diff --git a/src/cli.js b/src/cli.js
index 001aed02c0f..d41c0ebaf94 100644
--- a/src/cli.js
+++ b/src/cli.js
@@ -6,6 +6,14 @@
 //@ts-check
 'use strict';
 
+// Delete `VSCODE_CWD` very early even before
+// importing bootstrap files. We have seen
+// reports where `code .` would use the wrong
+// current working directory due to our variable
+// somehow escaping to the parent shell
+// (https://github.com/microsoft/vscode/issues/126399)
+delete process.env['VSCODE_CWD'];
+
 const bootstrap = require('./bootstrap');
 const bootstrapNode = require('./bootstrap-node');
 const product = require('../product.json');