diff --git a/CHANGELOG.md b/CHANGELOG.md
index f846ae5ff..a95ec6ec2 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -10,6 +10,7 @@
 #### Deprecation
 
 #### Bug Fixes
+- Fix installation crash caused by absolute path for `source_entry_path` in default `config/webpacker.yml` coming from `shakapacker` version 6.x - #1216
 
 ## 2.6.2
 
diff --git a/lib/generators/react/install_generator.rb b/lib/generators/react/install_generator.rb
index 694b3e549..7164cfbfc 100644
--- a/lib/generators/react/install_generator.rb
+++ b/lib/generators/react/install_generator.rb
@@ -16,6 +16,19 @@ class InstallGenerator < ::Rails::Generators::Base
         default: false,
         desc: "Don't generate server_rendering.js or config/initializers/react_server_rendering.rb"
 
+      # For Shakapacker below version 7, we need to set relative path for source_entry_path
+      def modify_webpacker_yml
+        webpacker_yml_path = 'config/webpacker.yml'
+        if webpacker? && Pathname.new(webpacker_yml_path).exist?
+          gsub_file(
+            webpacker_yml_path,
+            "source_entry_path: /\n",
+            "source_entry_path: packs\n"
+          )
+          reloaded_webpacker_config
+        end
+      end
+
       # Make an empty `components/` directory in the right place:
       def create_directory
         components_dir = if webpacker?
@@ -119,6 +132,11 @@ def webpack_source_path
           Webpacker::Configuration.source_path.join(Webpacker::Configuration.entry_path) # Webpacker <3
         end
       end
+
+      def reloaded_webpacker_config
+        Webpacker.instance.instance_variable_set(:@config, nil)
+        Webpacker.config
+      end
     end
   end
 end