diff --git a/docs/changelog/3165.bugfix.rst b/docs/changelog/3165.bugfix.rst
new file mode 100644
index 000000000..8caad53b9
--- /dev/null
+++ b/docs/changelog/3165.bugfix.rst
@@ -0,0 +1 @@
+Fixed bug where running with --installpkg and multiple envs could not clean up between tests
diff --git a/src/tox/tox_env/python/virtual_env/package/cmd_builder.py b/src/tox/tox_env/python/virtual_env/package/cmd_builder.py
index fd38c91b0..a73ebf1a5 100644
--- a/src/tox/tox_env/python/virtual_env/package/cmd_builder.py
+++ b/src/tox/tox_env/python/virtual_env/package/cmd_builder.py
@@ -1,7 +1,6 @@
 from __future__ import annotations
 
 import glob
-import shutil
 import tarfile
 from functools import partial
 from io import TextIOWrapper
@@ -108,9 +107,8 @@ def extract_install_info(self, for_env: EnvConfigSet, path: Path) -> list[Packag
             package: Package = WheelPackage(path, deps)
         else:  # must be source distribution
             work_dir = self.env_tmp_dir / "sdist-extract"
-            if work_dir.exists():  # pragma: no branch
-                shutil.rmtree(work_dir)  # pragma: no cover
-            work_dir.mkdir()
+            if not work_dir.exists():  # pragma: no branch
+                work_dir.mkdir()
             with tarfile.open(str(path), "r:gz") as tar:
                 tar.extractall(path=str(work_dir))  # noqa: S202
             # the register run env is guaranteed to be called before this
diff --git a/tests/tox_env/python/virtual_env/package/test_package_cmd_builder.py b/tests/tox_env/python/virtual_env/package/test_package_cmd_builder.py
index 5052c6a6b..500e4e237 100644
--- a/tests/tox_env/python/virtual_env/package/test_package_cmd_builder.py
+++ b/tests/tox_env/python/virtual_env/package/test_package_cmd_builder.py
@@ -35,6 +35,16 @@ def test_tox_install_pkg_wheel(tox_project: ToxProjectCreator, pkg_with_extras_p
     assert calls == expected
 
 
+@pytest.fixture(scope="session")
+def pkg_with_sdist(
+    pkg_with_extras_project: Path,
+    pkg_builder: Callable[[Path, Path, list[str], bool], Path],
+) -> Path:
+    dist = pkg_with_extras_project / "dist"
+    pkg_builder(dist, pkg_with_extras_project, ["sdist"], False)
+    return next(dist.iterdir())
+
+
 @pytest.fixture()
 def pkg_with_extras_project_sdist(
     pkg_with_extras_project: Path,
@@ -162,3 +172,22 @@ def test_tox_install_pkg_with_skip_install(
     project = tox_project({"tox.ini": ini, "pyproject.toml": (demo_pkg_inline / "pyproject.toml").read_text()})
     result = project.run("-e", "py", "--installpkg", str(demo_pkg_inline_wheel))
     result.assert_success()
+
+
+def test_run_installpkg_targz(
+    tox_project: ToxProjectCreator,
+    pkg_with_sdist: Path,
+    enable_pip_pypi_access: str | None,  # noqa: ARG001
+) -> None:
+    project = tox_project({
+        "tox.ini": """
+     [tox]
+    envlist = base, flake8
+    [testenv]
+    package = sdist
+    [testenv:base]
+    [testenv:flake8]
+    """
+    })
+    outcome = project.run(f"--installpkg={pkg_with_sdist}")
+    outcome.assert_success()