diff --git a/.github/workflows/test.yml b/.github/workflows/test.yml
index 0b876cc..f61d94d 100644
--- a/.github/workflows/test.yml
+++ b/.github/workflows/test.yml
@@ -430,6 +430,49 @@ jobs:
           PY
         shell: bash
 
+  test-activate-environment-no-project:
+    runs-on: ubuntu-latest
+    steps:
+      - uses: actions/checkout@de0fac2e4500dabe0009e67214ff5f5447ce83dd # v6.0.2
+        with:
+          persist-credentials: false
+      - name: Create incompatible pyproject.toml
+        run: |
+          cat > pyproject.toml <<'EOF'
+          [project]
+          name = "test-no-project"
+          version = "0.1.0"
+
+          [dependency-groups]
+          dev = [
+              "-e file:///${PROJECT_ROOT}/projects/pkg",
+          ]
+          EOF
+        shell: bash
+      - name: Install latest version with no-project
+        id: setup-uv
+        uses: ./
+        with:
+          python-version: 3.13.1t
+          activate-environment: true
+          no-project: true
+      - name: Verify packages can be installed
+        run: uv pip install pip
+        shell: bash
+      - name: Verify output venv is set
+        run: |
+          if [ -z "$UV_VENV" ]; then
+            echo "output venv is not set"
+            exit 1
+          fi
+          if [ ! -d "$UV_VENV" ]; then
+            echo "output venv not point to a directory: $UV_VENV"
+            exit 1
+          fi
+        shell: bash
+        env:
+          UV_VENV: ${{ steps.setup-uv.outputs.venv }}
+
   test-debian-unstable:
     runs-on: ubuntu-latest
     container: debian:unstable
@@ -1057,6 +1100,7 @@ jobs:
       - test-python-version
       - test-activate-environment
       - test-activate-environment-custom-path
+      - test-activate-environment-no-project
       - test-debian-unstable
       - test-musl
       - test-cache-key-os-version
diff --git a/README.md b/README.md
index b7bfb1b..5a7be53 100644
--- a/README.md
+++ b/README.md
@@ -62,6 +62,9 @@ Have a look under [Advanced Configuration](#advanced-configuration) for detailed
     # Custom path for the virtual environment when using activate-environment (default: .venv in the working directory)
     venv-path: ""
 
+    # Pass --no-project when creating the venv with activate-environment.
+    no-project: "false"
+
     # The directory to execute all commands in and look for files such as pyproject.toml
     working-directory: ""
 
