diff --git a/sh/sh_binary.go b/sh/sh_binary.go
index 7bb267d..f28b2b6 100644
--- a/sh/sh_binary.go
+++ b/sh/sh_binary.go
@@ -107,6 +107,8 @@
 
 	testProperties TestProperties
 
+	installDir android.InstallPath
+
 	data       android.Paths
 	testConfig android.Path
 }
@@ -176,13 +178,13 @@
 		ExtraEntries: []android.AndroidMkExtraEntriesFunc{
 			func(entries *android.AndroidMkEntries) {
 				s.customAndroidMkEntries(entries)
+				entries.SetString("LOCAL_MODULE_RELATIVE_PATH", proptools.String(s.properties.Sub_dir))
 			},
 		},
 	}}
 }
 
 func (s *ShBinary) customAndroidMkEntries(entries *android.AndroidMkEntries) {
-	entries.SetString("LOCAL_MODULE_RELATIVE_PATH", proptools.String(s.properties.Sub_dir))
 	entries.SetString("LOCAL_MODULE_SUFFIX", "")
 	entries.SetString("LOCAL_MODULE_STEM", s.outputFilePath.Rel())
 	if len(s.properties.Symlinks) > 0 {
@@ -201,8 +203,14 @@
 	} else if !ctx.Host() && ctx.Config().HasMultilibConflict(ctx.Arch().ArchType) {
 		testDir = filepath.Join(testDir, ctx.Arch().ArchType.String())
 	}
-	installDir := android.PathForModuleInstall(ctx, testDir, proptools.String(s.properties.Sub_dir))
-	s.installedFile = ctx.InstallExecutable(installDir, s.outputFilePath.Base(), s.outputFilePath)
+	if s.SubDir() != "" {
+		// Don't add the module name to the installation path if sub_dir is specified for backward
+		// compatibility.
+		s.installDir = android.PathForModuleInstall(ctx, testDir, s.SubDir())
+	} else {
+		s.installDir = android.PathForModuleInstall(ctx, testDir, s.Name())
+	}
+	s.installedFile = ctx.InstallExecutable(s.installDir, s.outputFilePath.Base(), s.outputFilePath)
 
 	s.data = android.PathsForModuleSrc(ctx, s.testProperties.Data)
 
@@ -229,7 +237,7 @@
 		ExtraEntries: []android.AndroidMkExtraEntriesFunc{
 			func(entries *android.AndroidMkEntries) {
 				s.customAndroidMkEntries(entries)
-
+				entries.SetPath("LOCAL_MODULE_PATH", s.installDir.ToMakePath())
 				entries.AddStrings("LOCAL_COMPATIBILITY_SUITE", s.testProperties.Test_suites...)
 				if s.testConfig != nil {
 					entries.SetPath("LOCAL_FULL_TEST_CONFIG", s.testConfig)
diff --git a/sh/sh_binary_test.go b/sh/sh_binary_test.go
index 6c0d96a..3bfe611 100644
--- a/sh/sh_binary_test.go
+++ b/sh/sh_binary_test.go
@@ -55,7 +55,27 @@
 	return ctx, config
 }
 
-func TestShTestTestData(t *testing.T) {
+func TestShTestSubDir(t *testing.T) {
+	ctx, config := testShBinary(t, `
+		sh_test {
+			name: "foo",
+			src: "test.sh",
+			sub_dir: "foo_test"
+		}
+	`)
+
+	mod := ctx.ModuleForTests("foo", "android_arm64_armv8-a").Module().(*ShTest)
+
+	entries := android.AndroidMkEntriesForTest(t, config, "", mod)[0]
+
+	expectedPath := "/tmp/target/product/test_device/data/nativetest64/foo_test"
+	actualPath := entries.EntryMap["LOCAL_MODULE_PATH"][0]
+	if expectedPath != actualPath {
+		t.Errorf("Unexpected LOCAL_MODULE_PATH expected: %q, actual: %q", expectedPath, actualPath)
+	}
+}
+
+func TestShTest(t *testing.T) {
 	ctx, config := testShBinary(t, `
 		sh_test {
 			name: "foo",
@@ -71,10 +91,17 @@
 	mod := ctx.ModuleForTests("foo", "android_arm64_armv8-a").Module().(*ShTest)
 
 	entries := android.AndroidMkEntriesForTest(t, config, "", mod)[0]
-	expected := []string{":testdata/data1", ":testdata/sub/data2"}
-	actual := entries.EntryMap["LOCAL_TEST_DATA"]
-	if !reflect.DeepEqual(expected, actual) {
-		t.Errorf("Unexpected test data expected: %q, actual: %q", expected, actual)
+
+	expectedPath := "/tmp/target/product/test_device/data/nativetest64/foo"
+	actualPath := entries.EntryMap["LOCAL_MODULE_PATH"][0]
+	if expectedPath != actualPath {
+		t.Errorf("Unexpected LOCAL_MODULE_PATH expected: %q, actual: %q", expectedPath, actualPath)
+	}
+
+	expectedData := []string{":testdata/data1", ":testdata/sub/data2"}
+	actualData := entries.EntryMap["LOCAL_TEST_DATA"]
+	if !reflect.DeepEqual(expectedData, actualData) {
+		t.Errorf("Unexpected test data expected: %q, actual: %q", expectedData, actualData)
 	}
 }