diff --git a/lib/private/tar.bzl b/lib/private/tar.bzl
index 707d17a..f8157cd 100644
--- a/lib/private/tar.bzl
+++ b/lib/private/tar.bzl
@@ -1,5 +1,7 @@
 "Implementation of tar rule"
 
+load("//lib:paths.bzl", "to_repository_relative_path")
+
 TAR_TOOLCHAIN_TYPE = "@aspect_bazel_lib//lib:tar_toolchain_type"
 
 # https://www.gnu.org/software/tar/manual/html_section/Compression.html
@@ -182,7 +184,7 @@ def _to_rlocation_path(file, workspace):
     else:
         return workspace + "/" + file.short_path
 
-def _expand(file, expander, transform = lambda f: f.short_path):
+def _expand(file, expander, transform = to_repository_relative_path):
     expanded = expander.expand(file)
     lines = []
     for e in expanded:
diff --git a/lib/tests/tar/BUILD.bazel b/lib/tests/tar/BUILD.bazel
index 1325a41..1352eb2 100644
--- a/lib/tests/tar/BUILD.bazel
+++ b/lib/tests/tar/BUILD.bazel
@@ -279,3 +279,21 @@ assert_tar_listing(
         "-rwxr-xr-x  0 1000   500        21 Jan  1  2023 lib/tests/tar/src_file",
     ],
 )
+
+# Case 9: Files from a different repository (#697)
+# Note: This test uses an exported file from skylib, so we do not need to create
+# an additional workspace just for this test.
+
+tar(
+    name = "tar_different_repo",
+    srcs = ["@bazel_skylib//:LICENSE"],
+    out = "9.tar",
+)
+
+assert_archive_contains(
+    name = "test_different_repo",
+    archive = "9.tar",
+    expected = [
+        "LICENSE",
+    ],
+)