diff --git a/cli.js b/cli.js
index 22bcb26..38f7f61 100755
--- a/cli.js
+++ b/cli.js
@@ -138,6 +138,7 @@ var api = new Api({
 	match: arrify(cli.flags.match),
 	babelConfig: conf.babel,
 	resolveTestsFrom: cli.input.length === 0 ? pkgDir : process.cwd(),
+	pkgDir: pkgDir,
 	timeout: cli.flags.timeout,
 	concurrency: cli.flags.concurrency ? parseInt(cli.flags.concurrency, 10) : 0
 });
diff --git a/lib/fork.js b/lib/fork.js
index 7748c69..495f8d8 100644
--- a/lib/fork.js
+++ b/lib/fork.js
@@ -41,7 +41,7 @@ module.exports = function (file, opts, execArgv) {
 	}, opts);
 
 	var ps = childProcess.fork(path.join(__dirname, 'test-worker.js'), [JSON.stringify(opts)], {
-		cwd: path.dirname(file),
+		cwd: opts.pkgDir,
 		silent: true,
 		env: env,
 		execArgv: execArgv || process.execArgv
diff --git a/readme.md b/readme.md
index 69768c2..b1d4f51 100644
--- a/readme.md
+++ b/readme.md
@@ -247,7 +247,7 @@ If you're unable to use promises or observables, you may enable "callback mode"
 
 You must define all tests synchronously. They can't be defined inside `setTimeout`, `setImmediate`, etc.
 
-Test files are run from their current directory, so [`process.cwd()`](https://nodejs.org/api/process.html#process_process_cwd) is always the same as [`__dirname`](https://nodejs.org/api/globals.html#globals_dirname). You can just use relative paths instead of doing `path.join(__dirname, 'relative/path')`.
+AVA tries to run test files with their current working directory set to the directory that contains your `package.json` file.
 
 ### Creating tests
 
diff --git a/test/api.js b/test/api.js
index 69dd3e8..e40e7d5 100644
--- a/test/api.js
+++ b/test/api.js
@@ -4,9 +4,13 @@ var fs = require('fs');
 var figures = require('figures');
 var rimraf = require('rimraf');
 var test = require('tap').test;
+var pkgConf = require('pkg-conf');
 var Api = require('../api');
 var testCapitalizerPlugin = require('./fixture/babel-plugin-test-capitalizer');
 
+var conf = pkgConf.sync('ava');
+var pkgDir = path.dirname(pkgConf.filepath(conf));
+
 test('must be called with new', function (t) {
 	t.throws(function () {
 		var api = Api;
@@ -18,6 +22,7 @@ test('must be called with new', function (t) {
 generateTests('Without Pool: ', function (options) {
 	options = options || {};
 	options.powerAssert = true;
+	options.pkgDir = options.pkgDir || pkgDir;
 	return new Api(options);
 });
 
@@ -63,6 +68,7 @@ generateTests('With Pool: ', function (options) {
 	options = options || {};
 	options.concurrency = 2;
 	options.powerAssert = true;
+	options.pkgDir = options.pkgDir || pkgDir;
 	return new Api(options);
 });
 
@@ -307,12 +313,23 @@ function generateTests(prefix, apiCreator) {
 			});
 	});
 
-	test(prefix + 'change process.cwd() to a test\'s directory', function (t) {
+	test(prefix + 'run from package.json folder by default', function (t) {
 		t.plan(1);
-
 		var api = apiCreator();
 
-		return api.run([path.join(__dirname, 'fixture/process-cwd.js')])
+		return api.run([path.join(__dirname, 'fixture/process-cwd-default.js')])
+			.then(function (result) {
+				t.is(result.passCount, 1);
+			});
+	});
+
+	test(prefix + 'change process.cwd() to a test\'s directory with pkgDir', function (t) {
+		t.plan(1);
+
+		var fullPath = path.join(__dirname, 'fixture/process-cwd-pkgdir.js');
+		var api = apiCreator({pkgDir: path.dirname(fullPath)});
+
+		return api.run([fullPath])
 			.then(function (result) {
 				t.is(result.passCount, 1);
 			});
diff --git a/test/fixture/process-cwd-default.js b/test/fixture/process-cwd-default.js
new file mode 100644
index 0000000..78c4eb4
--- /dev/null
+++ b/test/fixture/process-cwd-default.js
@@ -0,0 +1,9 @@
+import path from 'path';
+import pkgConf from 'pkg-conf';
+import test from '../../';
+
+test(t => {
+	const conf = pkgConf.sync('ava');
+	const pkgDir = path.dirname(pkgConf.filepath(conf));
+	t.is(process.cwd(), pkgDir);
+});
diff --git a/test/fixture/process-cwd.js b/test/fixture/process-cwd-pkgdir.js
similarity index 100%
rename from test/fixture/process-cwd.js
rename to test/fixture/process-cwd-pkgdir.js