diff --git a/action-types.yml b/action-types.yml
index 61335a0..804f0e7 100644
--- a/action-types.yml
+++ b/action-types.yml
@@ -11,6 +11,8 @@ inputs:
     type: boolean
   venv-path:
     type: string
+  no-project:
+    type: boolean
   working-directory:
     type: string
   checksum:
diff --git a/action.yml b/action.yml
index 8882beb..5ae9eca 100644
--- a/action.yml
+++ b/action.yml
@@ -18,6 +18,9 @@ inputs:
   venv-path:
     description: "Custom path for the virtual environment when using activate-environment. Defaults to '.venv' in the working directory."
     default: ""
+  no-project:
+    description: "Pass --no-project when creating the venv with activate-environment."
+    default: "false"
   working-directory:
     description: "The directory to execute all commands in and look for files such as pyproject.toml"
     default: ${{ github.workspace }}
diff --git a/dist/save-cache/index.cjs b/dist/save-cache/index.cjs
index 60bdd2c..7e7c9a7 100644
--- a/dist/save-cache/index.cjs
+++ b/dist/save-cache/index.cjs
@@ -62968,6 +62968,7 @@ function loadInputs() {
   const versionFile = getVersionFile(workingDirectory);
   const pythonVersion = getInput("python-version");
   const activateEnvironment = getBooleanInput("activate-environment");
+  const noProject = getBooleanInput("no-project");
   const venvPath = getVenvPath(workingDirectory, activateEnvironment);
   const checksum = getInput("checksum");
   const enableCache = getEnableCache();
@@ -63004,6 +63005,7 @@ function loadInputs() {
     ignoreEmptyWorkdir,
     ignoreNothingToCache,
     manifestFile,
+    noProject,
     pruneCache: pruneCache2,
     pythonDir,
     pythonVersion,
diff --git a/dist/setup/index.cjs b/dist/setup/index.cjs
index 731ea2b..724871c 100644
--- a/dist/setup/index.cjs
+++ b/dist/setup/index.cjs
@@ -96970,6 +96970,7 @@ function loadInputs() {
   const versionFile = getVersionFile(workingDirectory);
   const pythonVersion = getInput("python-version");
   const activateEnvironment2 = getBooleanInput("activate-environment");
+  const noProject = getBooleanInput("no-project");
   const venvPath = getVenvPath(workingDirectory, activateEnvironment2);
   const checksum = getInput("checksum");
   const enableCache = getEnableCache();
@@ -97006,6 +97007,7 @@ function loadInputs() {
     ignoreEmptyWorkdir,
     ignoreNothingToCache,
     manifestFile,
+    noProject,
     pruneCache,
     pythonDir,
     pythonVersion,
@@ -97385,13 +97387,17 @@ async function activateEnvironment(inputs) {
       );
     }
     info(`Creating and activating python venv at ${inputs.venvPath}...`);
-    await exec("uv", [
+    const venvArgs = [
       "venv",
       inputs.venvPath,
       "--directory",
       inputs.workingDirectory,
       "--clear"
-    ]);
+    ];
+    if (inputs.noProject) {
+      venvArgs.push("--no-project");
+    }
+    await exec("uv", venvArgs);
     let venvBinPath = `${inputs.venvPath}${path16.sep}bin`;
     if (process.platform === "win32") {
       venvBinPath = `${inputs.venvPath}${path16.sep}Scripts`;
diff --git a/src/setup-uv.ts b/src/setup-uv.ts
index 33d9d9b..2957541 100644
--- a/src/setup-uv.ts
+++ b/src/setup-uv.ts
@@ -218,13 +218,17 @@ async function activateEnvironment(inputs: SetupInputs): Promise<void> {
     }
 
     core.info(`Creating and activating python venv at ${inputs.venvPath}...`);
-    await exec.exec("uv", [
+    const venvArgs = [
       "venv",
       inputs.venvPath,
       "--directory",
       inputs.workingDirectory,
       "--clear",
-    ]);
+    ];
+    if (inputs.noProject) {
+      venvArgs.push("--no-project");
+    }
+    await exec.exec("uv", venvArgs);
 
     let venvBinPath = `${inputs.venvPath}${path.sep}bin`;
     if (process.platform === "win32") {
diff --git a/src/utils/inputs.ts b/src/utils/inputs.ts
index be8ce83..551144c 100644
--- a/src/utils/inputs.ts
+++ b/src/utils/inputs.ts
@@ -22,6 +22,7 @@ export interface SetupInputs {
   versionFile: string;
   pythonVersion: string;
   activateEnvironment: boolean;
+  noProject: boolean;
   venvPath: string;
   checksum: string;
   enableCache: boolean;
@@ -49,6 +50,7 @@ export function loadInputs(): SetupInputs {
   const versionFile = getVersionFile(workingDirectory);
   const pythonVersion = core.getInput("python-version");
   const activateEnvironment = core.getBooleanInput("activate-environment");
+  const noProject = core.getBooleanInput("no-project");
   const venvPath = getVenvPath(workingDirectory, activateEnvironment);
   const checksum = core.getInput("checksum");
   const enableCache = getEnableCache();
@@ -87,6 +89,7 @@ export function loadInputs(): SetupInputs {
     ignoreEmptyWorkdir,
     ignoreNothingToCache,
     manifestFile,
+    noProject,
     pruneCache,
     pythonDir,
     pythonVersion,