
+	if err := osutil.Rename(tmp, dst); err != nil {
+		if err := osutil.Rename(tmp, src); err != nil {
+			jirix.Logger.Errorf("Could not move %s to %s, original contents are in %s. Please complete the move manually", src, dst, tmp)
+		}
+		return err
+	}
+
+	return nil
+}
\ No newline at end of file
diff --git a/project/project_test.go b/project/project_test.go
index 08b17e4..bb439c4 100644
--- a/project/project_test.go
+++ b/project/project_test.go
@@ -1275,6 +1275,43 @@
 	checkReadme(t, fake.X, localProjects[1], "initial readme")
 }
 
+// TestUpdateUniverseMovedProjectSelf checks that UpdateUniverse can move a
+// project to a path currently nested within itself.
+func TestUpdateUniverseMovedProjectSelf(t *testing.T) {
+	localProjects, fake, cleanup := setupUniverse(t)
+	defer cleanup()
+	if err := fake.UpdateUniverse(false); err != nil {
+		t.Fatal(err)
+	}
+
+	// Update the local path at which project 1 is located.
+	m, err := fake.ReadRemoteManifest()
+	if err != nil {
+		t.Fatal(err)
+	}
+	oldProjectPath := localProjects[1].Path
+	localProjects[1].Path = filepath.Join(oldProjectPath, "new-project-path")
+	projects := []project.Project{}
+	for _, p := range m.Projects {
+		if p.Name == localProjects[1].Name {
+			p.Path = localProjects[1].Path
+		}
+		projects = append(projects, p)
+	}
+	m.Projects = projects
+	if err := fake.WriteRemoteManifest(m); err != nil {
+		t.Fatal(err)
+	}
+	// Check that UpdateUniverse() moves the local copy of the project 1.
+	if err := fake.UpdateUniverse(false); err != nil {
+		t.Fatal(err)
+	}
+	if err := dirExists(localProjects[2].Path); err != nil {
+		t.Fatalf("expected project %q at path %q to exist but it did not", localProjects[1].Name, localProjects[1].Path)
+	}
+	checkReadme(t, fake.X, localProjects[1], "initial readme")
+}
+
 // TestUpdateUniverseChangeRemote checks that UpdateUniverse can change remote
 // of a project.
 func TestUpdateUniverseChangeRemote(t *testing.T) {
diff --git a/x.go b/x.go
index fcd3a4f..0362e2f 100644
--- a/x.go
+++ b/x.go
@@ -458,6 +458,16 @@
 	return filepath.Join(x.RootMetaDir(), "scripts")
 }
 
+// SwapDir returns the path to the swap directory. This is used
+// to stage moves of direcories that may be moving into subdirectories
+// of themselves or to handle unnesting of repositories.
+//
+// We use a directory in `.jiri_root` to prevent the complexities of an
+// arbitrary $TMPDIR which can cross mountpoints/filesystems.
+func (x *X) SwapDir() string {
+	return filepath.Join(x.RootMetaDir(), "swap")
+}
+
 // UpdateHistoryDir returns the path to the update history directory.
 func (x *X) UpdateHistoryDir() string {
 	return filepath.Join(x.RootMetaDir(), "update_history")