diff --git a/kitty/cocoa_window.m b/kitty/cocoa_window.m
index 32d761c67..6b0dcb854 100644
--- a/kitty/cocoa_window.m
+++ b/kitty/cocoa_window.m
@@ -872,20 +872,29 @@ cocoa_set_app_icon(PyObject UNUSED *self, PyObject *args) {
         PyErr_SetString(PyExc_TypeError, "Empty icon file path");
         return NULL;
     }
-
     NSString *custom_icon_path = [NSString stringWithUTF8String:icon_path];
-    NSString *bundle_path = @"";
-    if (!app_path) {
-        bundle_path = [[NSBundle mainBundle] bundlePath];
-        if (!bundle_path || bundle_path.length == 0) bundle_path = @"/Applications/kitty.app";
-    } else if (app_path[0] != '\0') {
-        bundle_path = [NSString stringWithUTF8String:app_path];
-    }
     if (![[NSFileManager defaultManager] fileExistsAtPath:custom_icon_path]) {
         PyErr_Format(PyExc_FileNotFoundError, "Icon file not found: %s", [custom_icon_path UTF8String]);
         return NULL;
     }
-    if (![[NSFileManager defaultManager] fileExistsAtPath:bundle_path]) {
+
+    NSString *bundle_path = @"";
+    if (!app_path) {
+        bundle_path = [[NSBundle mainBundle] bundlePath];
+        if (!bundle_path || bundle_path.length == 0) bundle_path = @"/Applications/kitty.app";
+        // When compiled from source and run from the launcher folder the bundle path should be `kitty.app` in it
+        if (![bundle_path hasSuffix:@".app"]) {
+            NSString *launcher_app_path = [bundle_path stringByAppendingPathComponent:@"kitty.app"];
+            bundle_path = @"";
+            BOOL is_dir;
+            if ([[NSFileManager defaultManager] fileExistsAtPath:launcher_app_path isDirectory:&is_dir] && is_dir && [[NSWorkspace sharedWorkspace] isFilePackageAtPath:launcher_app_path]) {
+                bundle_path = launcher_app_path;
+            }
+        }
+    } else if (app_path[0] != '\0') {
+        bundle_path = [NSString stringWithUTF8String:app_path];
+    }
+    if (!bundle_path || bundle_path.length == 0 || ![[NSFileManager defaultManager] fileExistsAtPath:bundle_path]) {
         PyErr_Format(PyExc_FileNotFoundError, "Application bundle not found: %s", [bundle_path UTF8String]);
         return NULL;
     }
diff --git a/kitty/main.py b/kitty/main.py
index e49a6c539..93702fe44 100644
--- a/kitty/main.py
+++ b/kitty/main.py
@@ -151,7 +151,11 @@ def set_macos_app_custom_icon() -> None:
             icon_sentinel = os.path.join(bundle_path, 'Icon\r')
             sentinel_mtime = safe_mtime(icon_sentinel)
             if sentinel_mtime is None or sentinel_mtime < custom_icon_mtime:
-                cocoa_set_app_icon(icon_path)
+                try:
+                    cocoa_set_app_icon(icon_path, bundle_path)
+                except (FileNotFoundError, OSError) as e:
+                    log_error(str(e))
+                    log_error('Failed to set custom app icon, ignoring')
             # macOS Dock does not reload icons until it is restarted, so we set
             # the application icon here. This will revert when kitty quits, but
             # cant be helped since there appears to be no way to get the dock