diff --git a/doc/api/cli.md b/doc/api/cli.md
index 01efb97e31be23..2e9452305878c1 100644
--- a/doc/api/cli.md
+++ b/doc/api/cli.md
@@ -1097,6 +1097,18 @@ generated as part of the test runner output. If no tests are run, a coverage
 report is not generated. See the documentation on
 [collecting code coverage from tests][] for more details.
 
+### `--experimental-test-cwd=directory`
+
+<!-- YAML
+added: CHANGEME
+-->
+
+> Stability: 1.0 - Early development
+
+Set the current working directory for the test runner.
+If not specified, the current working directory is used.
+This flag is particularly useful when running tests from a different directory.
+
 ### `--experimental-test-isolation=mode`
 
 <!-- YAML
diff --git a/lib/internal/test_runner/coverage.js b/lib/internal/test_runner/coverage.js
index 7d78bd69886566..5c44563efe063d 100644
--- a/lib/internal/test_runner/coverage.js
+++ b/lib/internal/test_runner/coverage.js
@@ -469,7 +469,7 @@ function sortCoverageFiles(a, b) {
 
 function setupCoverage(options) {
   let originalCoverageDirectory = process.env.NODE_V8_COVERAGE;
-  const cwd = process.cwd();
+  const cwd = options.testCwd;
 
   if (originalCoverageDirectory) {
     // NODE_V8_COVERAGE was already specified. Convert it to an absolute path
diff --git a/lib/internal/test_runner/harness.js b/lib/internal/test_runner/harness.js
index 1bc6cddabd41a0..c75e182bbf93a6 100644
--- a/lib/internal/test_runner/harness.js
+++ b/lib/internal/test_runner/harness.js
@@ -83,7 +83,7 @@ function createTestTree(rootTestOptions, globalOptions) {
   return globalRoot;
 }
 
-function createProcessEventHandler(eventName, rootTest) {
+function createProcessEventHandler(eventName, rootTest, cwd) {
   return (err) => {
     if (rootTest.harness.bootstrapPromise) {
       // Something went wrong during the asynchronous portion of bootstrapping
@@ -109,7 +109,7 @@ function createProcessEventHandler(eventName, rootTest) {
         const name = test.hookType ? `Test hook "${test.hookType}"` : `Test "${test.name}"`;
         let locInfo = '';
         if (test.loc) {
-          const relPath = relative(process.cwd(), test.loc.file);
+          const relPath = relative(cwd, test.loc.file);
           locInfo = ` at ${relPath}:${test.loc.line}:${test.loc.column}`;
         }
 
@@ -194,9 +194,9 @@ function setupProcessState(root, globalOptions) {
   hook.enable();
 
   const exceptionHandler =
-    createProcessEventHandler('uncaughtException', root);
+    createProcessEventHandler('uncaughtException', root, globalOptions.testCwd);
   const rejectionHandler =
-    createProcessEventHandler('unhandledRejection', root);
+    createProcessEventHandler('unhandledRejection', root, globalOptions.testCwd);
   const coverage = configureCoverage(root, globalOptions);
   const exitHandler = async () => {
     if (root.subtests.length === 0 && (root.hooks.before.length > 0 || root.hooks.after.length > 0)) {
diff --git a/lib/internal/test_runner/runner.js b/lib/internal/test_runner/runner.js
index 22cab872e54359..4139fa69799aca 100644
--- a/lib/internal/test_runner/runner.js
+++ b/lib/internal/test_runner/runner.js
@@ -32,7 +32,7 @@ const {
 
 const { spawn } = require('child_process');
 const { finished } = require('internal/streams/end-of-stream');
-const { resolve } = require('path');
+const { resolve, sep, isAbsolute } = require('path');
 const { DefaultDeserializer, DefaultSerializer } = require('v8');
 const { getOptionValue } = require('internal/options');
 const { Interface } = require('internal/readline/interface');
@@ -62,7 +62,6 @@ const { isRegExp } = require('internal/util/types');
 const { pathToFileURL } = require('internal/url');
 const {
   createDeferredPromise,
-  getCWDURL,
   kEmptyObject,
 } = require('internal/util');
 const { kEmitMessage } = require('internal/test_runner/tests_stream');
@@ -96,7 +95,7 @@ let debug = require('internal/util/debuglog').debuglog('test_runner', (fn) => {
 });
 
 const kIsolatedProcessName = Symbol('kIsolatedProcessName');
-const kFilterArgs = ['--test', '--experimental-test-coverage', '--watch'];
+const kFilterArgs = ['--test', '--experimental-test-coverage', '--watch', '--experimental-test-cwd'];
 const kFilterArgValues = ['--test-reporter', '--test-reporter-destination'];
 const kDiagnosticsFilterArgs = ['tests', 'suites', 'pass', 'fail', 'cancelled', 'skipped', 'todo', 'duration_ms'];
 
@@ -130,7 +129,7 @@ function filterExecArgv(arg, i, arr) {
   !ArrayPrototypeSome(kFilterArgValues, (p) => arg === p || (i > 0 && arr[i - 1] === p) || StringPrototypeStartsWith(arg, `${p}=`));
 }
 
