diff --git a/.claude-plugin/marketplace.json b/.claude-plugin/marketplace.json
index a4e9729..c3d6bd9 100644
--- a/.claude-plugin/marketplace.json
+++ b/.claude-plugin/marketplace.json
@@ -8,10 +8,7 @@
     {
       "name": "harness-engineering",
       "description": "Readiness analysis and enforcement scaffolding for AI coding agent projects.",
-      "source": {
-        "source": "github",
-        "repo": "jrenaldi79/harness-engineering"
-      },
+      "source": "./",
       "homepage": "https://github.com/jrenaldi79/harness-engineering"
     }
   ]
diff --git a/CLAUDE.md b/CLAUDE.md
index 397087e..54fa7a7 100644
--- a/CLAUDE.md
+++ b/CLAUDE.md
@@ -112,6 +112,7 @@ tests/
     ├── init-project.test.js  # Tests for skills/setup/scripts/init-project.js
     ├── install-enforcement.test.js  # Tests for skills/setup/scripts/install-enforcement.js
     ├── marketplace-schema.test.js  # Tests for .claude-plugin/marketplace.json schema validity.
+    ├── plugin-cache-recursion.test.js  # Tests for plugin cache recursion bug (ENAMETOOLONG).
     ├── README.md
     ├── release.test.js  # Tests for scripts/release.sh — validates version bumping, changelog
     ├── repo-generate-docs.test.js  # Tests for scripts/repo-generate-docs.js — the repo-level CLAUDE.md
diff --git a/tests/evals/test-marketplace-install.sh b/tests/evals/test-marketplace-install.sh
index 87eddc8..79801cb 100755
--- a/tests/evals/test-marketplace-install.sh
+++ b/tests/evals/test-marketplace-install.sh
@@ -149,6 +149,19 @@ fi
 
 pass "Plugin installed successfully"
 
+# Check for recursive cache nesting (ENAMETOOLONG bug)
+# If the plugin source is self-referential, Claude Code creates deeply nested
+# directories like harness-engineering/1.0.0/harness-engineering/1.0.0/...
+CACHE_DIR="$HOME/.claude/plugins/cache"
+if [ -d "$CACHE_DIR" ]; then
+  NESTED=$(find "$CACHE_DIR" -maxdepth 6 -type d -name "$PLUGIN_NAME" 2>/dev/null | wc -l)
+  if [ "$NESTED" -gt 2 ]; then
+    fail "Recursive cache nesting detected ($NESTED nested '$PLUGIN_NAME' dirs in cache). Self-referential source in marketplace.json?"
+  else
+    pass "No recursive cache nesting"
+  fi
+fi
+
 # Verify plugin is listed
 PLUGIN_LIST=$(cd "$TMP_DIR" && claude plugin list 2>/dev/null) || true
 echo "$PLUGIN_LIST" > "$RESULT_DIR/plugin-list-output.txt"
diff --git a/tests/scripts/marketplace-schema.test.js b/tests/scripts/marketplace-schema.test.js
index 363b08e..d787394 100644
--- a/tests/scripts/marketplace-schema.test.js
+++ b/tests/scripts/marketplace-schema.test.js
@@ -5,6 +5,9 @@
  * so that `claude plugin marketplace add` can register the marketplace
  * and `claude plugin install` can install plugins from it.
  *
+ * Also detects self-referential plugin sources that cause recursive
+ * caching (ENAMETOOLONG errors during plugin install).
+ *
  * Can be run standalone: node tests/scripts/marketplace-schema.test.js
  * Or via Jest if a jest config is present.
  */
@@ -21,6 +24,26 @@ const MARKETPLACE_PATH = path.resolve(
 
 const VALID_SOURCE_TYPES = ['github', 'url', 'git-subdir', 'npm'];
 
+/**
+ * Derive the marketplace's GitHub repo identifier (owner/repo, lowercase)
+ * from plugin homepage URLs or the marketplace name. Returns null if the
+ * repo cannot be determined.
