diff -r c64f298bcb81 distutils2/manifest.py
--- a/distutils2/manifest.py	Wed Apr 20 01:15:17 2011 +0530
+++ b/distutils2/manifest.py	Wed Apr 20 01:15:54 2011 +0530
@@ -117,6 +117,9 @@
         self.sort()
         self.remove_duplicates()
         content = self.files[:]
+        # value of content needs to be changed from 'somedir/somefile' to 'somefile'
+        # issue 10932 
+        content = [i.split('/')[-1:][0] for i in content]
         content.insert(0, '# file GENERATED by distutils, do NOT edit')
         logging.info("writing manifest file %r", path)
         write_file(path, content)
diff -r c64f298bcb81 distutils2/tests/test_command_sdist.py
--- a/distutils2/tests/test_command_sdist.py	Wed Apr 20 01:15:17 2011 +0530
+++ b/distutils2/tests/test_command_sdist.py	Wed Apr 20 01:15:54 2011 +0530
@@ -236,6 +236,14 @@
         manifest = open(join(self.tmp_dir, 'MANIFEST')).read()
         self.assertEqual(manifest, MANIFEST % {'sep': os.sep})
         
+        # compare the expected content in zipfile with the original content in the zipfile (Issue 10932).
+        # It means that 'config', ['cfg/data.cfg']) will create a file in config/data.cfg, not config/cfg/data.cfg     
+        expected_content = ['fake-1.0/file.txt', 'fake-1.0/inroot.txt', 'fake-1.0/__init__.py', 
+                            'fake-1.0/PKG-INFO', 'fake-1.0/doc.txt', 'fake-1.0/other_file.txt', 
+                            'fake-1.0/data.dt', 'fake-1.0/script.py', 'fake-1.0/doc.dat']
+
+        self.assertEqual(expected_content, content)        
+
     @unittest.skipUnless(zlib, "requires zlib")
     def test_metadata_check_option(self):
         # testing the `check-metadata` option