-function getRunArgs(path, { forceExit, inspectPort, testNamePatterns, testSkipPatterns, only }) {
+function getRunArgs(path, { forceExit, inspectPort, testNamePatterns, testSkipPatterns, only, cwd }) {
   const argv = ArrayPrototypeFilter(process.execArgv, filterExecArgv);
   if (forceExit === true) {
     ArrayPrototypePush(argv, '--test-force-exit');
@@ -629,7 +628,6 @@ function run(options = kEmptyObject) {
     setup,  // This line can be removed when parseCommandLine() is removed here.
   };
   const root = createTestTree(rootTestOptions, globalOptions);
-
   let testFiles = files ?? createTestFileList(globPatterns, cwd);
 
   if (shard) {
@@ -680,7 +678,9 @@ function run(options = kEmptyObject) {
     };
   } else if (isolation === 'none') {
     if (watch) {
-      filesWatcher = watchFiles(testFiles, opts);
+      // TODO 
+      const absoluteTestFiles = ArrayPrototypeMap(testFiles, (file) => isAbsolute(file) ? file : resolve(cwd, file));
+      filesWatcher = watchFiles(absoluteTestFiles, opts);
       runFiles = async () => {
         root.harness.bootstrapPromise = null;
         root.harness.buildPromise = null;
@@ -693,7 +693,7 @@ function run(options = kEmptyObject) {
         const { promise, resolve: finishBootstrap } = createDeferredPromise();
 
         await root.runInAsyncScope(async () => {
-          const parentURL = getCWDURL().href;
+          const parentURL = pathToFileURL(cwd + sep).href;
           const cascadedLoader = esmLoader.getOrInitializeCascadedLoader();
           let topLevelTestCount = 0;
 
@@ -705,8 +705,8 @@ function run(options = kEmptyObject) {
           }
 
           for (let i = 0; i < testFiles.length; ++i) {
-            const testFile = resolve(cwd, testFiles[i]);
-            const fileURL = pathToFileURL(testFile);
+            const testFile = testFiles[i];
+            const fileURL = pathToFileURL(resolve(cwd, testFile));
             const parent = i === 0 ? undefined : parentURL;
             let threw = false;
             let importError;
diff --git a/lib/internal/test_runner/utils.js b/lib/internal/test_runner/utils.js
index 0d6fab11d10d82..f3cd8838c0422c 100644
--- a/lib/internal/test_runner/utils.js
+++ b/lib/internal/test_runner/utils.js
@@ -200,6 +200,7 @@ function parseCommandLine() {
   let functionCoverage;
   let destinations;
   let isolation;
+  let testCwd = getOptionValue('--experimental-test-cwd') || process.cwd()
   let only = getOptionValue('--test-only');
   let reporters;
   let shard;
@@ -311,6 +312,7 @@ function parseCommandLine() {
     destinations,
     forceExit,
     isolation,
+    testCwd,
     branchCoverage,
     functionCoverage,
     lineCoverage,
diff --git a/src/node_options.cc b/src/node_options.cc
index cc290661ec3b76..5ba315582b7c35 100644
--- a/src/node_options.cc
+++ b/src/node_options.cc
@@ -671,6 +671,9 @@ EnvironmentOptionsParser::EnvironmentOptionsParser() {
             &EnvironmentOptions::test_coverage_lines,
             kAllowedInEnvvar);
 
+  AddOption("--experimental-test-cwd", 
+            "specify the working directory for the test runner",
+            &EnvironmentOptions::test_runner_cwd);
   AddOption("--experimental-test-isolation",
             "configures the type of test isolation used in the test runner",
             &EnvironmentOptions::test_isolation);
diff --git a/src/node_options.h b/src/node_options.h
index 5f186ae86f0bcc..529997c2cae58a 100644
--- a/src/node_options.h
+++ b/src/node_options.h
@@ -195,6 +195,7 @@ class EnvironmentOptions : public Options {
   bool test_only = false;
   bool test_udp_no_try_send = false;
   std::string test_isolation = "process";
+  std::string test_runner_cwd;
   std::string test_shard;
   std::vector<std::string> test_skip_pattern;
   std::vector<std::string> coverage_include_pattern;
diff --git a/test/parallel/test-runner-no-isolation-different-cwd.mjs b/test/parallel/test-runner-no-isolation-different-cwd.mjs
index 6a15cc4f2b6b32..777322bce88da8 100644
--- a/test/parallel/test-runner-no-isolation-different-cwd.mjs
+++ b/test/parallel/test-runner-no-isolation-different-cwd.mjs
@@ -1,6 +1,6 @@
 import { allowGlobals, mustCall } from '../common/index.mjs';
 import * as fixtures from '../common/fixtures.mjs';
-import { strictEqual } from 'node:assert';
+import { deepStrictEqual } from 'node:assert';
 import { run } from 'node:test';
 
 const stream = run({
@@ -8,16 +8,12 @@ const stream = run({
   isolation: 'none',
 });
 
-let errors = 0;
-stream.on('test:fail', () => {
-  errors++;
-});
+
 stream.on('test:pass', mustCall(5));
 // eslint-disable-next-line no-unused-vars
 for await (const _ of stream);
-strictEqual(errors, 0);
 allowGlobals(globalThis.GLOBAL_ORDER);
-strictEqual(globalThis.GLOBAL_ORDER, [
+deepStrictEqual(globalThis.GLOBAL_ORDER, [
   'before one: <root>',
   'suite one',
   'before two: <root>',