@@ -31,6 +31,7 @@
     do_format_type_alias,
     do_get_template,
     do_order_members,
+    do_source_location,
     do_split_path,
     do_stash_crossref,
 )
@@ -64,6 +65,7 @@
     "do_format_type_alias",
     "do_get_template",
     "do_order_members",
+    "do_source_location",
     "do_split_path",
     "do_stash_crossref",
     "get_handler",
 
@@ -310,6 +310,7 @@ def update_env(self, config: Any) -> None:  # noqa: ARG002
         self.env.filters["filter_objects"] = rendering.do_filter_objects
         self.env.filters["stash_crossref"] = rendering.do_stash_crossref
         self.env.filters["get_template"] = rendering.do_get_template
+        self.env.filters["source_location"] = rendering.do_source_location
         self.env.filters["as_attributes_section"] = rendering.do_as_attributes_section
         self.env.filters["as_functions_section"] = rendering.do_as_functions_section
         self.env.filters["as_classes_section"] = rendering.do_as_classes_section
 
@@ -11,6 +11,7 @@
 from contextlib import suppress
 from dataclasses import replace
 from functools import lru_cache
+from pathlib import Path
 from re import Pattern
 from typing import TYPE_CHECKING, Any, Callable, ClassVar, Literal, TypeVar
 
@@ -592,6 +593,30 @@ def do_get_template(obj: Object | Alias) -> str:
     return f"{name}.html.jinja"
 
 
+def do_source_location(obj: Object | Alias) -> Path:
+    """Get the file path displayed in an object's source block label.
+
+    Environment paths are never displayed: when the object's file lives in
+    a `site-packages` directory (for example a virtual environment inside
+    the current working directory), the path below `site-packages` is
+    returned instead.
+
+    Parameters:
+        obj: A Griffe object.
+
+    Returns:
+        The file path to display.
+    """
+    relative_filepath = obj.relative_filepath
+    parts = relative_filepath.parts
+    if "site-packages" in parts:
+        anchor = len(parts) - 1 - parts[::-1].index("site-packages")
+        return Path(*parts[anchor + 1 :])
+    if relative_filepath.is_absolute():
+        return obj.relative_package_filepath
+    return relative_filepath
+
+
 @pass_context
 def do_as_attributes_section(
     context: Context,  # noqa: ARG001
 
@@ -249,26 +249,14 @@ Context:
               {% if "__init__" in all_members and all_members["__init__"].source %}
                 {% with init = all_members["__init__"] %}
                   <details class="mkdocstrings-source">
-                    <summary>{{ lang.t("Source code in") }} <code>
-                      {%- if init.relative_filepath.is_absolute() -%}
-                        {{ init.relative_package_filepath }}
-                      {%- else -%}
-                        {{ init.relative_filepath }}
-                      {%- endif -%}
-                    </code></summary>
+                    <summary>{{ lang.t("Source code in") }} <code>{{ init|source_location }}</code></summary>
                     {{ init.source|highlight(language="python", linestart=init.lineno or 0, linenums=True) }}
                   </details>
                 {% endwith %}
               {% endif %}
             {% elif class.source %}
               <details class="mkdocstrings-source">
-                <summary>{{ lang.t("Source code in") }} <code>
-                  {%- if class.relative_filepath.is_absolute() -%}
-                    {{ class.relative_package_filepath }}
-                  {%- else -%}
-                    {{ class.relative_filepath }}
-                  {%- endif -%}
-                </code></summary>
+                <summary>{{ lang.t("Source code in") }} <code>{{ class|source_location }}</code></summary>
                 {{ class.source|highlight(language="python", linestart=class.lineno or 0, linenums=True) }}
               </details>
             {% endif %}
 
@@ -146,13 +146,7 @@ Context:
           -#}
           {% if config.show_source and function.source %}
             <details class="mkdocstrings-source">
-              <summary>{{ lang.t("Source code in") }} <code>
-                {%- if function.relative_filepath.is_absolute() -%}
-                  {{ function.relative_package_filepath }}
-                {%- else -%}
-                  {{ function.relative_filepath }}
-                {%- endif -%}
-              </code></summary>
+              <summary>{{ lang.t("Source code in") }} <code>{{ function|source_location }}</code></summary>
               {{ function.source|highlight(language="python", linestart=function.lineno or 0, linenums=True) }}
             </details>
           {% endif %}
 
