diff --git a/docs/changelog/1042.bugfix.rst b/docs/changelog/1042.bugfix.rst
new file mode 100644
index 0000000000..250208f33a
--- /dev/null
+++ b/docs/changelog/1042.bugfix.rst
@@ -0,0 +1 @@
+fix regression with ``3.5.0``: specifying ``--installpkg`` raises ``AttributeError: 'str' object has no attribute 'basename'``
diff --git a/src/tox/package.py b/src/tox/package.py
index bbd191fdd4..29548c6544 100644
--- a/src/tox/package.py
+++ b/src/tox/package.py
@@ -108,9 +108,9 @@ def get_local_package(config, report, session):
     path = config.option.installpkg
     if not path:
         path = config.sdistsrc
-    path = session._resolve_package(path)
-    report.info("using package {!r}, skipping 'sdist' activity ".format(str(path)))
-    return path
+    py_path = py.path.local(session._resolve_package(path))
+    report.info("using package {!r}, skipping 'sdist' activity ".format(str(py_path)))
+    return py_path
 
 
 def build_package(config, report, session):
diff --git a/tests/unit/test_package.py b/tests/unit/test_package.py
index d46d229d83..383d85ef9e 100644
--- a/tests/unit/test_package.py
+++ b/tests/unit/test_package.py
@@ -56,11 +56,11 @@ def test_make_sdist_distshare(tmpdir, initproj):
     assert package.ext == ".zip"
     assert package == config.temp_dir.join(package.basename)
 
-    assert dist == config.distdir.join(package.basename[len("1-") :])
+    assert dist == config.distdir.join(package.basename[len("1-"):])
     assert dist.check()
     assert os.stat(str(dist)).st_ino == os.stat(str(package)).st_ino
 
-    sdist_share = config.distshare.join(package.basename[len("1-") :])
+    sdist_share = config.distshare.join(package.basename[len("1-"):])
     assert sdist_share.check()
     assert sdist_share.read("rb") == dist.read("rb"), (sdist_share, package)
 
@@ -389,3 +389,18 @@ def build_package(config, report, session):
     assert len(dist_after) == 1
     sdist = dist_after[0]
     assert t1_package != sdist
+
+
+def test_install_via_installpkg(mock_venv, initproj, cmd):
+    base = initproj(
+        "pkg-0.1",
+        filedefs={
+            "tox.ini": """
+                [tox]
+                install_cmd = python -m -c 'print("ok")' -- {opts} {packages}'
+                """
+        },
+    )
+    fake_package = base.ensure(".tox", "dist", "pkg123-0.1.zip")
+    result = cmd("-e", "py", '--notest', '--installpkg', str(fake_package.relto(base)))
+    assert result.ret == 0, result.out