+ */
+function deriveMarketplaceRepo(manifest) {
+  // Check plugin homepage URLs for GitHub repo references
+  if (Array.isArray(manifest.plugins)) {
+    for (const p of manifest.plugins) {
+      if (typeof p.homepage === 'string') {
+        const match = p.homepage.match(
+          /github\.com\/([^/]+\/[^/]+?)(?:\.git)?(?:\/|$)/
+        );
+        if (match) return match[1].toLowerCase();
+      }
+    }
+  }
+  return null;
+}
+
 function validate() {
   const raw = fs.readFileSync(MARKETPLACE_PATH, 'utf8');
   const manifest = JSON.parse(raw);
@@ -60,6 +83,11 @@ function validate() {
   if (!Array.isArray(manifest.plugins) || manifest.plugins.length === 0) {
     errors.push('plugins must be a non-empty array');
   } else {
+    // Derive the marketplace repo from the homepage or known repo name.
+    // Used to detect self-referential GitHub sources that cause recursive
+    // caching and ENAMETOOLONG errors during plugin install.
+    const marketplaceRepo = deriveMarketplaceRepo(manifest);
+
     for (let i = 0; i < manifest.plugins.length; i++) {
       const p = manifest.plugins[i];
       const prefix = `plugins[${i}]`;
@@ -68,21 +96,37 @@ function validate() {
         errors.push(`${prefix}.name must be a non-empty string`);
       }
 
-      // source must be an object with a valid source type
+      // source can be a relative path string (e.g. "./plugins/my-plugin")
+      // or an object with a source type
       if (typeof p.source === 'string') {
-        errors.push(
-          `${prefix}.source must be an object (e.g. {"source": "github", "repo": "owner/repo"}), got string "${p.source}"`
-        );
+        if (!p.source.startsWith('./')) {
+          errors.push(
+            `${prefix}.source string must start with "./" (relative path), got "${p.source}"`
+          );
+        }
       } else if (
         typeof p.source !== 'object' ||
         p.source === null ||
         Array.isArray(p.source)
       ) {
-        errors.push(`${prefix}.source must be an object`);
+        errors.push(`${prefix}.source must be a string (relative path) or an object`);
       } else if (!VALID_SOURCE_TYPES.includes(p.source.source)) {
         errors.push(
           `${prefix}.source.source must be one of: ${VALID_SOURCE_TYPES.join(', ')} (got "${p.source.source}")`
         );
+      } else if (p.source.source === 'github' && marketplaceRepo) {
+        // Detect self-referential GitHub sources: when a plugin's GitHub
+        // source points to the same repo that hosts the marketplace, Claude
+        // Code re-clones the repo inside its own cache on every install,
+        // creating deeply nested directories until ENAMETOOLONG.
+        const pluginRepo = (p.source.repo || '').toLowerCase();
+        if (pluginRepo === marketplaceRepo) {
+          errors.push(
+            `${prefix}.source is self-referential: GitHub source "${p.source.repo}" ` +
+            `points to the same repo as the marketplace. Use a relative path ` +
+            `(e.g. "source": "./") instead to avoid recursive caching (ENAMETOOLONG).`
+          );
+        }
       }
     }
   }
diff --git a/tests/scripts/plugin-cache-recursion.test.js b/tests/scripts/plugin-cache-recursion.test.js
new file mode 100644
index 0000000..155eda2
--- /dev/null
+++ b/tests/scripts/plugin-cache-recursion.test.js
@@ -0,0 +1,253 @@
+/**
+ * Tests for plugin cache recursion bug (ENAMETOOLONG).
+ *
+ * Reproduces the recursive caching behavior that occurs when marketplace.json
+ * uses a GitHub source pointing to the same repo that hosts the marketplace.
+ * Claude Code copies the full repo into ~/.claude/plugins/cache/<name>/<version>/,
+ * then processes the marketplace.json found inside the cached copy, re-cloning
+ * into a nested subdirectory — repeating until the path exceeds OS limits.
+ *
+ * This test simulates that caching loop to verify:
+ *   1. The OLD config (self-referential GitHub source) triggers ENAMETOOLONG
+ *   2. The NEW config (relative path source) does NOT trigger recursion
+ */
+
+'use strict';
+
+const fs = require('node:fs');
+const os = require('node:os');
+const path = require('node:path');
+
+const PLUGIN_JSON_PATH = path.resolve(
+  __dirname,
+  '../../.claude-plugin/plugin.json'
+);
+const MARKETPLACE_JSON_PATH = path.resolve(
+  __dirname,
+  '../../.claude-plugin/marketplace.json'
+);
+
+// Linux max path length (PATH_MAX)
+const PATH_MAX = 4096;
+
+/**
+ * Simulate Claude Code's plugin caching behavior.
