diff --git a/src/main.rs b/src/main.rs
index 220d7f5..cc0d196 100644
--- a/src/main.rs
+++ b/src/main.rs
@@ -193,17 +193,30 @@ fn activate_venv(venv_path: &PathBuf) {
     }
 }
 
-fn anchor(shell_override: Option<&str>) {
-    let venv_path = get_venv_path();
-    let cfg_path = venv_path.join("pyvenv.cfg");
-
-    if !venv_path.is_dir() || !cfg_path.exists() {
-        eprintln!(
-            "uv-shell anchor: no .venv found in {}",
-            venv_path.parent().unwrap_or(&venv_path).display()
-        );
-        return;
+/// Walk from `start` up to the filesystem root looking for `.venv/pyvenv.cfg`.
+fn find_venv_upward(start: &std::path::Path) -> Option<PathBuf> {
+    let mut dir = start;
+    loop {
+        let candidate = dir.join(".venv");
+        if candidate.is_dir() && candidate.join("pyvenv.cfg").exists() {
+            return Some(candidate);
+        }
+        match dir.parent() {
+            Some(parent) => dir = parent,
+            None => return None,
+        }
     }
+}
+
+fn anchor(shell_override: Option<&str>) {
+    let cwd = env::current_dir().expect("failed to get current directory");
+    let venv_path = match find_venv_upward(&cwd) {
+        Some(p) => p,
+        None => {
+            eprintln!("uv-shell anchor: no .venv found in {} or any parent directory", cwd.display());
+            return;
+        }
+    };
 
     let bin_dir = get_bin_dir();
     let venv_bin = venv_path.join(bin_dir);
diff --git a/tests/integration.rs b/tests/integration.rs
index 762bde2..a5cbdfc 100644
--- a/tests/integration.rs
+++ b/tests/integration.rs
@@ -76,6 +76,10 @@ fn anchor_no_venv_reports_on_stderr() {
         stderr.contains("no .venv found"),
         "anchor should explain why it produced no output, got: {stderr}"
     );
+    assert!(
+        stderr.contains("or any parent directory"),
+        "anchor should mention traversal in message, got: {stderr}"
+    );
     let _ = fs::remove_dir_all(&dir);
 }
 
@@ -97,6 +101,33 @@ fn anchor_prints_exports_bash() {
     let _ = fs::remove_dir_all(&dir);
 }
 
+#[test]
+fn anchor_finds_venv_in_parent_directory() {
+    // project root has .venv; anchor is run from a subdirectory
+    let dir = tmpdir_with_venv("anchor-traversal");
+    let subdir = dir.join("src/utils");
+    fs::create_dir_all(&subdir).unwrap();
+
+    let out = Command::new(bin())
+        .args(["anchor", "--shell", "bash"])
+        .current_dir(&subdir)
+        .output()
+        .unwrap();
+    assert!(out.status.success());
+
+    let stdout = String::from_utf8_lossy(&out.stdout);
+    assert!(
+        stdout.contains("export VIRTUAL_ENV=\""),
+        "anchor should find .venv two levels up, got:\n{stdout}"
+    );
+    // The VIRTUAL_ENV path should point to the root .venv, not a subdir .venv
+    assert!(
+        stdout.contains(dir.join(".venv").to_str().unwrap()),
+        "VIRTUAL_ENV should point to root .venv"
+    );
+    let _ = fs::remove_dir_all(&dir);
+}
+
 #[test]
 fn anchor_creates_activated_marker() {
     let dir = tmpdir_with_venv("anchor-marker");