diff --git a/pythonFiles/testing_tools/unittest_discovery.py b/pythonFiles/testing_tools/unittest_discovery.py
index d13ea1c10dd9..2988092c387c 100644
--- a/pythonFiles/testing_tools/unittest_discovery.py
+++ b/pythonFiles/testing_tools/unittest_discovery.py
@@ -1,11 +1,12 @@
-import unittest
 import inspect
 import os
 import sys
 import traceback
+import unittest
 
 start_dir = sys.argv[1]
 pattern = sys.argv[2]
+top_level_dir = sys.argv[3] if len(sys.argv) >= 4 else None
 sys.path.insert(0, os.getcwd())
 
 
@@ -38,7 +39,7 @@ def generate_test_cases(suite):
 
 try:
     loader = unittest.TestLoader()
-    suite = loader.discover(start_dir, pattern=pattern)
+    suite = loader.discover(start_dir, pattern=pattern, top_level_dir=top_level_dir)
 
     print("start")  # Don't remove this line
     loader_errors = []
diff --git a/pythonFiles/visualstudio_py_testlauncher.py b/pythonFiles/visualstudio_py_testlauncher.py
index 7f80dfa3ba88..0b0ef3242f65 100644
--- a/pythonFiles/visualstudio_py_testlauncher.py
+++ b/pythonFiles/visualstudio_py_testlauncher.py
@@ -17,14 +17,13 @@
 __author__ = "Microsoft Corporation <ptvshelp@microsoft.com>"
 __version__ = "3.0.0.0"
 
-import os
-import sys
 import json
-import unittest
+import os
+import signal
 import socket
+import sys
 import traceback
-from types import CodeType, FunctionType
-import signal
+import unittest
 
 try:
     import thread
@@ -295,8 +294,8 @@ def main():
     if opts.mixed_mode:
         # For mixed-mode attach, there's no ptvsd and hence no wait_for_attach(),
         # so we have to use Win32 API in a loop to do the same thing.
+        from ctypes import c_char, windll
         from time import sleep
-        from ctypes import windll, c_char
 
         while True:
             if windll.kernel32.IsDebuggerPresent() != 0:
@@ -334,7 +333,9 @@ def main():
             # Easier approach is find the test suite and use that for running
             loader = unittest.TestLoader()
             # opts.us will be passed in
-            suites = loader.discover(opts.us, pattern=os.path.basename(opts.testFile))
+            suites = loader.discover(
+                opts.us, pattern=os.path.basename(opts.testFile), top_level_dir=opts.ut
+            )
             suite = None
             tests = None
             if opts.tests is None:
diff --git a/src/client/testing/testController/unittest/arguments.ts b/src/client/testing/testController/unittest/arguments.ts
index 52ae484a87c2..caff87999f6e 100644
--- a/src/client/testing/testController/unittest/arguments.ts
+++ b/src/client/testing/testController/unittest/arguments.ts
@@ -73,13 +73,29 @@ export function unittestGetTestPattern(args: string[]): string {
     return 'test*.py';
 }
 
+export function unittestGetTopLevelDirectory(args: string[]): string | null {
+    const shortValue = getOptionValues(args, '-t');
+    if (shortValue.length === 1) {
+        return shortValue[0];
+    }
+    const longValue = getOptionValues(args, '--top-level-directory');
+    if (longValue.length === 1) {
+        return longValue[0];
+    }
+    return null;
+}
+
 export function getTestRunArgs(args: string[]): string[] {
     const startTestDiscoveryDirectory = unittestGetTestFolders(args)[0];
     const pattern = unittestGetTestPattern(args);
+    const topLevelDir = unittestGetTopLevelDirectory(args);
 
     const failFast = args.some((arg) => arg.trim() === '-f' || arg.trim() === '--failfast');
     const verbosity = args.some((arg) => arg.trim().indexOf('-v') === 0) ? 2 : 1;
     const testArgs = [`--us=${startTestDiscoveryDirectory}`, `--up=${pattern}`, `--uvInt=${verbosity}`];
+    if (topLevelDir) {
+        testArgs.push(`--ut=${topLevelDir}`);
+    }
     if (failFast) {
         testArgs.push('--uf');
     }
diff --git a/src/client/testing/testController/unittest/unittestController.ts b/src/client/testing/testController/unittest/unittestController.ts
index 2fb4cb91c539..ee79103c4e3e 100644
--- a/src/client/testing/testController/unittest/unittestController.ts
+++ b/src/client/testing/testController/unittest/unittestController.ts
@@ -19,7 +19,7 @@ import {
     RawTestParent,
     TestData,
 } from '../common/types';
-import { unittestGetTestFolders, unittestGetTestPattern } from './arguments';
+import { unittestGetTestFolders, unittestGetTestPattern, unittestGetTopLevelDirectory } from './arguments';
 import {
     createErrorTestItem,
     createWorkspaceRootTestItem,
@@ -130,16 +130,20 @@ export class UnittestController implements ITestFrameworkController {
 
             const startDir = unittestGetTestFolders(options.args)[0];
             const pattern = unittestGetTestPattern(options.args);
+            const topLevelDir = unittestGetTopLevelDirectory(options.args);
             let testDir = startDir;
             if (path.isAbsolute(startDir)) {
                 const relative = path.relative(options.cwd, startDir);
                 testDir = relative.length > 0 ? relative : '.';
             }
 
+            const runOptionsArgs: string[] =
+                topLevelDir == null ? [startDir, pattern] : [startDir, pattern, topLevelDir];
+
             const runOptions: Options = {
                 // unittest needs to load modules in the workspace
                 // isolating it breaks unittest discovery
-                args: unittestDiscovery([startDir, pattern]),
+                args: unittestDiscovery(runOptionsArgs),
                 cwd: options.cwd,
                 workspaceFolder: options.workspaceFolder,
                 token: options.token,