diff --git a/src/sagemaker/model.py b/src/sagemaker/model.py
index 5d1e2a2b92..56a00478d3 100644
--- a/src/sagemaker/model.py
+++ b/src/sagemaker/model.py
@@ -478,7 +478,7 @@ def _script_mode_env_vars(self):
         dir_name = None
         if self.uploaded_code:
             script_name = self.uploaded_code.script_name
-            if self.enable_network_isolation():
+            if self.repacked_model_data or self.enable_network_isolation():
                 dir_name = "/opt/ml/model/code"
             else:
                 dir_name = self.uploaded_code.s3_prefix
diff --git a/tests/unit/sagemaker/model/test_model.py b/tests/unit/sagemaker/model/test_model.py
index b66fda908d..38aa894c10 100644
--- a/tests/unit/sagemaker/model/test_model.py
+++ b/tests/unit/sagemaker/model/test_model.py
@@ -665,3 +665,25 @@ def test_all_framework_models_add_jumpstart_base_name(
 
         sagemaker_session.create_model.reset_mock()
         sagemaker_session.endpoint_from_production_variants.reset_mock()
+
+
+@patch("sagemaker.utils.repack_model")
+def test_script_mode_model_uses_proper_sagemaker_submit_dir(repack_model, sagemaker_session):
+
+    source_dir = "s3://blah/blah/blah"
+    t = Model(
+        entry_point=ENTRY_POINT_INFERENCE,
+        role=ROLE,
+        sagemaker_session=sagemaker_session,
+        source_dir=source_dir,
+        image_uri=IMAGE_URI,
+        model_data=MODEL_DATA,
+    )
+    t.deploy(instance_type=INSTANCE_TYPE, initial_instance_count=INSTANCE_COUNT)
+
+    assert (
+        sagemaker_session.create_model.call_args_list[0][0][2]["Environment"][
+            "SAGEMAKER_SUBMIT_DIRECTORY"
+        ]
+        == "/opt/ml/model/code"
+    )