@@ -208,26 +208,14 @@ Context:
               {% if "__init__" in class.all_members and class.all_members["__init__"].source %}
                 {% with init = class.all_members["__init__"] %}
                   <details class="quote">
-                    <summary>Source code in <code>
-                      {%- if init.relative_filepath.is_absolute() -%}
-                        {{ init.relative_package_filepath }}
-                      {%- else -%}
-                        {{ init.relative_filepath }}
-                      {%- endif -%}
-                    </code></summary>
+                    <summary>Source code in <code>{{ init|source_location }}</code></summary>
                     {{ init.source|highlight(language="python", linestart=init.lineno or 0, linenums=True) }}
                   </details>
                 {% endwith %}
               {% endif %}
             {% elif class.source %}
               <details class="quote">
-                <summary>Source code in <code>
-                  {%- if class.relative_filepath.is_absolute() -%}
-                    {{ class.relative_package_filepath }}
-                  {%- else -%}
-                    {{ class.relative_filepath }}
-                  {%- endif -%}
-                </code></summary>
+                <summary>Source code in <code>{{ class|source_location }}</code></summary>
                 {{ class.source|highlight(language="python", linestart=class.lineno or 0, linenums=True) }}
               </details>
             {% endif %}
 
@@ -11,6 +11,7 @@
 from textwrap import dedent
 from typing import TYPE_CHECKING
 
+import bs4
 import mkdocstrings
 import pytest
 from griffe import (
@@ -333,3 +334,117 @@ def test_specifying_inventory_base_url(handler: PythonHandler) -> None:
     # Assert the URL is based on the provided base URL
     msg = "Expected inventory URL to start with base_url"
     assert item_url.startswith(base_url), msg
+
+
+def _source_labels(html: str) -> list[Path]:
+    soup = bs4.BeautifulSoup(html, features="html.parser")
+    labels = []
+    for summary in soup.find_all("summary"):
+        if "Source code in" in summary.get_text():
+            code_tag = summary.find("code")
+            assert code_tag is not None
+            labels.append(Path(code_tag.get_text(strip=True)))
+    return labels
+
+
+_BASE_CLASS = """
+class Base:
+    '''Base docstring.'''
+
+    def __init__(self) -> None:
+        '''Init docstring.'''
+        self.base_attribute = 0
+
+    def base_method(self) -> None:
+        '''Method docstring.'''
+"""
+
+
+def _write_venv_project(tmp_path: Path, *, single_module: bool) -> None:
+    """Lay out the issue-333 scenario: an in-project virtual environment.
+
+    A `Base` class is "installed" in a `site-packages` directory relative to the
+    current working directory, and the documented package inherits from it.
+    """
+    site_packages = tmp_path / "site-packages"
+    if single_module:
+        site_packages.mkdir(parents=True)
+        (site_packages / "basemod.py").write_text(dedent(_BASE_CLASS))
+        base_module = "basemod"
+    else:
+        base_pkg = site_packages / "basepkg"
+        base_pkg.mkdir(parents=True)
+        (base_pkg / "__init__.py").write_text(dedent(_BASE_CLASS))
+        base_module = "basepkg"
+    pkg = tmp_path / "pkg"
+    pkg.mkdir()
+    (pkg / "__init__.py").write_text(
+        dedent(
+            f"""
+            from {base_module} import Base
+
+            class Model(Base):
+                '''Model docstring.'''
+            """,
+        ),
+    )
+
+
+@pytest.mark.parametrize(
+    "handler",
+    [
+        {"theme": "readthedocs"},
+        {"theme": {"name": "material"}},
+    ],
+    indirect=["handler"],
+)
+@pytest.mark.parametrize(
+    ("single_module", "identifier", "extra_options", "expected_label"),
+    [
+        pytest.param(
+            False,
+            "pkg.Model",
+            {"merge_init_into_class": True},
+            Path("basepkg", "__init__.py"),
+            id="merged-init",
+        ),
+        pytest.param(
+            False,
+            "pkg.Model",
+            {"merge_init_into_class": True, "inherited_members": True},
+            Path("basepkg", "__init__.py"),
+            id="inherited-method",
+        ),
+        pytest.param(False, "basepkg.Base", {}, Path("basepkg", "__init__.py"), id="class-and-methods"),
+        pytest.param(True, "pkg.Model", {"merge_init_into_class": True}, Path("basemod.py"), id="single-module"),
+    ],
+)
+def test_no_environment_path_in_source_labels(
+    *,
+    tmp_path: Path,
+    monkeypatch: pytest.MonkeyPatch,
+    handler: PythonHandler,
+    single_module: bool,
+    identifier: str,
+    extra_options: dict,
+    expected_label: Path,
+) -> None:
+    """Assert source labels never show an environment path, whatever renders them."""
+    _write_venv_project(tmp_path, single_module=single_module)
+    monkeypatch.chdir(tmp_path)
+    # `collect()` reads the search paths lazily from this attribute.
+    handler._paths = [str(tmp_path), str(tmp_path / "site-packages")]
+    base_module = "basemod" if single_module else "basepkg"
+    options = handler.get_options(
+        {
+            "preload_modules": [base_module],
+            "show_source": True,
+            **extra_options,
+        },
+    )
+    html = handler.render(handler.collect(identifier, options), options)
+    labels = _source_labels(html)
+    assert labels
+    assert set(labels) == {expected_label}
+    # The init source body is still rendered.
+    assert "base_attribute" in html