diff --git a/features/dist-archive.feature b/features/dist-archive.feature
index e5a5132..72cd9d4 100644
--- a/features/dist-archive.feature
+++ b/features/dist-archive.feature
@@ -224,3 +224,37 @@ Feature: Generate a distribution archive of a project
     And the wp-content/plugins/hello-world/hello-world.php file should exist
     And the wp-content/plugins/hello-world/.travis.yml file should not exist
     And the wp-content/plugins/hello-world/bin directory should not exist
+
+Scenario: Avoids recursive symlink
+    Given a WP install in wordpress
+    And a .distignore file:
+      """
+      wp-content
+      wordpress
+      """
+
+    When I run `mkdir -p wp-content/plugins`
+    Then STDERR should be empty
+
+    When I run `rm -rf wordpress/wp-content`
+    Then STDERR should be empty
+
+    When I run `ln -s {RUN_DIR}/wp-content {RUN_DIR}/wordpress/wp-content`
+    Then STDERR should be empty
+
+    When I run `wp scaffold plugin hello-world --path=wordpress`
+    Then the wp-content/plugins/hello-world directory should exist
+    And the wp-content/plugins/hello-world/hello-world.php file should exist
+
+    When I run `mv wp-content/plugins/hello-world/hello-world.php .`
+    Then STDERR should be empty
+
+    When I run `rm -rf wp-content/plugins/hello-world`
+    Then STDERR should be empty
+
+    When I run `ln -s {RUN_DIR} {RUN_DIR}/wp-content/plugins/hello-world`
+    Then STDERR should be empty
+    And the wp-content/plugins/hello-world/hello-world.php file should exist
+
+    When I run `wp dist-archive . --plugin-dirname=$(basename "{RUN_DIR}")`
+    Then STDERR should be empty
diff --git a/src/Dist_Archive_Command.php b/src/Dist_Archive_Command.php
index 024171e..4d7c13b 100644
--- a/src/Dist_Archive_Command.php
+++ b/src/Dist_Archive_Command.php
@@ -78,7 +78,8 @@ public function __invoke( $args, $assoc_args ) {
 
 		$maybe_ignored_files = explode( PHP_EOL, file_get_contents( $dist_ignore_path ) );
 		$ignored_files       = array();
-		$archive_base        = basename( $path );
+		$source_base         = basename( $path );
+		$archive_base        = isset( $assoc_args['plugin-dirname'] ) ? rtrim( $assoc_args['plugin-dirname'], '/' ) : $source_base;
 		foreach ( $maybe_ignored_files as $file ) {
 			$file = trim( $file );
 			if ( 0 === strpos( $file, '#' ) || empty( $file ) ) {
@@ -119,7 +120,77 @@ public function __invoke( $args, $assoc_args ) {
 			}
 		}
 
-		if ( isset( $assoc_args['plugin-dirname'] ) && rtrim( $assoc_args['plugin-dirname'], '/' ) !== $archive_base ) {
+		/**
+		 * Given the path to a directory, check are any of the directories inside it symlinks.
+		 *
+		 * If the plugin contains a symlink, we will first copy it to a temp directory, potentially omitting any
+		 * symlinks that are excluded via the `.distignore` file, avoiding recursive loops as described in #57.
+		 *
+		 * @param string $path The filepath to the directory to check.
+		 *
+		 * @return bool
+		 */
+		$is_path_contains_symlink = static function ( $path ) {
+
+			if ( ! is_dir( $path ) ) {
+				throw new Exception( 'Path `' . $path . '` is not a directory' );
+			}
+
+			$iterator = new RecursiveIteratorIterator(
+				new RecursiveDirectoryIterator( $path, RecursiveDirectoryIterator::SKIP_DOTS ),
+				RecursiveIteratorIterator::SELF_FIRST
+			);
+
+			/**
+			 * @var RecursiveIteratorIterator $iterator
+			 * @var SplFileInfo $item
+			 */
+			foreach ( $iterator as $item ) {
+				if ( is_link( $item->getPathname() ) ) {
+					return true;
+				}
+			}
+			return false;
+		};
+
+		/**
+		 * Check a file from the plugin against the list of rules in the `.distignore` file.
+		 *
+		 * @param string $relative_filepath Path to the file from the plugin root.
+		 * @param string[] $distignore_entries List of ignore rules.
+		 *
+		 * @return bool True when the file matches a rule in the `.distignore` file.
+		 */
+		$is_ignored_file = static function ( $relative_filepath, array $distignore_entries ) {
+
+			foreach ( array_filter( $distignore_entries ) as $entry ) {
+
+				// We don't want to quote `*` in regex pattern, later we'll replace it with `.*`.
+				$pattern = str_replace( '*', '*', $entry );
+
+				$pattern = '/' . preg_quote( $pattern, '/' ) . '/';
+
+				$pattern = str_replace( '*', '.*', $pattern );
+
+				// If the entry is tied to the beginning of the path, add the `^` regex symbol.
+				if ( 0 === strpos( $entry, '/' ) ) {
+					$pattern = '/^' . substr( $pattern, 3 );
+				}
+
+				// If the entry begins with `.` (hidden files), tie it to the beginning of directories.
+				if ( 0 === strpos( $entry, '.' ) ) {
+					$pattern = '/[^\/]' . substr( $pattern, 1 );
+				}
+
+				if ( 1 === preg_match( $pattern, $relative_filepath ) ) {
+					return true;
+				}
+			}
+
+			return false;
+		};
+
+		if ( $archive_base !== $source_base || $is_path_contains_symlink( $path ) ) {
 			$plugin_dirname = rtrim( $assoc_args['plugin-dirname'], '/' );
 			$archive_base   = $plugin_dirname;
 			$tmp_dir        = sys_get_temp_dir() . DIRECTORY_SEPARATOR . $plugin_dirname . $version . '.' . time();
@@ -130,6 +201,9 @@ public function __invoke( $args, $assoc_args ) {
 				RecursiveIteratorIterator::SELF_FIRST
 			);
 			foreach ( $iterator as $item ) {
+				if ( $is_ignored_file( $iterator->getSubPathName(), $maybe_ignored_files ) ) {
+					continue;
+				}
 				if ( $item->isDir() ) {
 					mkdir( $new_path . DIRECTORY_SEPARATOR . $iterator->getSubPathName() );
 				} else {