diff --git a/build.ps1 b/build.ps1
index a3adf7890..2ee850d14 100755
--- a/build.ps1
+++ b/build.ps1
@@ -44,6 +44,10 @@ using module ./helpers.build.psm1
     .PARAMETER Test
     Determines whether to run Rust and Pester tests for the project.
 
+    .PARAMETER Project
+    Specifies the projects to build. When used with `-Test`, only tests for the selected projects
+    are run.
+
     .PARAMETER CodeCoverage
     Enables code coverage instrumentation using cargo-llvm-cov. When specified, the build and
     tests run with coverage instrumentation enabled and an LCOV report is generated at the path
@@ -178,6 +182,9 @@ begin {
         $BuildData.Projects = $BuildData.Projects | Where-Object -FilterScript {
             $_.Name -in $Project
         }
+        if ($BuildData.Projects.Count -eq 0) {
+            throw "No projects matched the specified project names: $($Project -join ', ')"
+        }
     }
     $VerboseParam = @{}
     if ($VerbosePreference -eq 'Continue' -and -not $Quiet) {
@@ -366,6 +373,9 @@ process {
             $pesterParams = @{
                 UsingADO = $usingADO
             }
+            if ($Project.Count -ge 1) {
+                $pesterParams.Project = $BuildData.Projects
+            }
             if ($null -ne $PesterTestGroup) {
                 $pesterParams.Group = $PesterTestGroup
             }
diff --git a/helpers.build.psm1 b/helpers.build.psm1
index 4c2d64a98..b1f8bdc55 100644
--- a/helpers.build.psm1
+++ b/helpers.build.psm1
@@ -2882,15 +2882,36 @@ function Test-ProjectWithPester {
             Write-Verbose "Updated Pester module location:`n`t$((Get-Module -Name Pester -ListAvailable).Path)"
         }
         $pesterParams = @{
-            Output = 'Detailed'
+            Output      = 'Detailed'
             ErrorAction = 'Stop'
         }
         if ($Project) {
-            $pesterParams.ExcludePath = $Project.RelativePath | Where-Object -FilterScript {
-                $_.Name -notin $Project.Name
+            $projectPath = @($Project.RelativePath)
+            if ($Group) {
+                $projectPath = @(
+                    foreach ($path in $projectPath) {
+                        $normalizedPath = $path -replace '\\', '/'
+                        foreach ($testGroup in $Group) {
+                            if ($normalizedPath -eq '.') {
+                                $testGroup
+                            } elseif (
+                                $normalizedPath -eq $testGroup -or
+                                $normalizedPath.StartsWith("$testGroup/")
+                            ) {
+                                $normalizedPath
+                            } elseif ($testGroup.StartsWith("$normalizedPath/")) {
+                                $testGroup
+                            }
+                        }
+                    }
+                ) | Select-Object -Unique
+                $projectPath = @($projectPath)
             }
-        }
-        if ($Group) {
+            if ($projectPath.Count -eq 0) {
+                throw 'None of the selected projects are in the specified Pester test groups.'
+            }
+            $pesterParams.Path = $projectPath
+        } elseif ($Group) {
             $pesterParams.Path = $Group
         }
     }
diff --git a/tests/helpers.build.pester.tests.ps1 b/tests/helpers.build.pester.tests.ps1
new file mode 100644
index 000000000..42a7f5728
--- /dev/null
+++ b/tests/helpers.build.pester.tests.ps1
@@ -0,0 +1,67 @@
+# Copyright (c) Microsoft Corporation.
+# Licensed under the MIT License.
+
+Describe 'Test-ProjectWithPester' {
+    BeforeAll {
+        Import-Module (Join-Path $PSScriptRoot '..' 'helpers.build.psm1') -Force
+        $buildData = Import-DscBuildData -RefreshProjects
+        $dscProject = $buildData.Projects | Where-Object -Property Name -EQ 'dsc'
+        $fileContentProject = $buildData.Projects | Where-Object -Property Name -EQ 'filecontent'
+    }
+
+    BeforeEach {
+        $originalPSModulePath = $env:PSModulePath
+        Mock Invoke-Pester -ModuleName helpers.build
+    }
+
+    AfterEach {
+        $env:PSModulePath = $originalPSModulePath
+    }
+
+    It 'Runs tests only from the selected project paths' {
+        Test-ProjectWithPester -Project @($dscProject, $fileContentProject)
+
+        Should -Invoke Invoke-Pester -ModuleName helpers.build -Exactly 1 -ParameterFilter {
+            $Path.Count -eq 2 -and
+            $Path -contains 'dsc' -and
+            $Path -contains 'resources/filecontent'
+        }
+    }
+
+    Describe 'build.ps1 project selection' {
+        It 'Fails when no projects match the requested names' {
+            $pwsh = (Get-Process -Id $PID).Path
+            $output = & $pwsh -NoProfile -File (Join-Path $PSScriptRoot '..' 'build.ps1') `
+                -SkipBuild -Test -ExcludeRustTests -ExcludePesterTests -Project 'does-not-exist' 2>&1
+
+            $LASTEXITCODE | Should -Not -Be 0
+            $output -join "`n" | Should -Match 'No projects matched the specified project names: does-not-exist'
+        }
+    }
+
+    It 'Intersects selected projects with Pester test groups' {
+        Test-ProjectWithPester -Project @($dscProject, $fileContentProject) -Group 'resources'
+
+        Should -Invoke Invoke-Pester -ModuleName helpers.build -Exactly 1 -ParameterFilter {
+            $Path.Count -eq 1 -and $Path -contains 'resources/filecontent'
+        }
+    }
+
+    It 'Uses the narrower test group when the root project is selected' {
+        $rootProject = $buildData.Projects | Where-Object -Property Name -EQ 'root'
+
+        Test-ProjectWithPester -Project $rootProject -Group 'resources'
+
+        Should -Invoke Invoke-Pester -ModuleName helpers.build -Exactly 1 -ParameterFilter {
+            $Path.Count -eq 1 -and $Path -contains 'resources'
+        }
+    }
+
+    It 'Fails when selected projects do not belong to a Pester test group' {
+        {
+            Test-ProjectWithPester -Project $dscProject -Group 'resources'
+        } | Should -Throw 'None of the selected projects are in the specified Pester test groups.'
+
+        Should -Invoke Invoke-Pester -ModuleName helpers.build -Exactly 0
+    }
+}