+ *
+ * When Claude Code installs a plugin from a marketplace:
+ *   1. It reads marketplace.json to find the plugin source
+ *   2. For GitHub sources, it clones the repo into the cache
+ *   3. The cached copy is at: ~/.claude/plugins/cache/<name>/<version>/
+ *   4. If the cached copy contains a marketplace.json with a GitHub source
+ *      pointing to the same repo, Claude Code clones AGAIN inside the cache
+ *   5. This repeats, building paths like:
+ *      cache/harness-engineering/1.2.1/harness-engineering/1.2.1/...
+ *
+ * Returns the path depth at which ENAMETOOLONG would occur, or -1 if
+ * no recursion happens.
+ */
+function simulateCacheRecursion(marketplaceJson, pluginJson) {
+  const marketplace = JSON.parse(marketplaceJson);
+  const plugin = JSON.parse(pluginJson);
+
+  const pluginName = plugin.name || marketplace.plugins[0].name;
+  const pluginVersion = plugin.version || '1.0.0';
+
+  // Base cache path (realistic home directory)
+  const baseCachePath = path.join(
+    os.homedir(),
+    '.claude',
+    'plugins',
+    'cache'
+  );
+
+  let currentPath = baseCachePath;
+  let depth = 0;
+
+  for (const entry of marketplace.plugins) {
+    // Only GitHub object sources trigger re-cloning
+    if (
+      typeof entry.source === 'object' &&
+      entry.source !== null &&
+      entry.source.source === 'github'
+    ) {
+      // Simulate the recursive caching loop
+      while (currentPath.length < PATH_MAX) {
+        depth++;
+        // Claude Code creates: <cache>/<pluginName>/<version>/
+        currentPath = path.join(currentPath, pluginName, pluginVersion);
+
+        // Inside the cached copy, the full repo is present including
+        // .claude-plugin/marketplace.json. If Claude Code processes it
+        // and finds the same GitHub source, it clones again.
+        // The loop continues until the path is too long.
+      }
+      return { depth, pathLength: currentPath.length, recursion: true };
+    }
+
+    // Relative path sources (e.g. "./") don't trigger re-cloning.
+    // The plugin is already in the marketplace directory — Claude Code
+    // copies it to the cache once and stops.
+    if (typeof entry.source === 'string' && entry.source.startsWith('./')) {
+      currentPath = path.join(baseCachePath, pluginName, pluginVersion);
+      return { depth: 1, pathLength: currentPath.length, recursion: false };
+    }
+  }
+
+  return { depth: 0, pathLength: currentPath.length, recursion: false };
+}
+
+// ─── The OLD marketplace.json (self-referential GitHub source) ───
+const OLD_MARKETPLACE = JSON.stringify({
+  name: 'harness-engineering',
+  owner: { name: 'John Renaldi' },
+  plugins: [
+    {
+      name: 'harness-engineering',
+      source: {
+        source: 'github',
+        repo: 'jrenaldi79/harness-engineering',
+      },
+      homepage: 'https://github.com/jrenaldi79/harness-engineering',
+    },
+  ],
+});
+
+// ─── Helper: build the old marketplace.json with a given plugin.json ───
+function readCurrentPluginJson() {
+  return fs.readFileSync(PLUGIN_JSON_PATH, 'utf8');
+}
+
+function readCurrentMarketplaceJson() {
+  return fs.readFileSync(MARKETPLACE_JSON_PATH, 'utf8');
+}
+
+describe('plugin cache recursion (ENAMETOOLONG reproduction)', () => {
+  describe('OLD config: self-referential GitHub source', () => {
+    it('triggers recursive caching that exceeds PATH_MAX', () => {
+      const pluginJson = readCurrentPluginJson();
+      const result = simulateCacheRecursion(OLD_MARKETPLACE, pluginJson);
+
+      expect(result.recursion).toBe(true);
+      expect(result.pathLength).toBeGreaterThan(PATH_MAX);
+      // On Linux, PATH_MAX is 4096. Each nesting adds ~40 chars
+      // ("harness-engineering/1.2.1/"), so ~100 levels to overflow.
