As stated in the comments, target_include_directories should be given a path to a directory, not to a file.

Moreover, if you want to create a dependency for lib2 on lib1, you should do it through target_link_libraries: a dependency is not only about include directories, but also about compile options, definitions, target properties...

target_sources doesn't work with interface libraries. From this answer, You can use a custom target without commands to associate the sources to a target without impacting the build process (for msvc, QtCreator and other GUI-based tools, this makes the sources accessible through the IDE; AFAIK it's useless for other build tools).

Your cmake may look like this:

add_library(lib1 INTERFACE)
target_sources(lib1 INTERFACE lib1.h)

target_include_directories(lib1 INTERFACE
    "${PROJECT_SOURCE_DIR}/lib1"
)

add_library(lib2 INTERFACE)
if(MSVC)
    add_custom_target(lib2.headers SOURCES lib2.h)
endif()

target_include_directories(lib2 INTERFACE
    "${PROJECT_SOURCE_DIR}/lib2"
)

target_link_libraries(lib2 INTERFACE lib1)

add_executable(project main.cc)
target_link_libraries(project lib2)

Advanced tip: you can specify a different directory in target_include_directories for the build tree and the install tree (see documentation):

target_include_directories(lib1 INTERFACE
    $<BUILD_INTERFACE:${PROJECT_SOURCE_DIR}/lib1>
    $<INSTALL_INTERFACE:${YOUR_INSTALL_DIR}/lib1>
)

Just compiled it on Debian 12, no issues. https://imgur.com/VqgUtJj.png

Looks like you forgot to run the ./deb_get_prereqs.sh script. You can find it in the same directory as the build script.

A .lib is when you create a STATIC (.lib) or SHARED (.lib and .dll) library on Windows. What you want is an INTERFACE library and it generates no files. http://mariobadr.com/creating-a-header-only-library-with-cmake.html has an example. Then you can use the following commands listed here, https://cmake.org/cmake/help/latest/command/add_library.html#interface-libraries, to populate the interface. Notice that it uses INTERFACE not PUBLIC.

target_link_libraries(INTERFACE),
target_link_options(INTERFACE),
target_include_directories(INTERFACE),
target_compile_options(INTERFACE),
target_compile_definitions(INTERFACE), and
target_sources(INTERFACE),

I've never actually used this but I assume it works as documented.

For me (came here from Google), this error occurred when CMake target_sources had only PRIVATE sources, and no PUBLIC sources.

I had to make at least one PUBLIC source file:

old:

target_sources(${PROJECT_NAME}
        PRIVATE
        External/dbscan.cpp

        main.cpp
        )

new:

target_sources(${PROJECT_NAME}
        PRIVATE
        External/dbscan.cpp

        PUBLIC
        main.cpp
        )

Thanks to @ixSci for asking the good question that lead me on the path:

My Core library that was linking to the INTERFACE library did not have any source files in it, only other headers, so there was no compilation output. This causes either CMake or VS (not sure which) to not bring in the additional include directories. Once I added an empty TestSource.cpp into Core and ran CMake again, the include directories appear in the project properties as I expect and I can #include the headers in my files.

Now we need only 8 years for 3.11 to get to all distros we still have to support, 15 for online tutorials to use this and inf for this to propagate to existing projects.