diff --git a/README.md b/README.md
index a0fe9e3e..f0ab8e42 100644
--- a/README.md
+++ b/README.md
@@ -523,6 +523,10 @@ services:
         # group and group-id are specified, the group's GID must match group-id.
         group-id: <gid>
 
+        # (Optional) Working directory to run command in. By default, the
+        # command is run in the service manager's current directory.
+        working-dir: <directory>
+
         # (Optional) Defines what happens when the service exits with a zero
         # exit code. Possible values are: "restart" (default) which restarts
         # the service after the backoff delay, "shutdown" which shuts down and
@@ -653,7 +657,8 @@ checks:
             # match group-id.
             group-id: <gid>
 
-            # (Optional) Working directory to run command in.
+            # (Optional) Working directory to run command in. By default, the
+            # command is run in the service manager's current directory.
             working-dir: <directory>
 ```
 
diff --git a/internals/overlord/servstate/handlers.go b/internals/overlord/servstate/handlers.go
index 1beb7d50..32348a25 100644
--- a/internals/overlord/servstate/handlers.go
+++ b/internals/overlord/servstate/handlers.go
@@ -347,6 +347,8 @@ func (s *serviceData) startInternal() error {
 		environment[k] = v
 	}
 
+	s.cmd.Dir = s.config.WorkingDir
+
 	// Start as another user if specified in plan.
 	uid, gid, err := osutil.NormalizeUidGid(s.config.UserID, s.config.GroupID, s.config.User, s.config.Group)
 	if err != nil {
diff --git a/internals/overlord/servstate/manager_test.go b/internals/overlord/servstate/manager_test.go
index 58a4d920..629cf029 100644
--- a/internals/overlord/servstate/manager_test.go
+++ b/internals/overlord/servstate/manager_test.go
@@ -1763,3 +1763,62 @@ type fakeLogManager struct{}
 func (f fakeLogManager) ServiceStarted(serviceName string, logs *servicelog.RingBuffer) {
 	// no-op
 }
+
+func (s *S) TestNoWorkingDir(c *C) {
+	// Service command should run in current directory (package directory)
+	// if "working-dir" config option not set.
+	dir := c.MkDir()
+	err := os.Mkdir(filepath.Join(dir, "layers"), 0755)
+	c.Assert(err, IsNil)
+	manager, err := servstate.NewManager(s.st, s.runner, dir, nil, nil, fakeLogManager{})
+	c.Assert(err, IsNil)
+	defer manager.Stop()
+
+	outputPath := filepath.Join(dir, "output")
+	layer := parseLayer(c, 0, "layer", fmt.Sprintf(`
+services:
+    nowrkdir:
+        override: replace
+        command: /bin/sh -c "pwd >%s; sleep %g"
+`, outputPath, shortOkayDelay.Seconds()+0.01))
+	err = manager.AppendLayer(layer)
+	c.Assert(err, IsNil)
+
+	chg := s.startServices(c, []string{"nowrkdir"}, 1)
+	s.st.Lock()
+	c.Assert(chg.Err(), IsNil)
+	s.st.Unlock()
+
+	output, err := ioutil.ReadFile(outputPath)
+	c.Assert(err, IsNil)
+	c.Check(string(output), Matches, ".*/overlord/servstate\n")
+}
+
+func (s *S) TestWorkingDir(c *C) {
+	dir := c.MkDir()
+	err := os.Mkdir(filepath.Join(dir, "layers"), 0755)
+	c.Assert(err, IsNil)
+	manager, err := servstate.NewManager(s.st, s.runner, dir, nil, nil, fakeLogManager{})
+	c.Assert(err, IsNil)
+	defer manager.Stop()
+
+	outputPath := filepath.Join(dir, "output")
+	layer := parseLayer(c, 0, "layer", fmt.Sprintf(`
+services:
+    wrkdir:
+        override: replace
+        command: /bin/sh -c "pwd >%s; sleep %g"
+        working-dir: %s
+`, outputPath, shortOkayDelay.Seconds()+0.01, dir))
+	err = manager.AppendLayer(layer)
+	c.Assert(err, IsNil)
+
+	chg := s.startServices(c, []string{"wrkdir"}, 1)
+	s.st.Lock()
+	c.Assert(chg.Err(), IsNil)
+	s.st.Unlock()
+
+	output, err := ioutil.ReadFile(outputPath)
+	c.Assert(err, IsNil)
+	c.Check(string(output), Equals, dir+"\n")
+}
diff --git a/internals/plan/plan.go b/internals/plan/plan.go
index d142e184..76fc1feb 100644
--- a/internals/plan/plan.go
+++ b/internals/plan/plan.go
@@ -79,6 +79,7 @@ type Service struct {
 	User        string            `yaml:"user,omitempty"`
 	GroupID     *int              `yaml:"group-id,omitempty"`
 	Group       string            `yaml:"group,omitempty"`
+	WorkingDir  string            `yaml:"working-dir,omitempty"`
 
 	// Auto-restart and backoff functionality
 	OnSuccess      ServiceAction            `yaml:"on-success,omitempty"`
@@ -154,6 +155,9 @@ func (s *Service) Merge(other *Service) {
 	if other.Group != "" {
 		s.Group = other.Group
 	}
+	if other.WorkingDir != "" {
+		s.WorkingDir = other.WorkingDir
+	}
 	s.After = append(s.After, other.After...)
 	s.Before = append(s.Before, other.Before...)
 	s.Requires = append(s.Requires, other.Requires...)