+      expect(result.depth).toBeGreaterThan(10);
+    });
+
+    it('reproduces the exact nested directory pattern users reported', () => {
+      const pluginJson = readCurrentPluginJson();
+      const plugin = JSON.parse(pluginJson);
+      const name = plugin.name;
+      const version = plugin.version;
+
+      // Build the recursive path manually to show what users saw
+      const baseCachePath = path.join(
+        os.homedir(),
+        '.claude',
+        'plugins',
+        'cache'
+      );
+      const segment = path.join(name, version);
+      let recursivePath = baseCachePath;
+      const nestings = [];
+
+      for (let i = 0; i < 5; i++) {
+        recursivePath = path.join(recursivePath, segment);
+        nestings.push(recursivePath);
+      }
+
+      // This is exactly what the user's /doctor output showed:
+      // harness-engineering/1.x.x/harness-engineering/1.x.x/...
+      const pattern = new RegExp(
+        `(${name}/${version}/){2,}`.replace(/\./g, '\\.')
+      );
+      expect(recursivePath).toMatch(pattern);
+
+      // After enough nesting, the path blows past filesystem limits
+      let fullPath = baseCachePath;
+      let depth = 0;
+      while (fullPath.length < PATH_MAX) {
+        fullPath = path.join(fullPath, segment);
+        depth++;
+      }
+      expect(fullPath.length).toBeGreaterThan(PATH_MAX);
+    });
+
+    it('would hit ENAMETOOLONG trying to create a file in the nested cache', () => {
+      // Simulate creating an actual file at the recursive path
+      const tmpDir = fs.mkdtempSync(path.join(os.tmpdir(), 'cache-test-'));
+
+      try {
+        const pluginJson = readCurrentPluginJson();
+        const plugin = JSON.parse(pluginJson);
+        const segment = path.join(plugin.name, plugin.version);
+
+        // Build a path that exceeds filesystem limits
+        let deepPath = tmpDir;
+        for (let i = 0; i < 200; i++) {
+          deepPath = path.join(deepPath, segment);
+        }
+
+        // This MUST throw ENAMETOOLONG (or ENOENT on some systems)
+        expect(() => {
+          fs.mkdirSync(deepPath, { recursive: true });
+        }).toThrow();
+      } finally {
+        fs.rmSync(tmpDir, { recursive: true, force: true });
+      }
+    });
+  });
+
+  describe('NEW config: relative path source (FIXED)', () => {
+    it('does NOT trigger recursive caching', () => {
+      const pluginJson = readCurrentPluginJson();
+      const marketplaceJson = readCurrentMarketplaceJson();
+      const result = simulateCacheRecursion(marketplaceJson, pluginJson);
+
+      expect(result.recursion).toBe(false);
+      expect(result.depth).toBe(1);
+    });
+
+    it('cache path stays well within PATH_MAX', () => {
+      const pluginJson = readCurrentPluginJson();
+      const marketplaceJson = readCurrentMarketplaceJson();
+      const result = simulateCacheRecursion(marketplaceJson, pluginJson);
+
+      expect(result.pathLength).toBeLessThan(PATH_MAX);
+      // A single level: ~/.claude/plugins/cache/harness-engineering/1.2.1/
+      // should be well under 200 chars
+      expect(result.pathLength).toBeLessThan(200);
+    });
+
+    it('uses a relative path source in marketplace.json', () => {
+      const marketplaceJson = readCurrentMarketplaceJson();
+      const marketplace = JSON.parse(marketplaceJson);
+
+      const plugin = marketplace.plugins[0];
+      expect(typeof plugin.source).toBe('string');
+      expect(plugin.source).toBe('./');
+    });
+
+    it('can create the single-level cache path without errors', () => {
+      const tmpDir = fs.mkdtempSync(path.join(os.tmpdir(), 'cache-test-'));
+
+      try {
+        const pluginJson = readCurrentPluginJson();
+        const plugin = JSON.parse(pluginJson);
+
+        const cachePath = path.join(tmpDir, plugin.name, plugin.version);
+
+        // This should succeed — single level, short path
+        fs.mkdirSync(cachePath, { recursive: true });
+        expect(fs.existsSync(cachePath)).toBe(true);
+
+        // Write a marker file to prove it works
+        const markerFile = path.join(cachePath, 'plugin.json');
+        fs.writeFileSync(markerFile, pluginJson);
+        expect(fs.existsSync(markerFile)).toBe(true);
+      } finally {
+        fs.rmSync(tmpDir, { recursive: true, force: true });
+      }
+    });
+  });
+});