diff --git a/src/client/testing/common/debugLauncher.ts b/src/client/testing/common/debugLauncher.ts
index f7a027ad1304..dcf23c0478db 100644
--- a/src/client/testing/common/debugLauncher.ts
+++ b/src/client/testing/common/debugLauncher.ts
@@ -146,7 +146,7 @@ export class DebugLauncher implements ITestDebugLauncher {
             cfg.console = 'internalConsole';
         }
         if (!cfg.cwd) {
-            cfg.cwd = workspaceFolder.uri.fsPath;
+            cfg.cwd = configSettings.testing.cwd || workspaceFolder.uri.fsPath;
         }
         if (!cfg.env) {
             cfg.env = {};
diff --git a/src/client/testing/testController/unittest/testExecutionAdapter.ts b/src/client/testing/testController/unittest/testExecutionAdapter.ts
index bf83c3c0feb1..b671a64138cb 100644
--- a/src/client/testing/testController/unittest/testExecutionAdapter.ts
+++ b/src/client/testing/testController/unittest/testExecutionAdapter.ts
@@ -44,10 +44,10 @@ export class UnittestTestExecutionAdapter implements ITestExecutionAdapter {
 
     public async runTests(uri: Uri, testIds: string[], debugBool?: boolean): Promise<ExecutionTestPayload> {
         const settings = this.configSettings.getSettings(uri);
-        const { unittestArgs } = settings.testing;
+        const { cwd, unittestArgs } = settings.testing;
 
         const command = buildExecutionCommand(unittestArgs);
-        this.cwd = uri.fsPath;
+        this.cwd = cwd || uri.fsPath;
         const uuid = this.testServer.createUUID(uri.fsPath);
 
         const options: TestCommandOptions = {
diff --git a/src/test/testing/common/debugLauncher.unit.test.ts b/src/test/testing/common/debugLauncher.unit.test.ts
index 41b95c66040e..4712c9b6136a 100644
--- a/src/test/testing/common/debugLauncher.unit.test.ts
+++ b/src/test/testing/common/debugLauncher.unit.test.ts
@@ -77,7 +77,7 @@ suite('Unit Tests - Debug Launcher', () => {
         settings = TypeMoq.Mock.ofType<IPythonSettings>(undefined, TypeMoq.MockBehavior.Strict);
         configService.setup((c) => c.getSettings(TypeMoq.It.isAny())).returns(() => settings.object);
 
-        unitTestSettings = TypeMoq.Mock.ofType<ITestingSettings>(undefined, TypeMoq.MockBehavior.Strict);
+        unitTestSettings = TypeMoq.Mock.ofType<ITestingSettings>();
         settings.setup((p) => p.testing).returns(() => unitTestSettings.object);
 
         debugEnvHelper = TypeMoq.Mock.ofType<IDebugEnvironmentVariablesService>(undefined, TypeMoq.MockBehavior.Strict);
@@ -333,6 +333,21 @@ suite('Unit Tests - Debug Launcher', () => {
         debugService.verifyAll();
     });
 
+    test('Use cwd value in settings if exist', async () => {
+        unitTestSettings.setup((p) => p.cwd).returns(() => 'path/to/settings/cwd');
+        const options: LaunchOptions = {
+            cwd: 'one/two/three',
+            args: ['/one/two/three/testfile.py'],
+            testProvider: 'unittest',
+        };
+        const expected = getDefaultDebugConfig();
+        expected.cwd = 'path/to/settings/cwd';
+        setupSuccess(options, 'unittest', expected);
+        await debugLauncher.launchDebugger(options);
+
+        debugService.verifyAll();
+    });
+
     test('Full debug config', async () => {
         const options: LaunchOptions = {
             cwd: 'one/two/three',