diff --git a/CHANGELOG.md b/CHANGELOG.md
index caeee1f5..379c2002 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -19,6 +19,7 @@ The format is based on [Keep a Changelog](https://keepachangelog.com/en/1.0.0/).
 ### Changed
 
 - Cursors are now inverted when their fixed color is similar to the cell's background
+- Use working directory of active process instead of shell for SpawnNewInstance action
 
 ### Fixed
 
diff --git a/alacritty/src/event.rs b/alacritty/src/event.rs
index c30765ae..85dca0ee 100644
--- a/alacritty/src/event.rs
+++ b/alacritty/src/event.rs
@@ -297,16 +297,20 @@ impl<'a, N: Notify + 'a, T: EventListener> input::ActionContext<T> for ActionCon
 
         #[cfg(unix)]
         let args = {
-            #[cfg(not(target_os = "freebsd"))]
-            let proc_prefix = "";
-            #[cfg(target_os = "freebsd")]
-            let proc_prefix = "/compat/linux";
-            let link_path = format!("{}/proc/{}/cwd", proc_prefix, tty::child_pid());
-            if let Ok(path) = fs::read_link(link_path) {
-                vec!["--working-directory".into(), path]
-            } else {
-                Vec::new()
+            // Use working directory of controlling process, or fallback to initial shell.
+            let mut pid = unsafe { libc::tcgetpgrp(tty::master_fd()) };
+            if pid < 0 {
+                pid = tty::child_pid();
             }
+
+            #[cfg(not(target_os = "freebsd"))]
+            let link_path = format!("/proc/{}/cwd", pid);
+            #[cfg(target_os = "freebsd")]
+            let link_path = format!("/compat/linux/proc/{}/cwd", pid);
+
+            fs::read_link(link_path)
+                .map(|path| vec!["--working-directory".into(), path])
+                .unwrap_or_default()
         };
         #[cfg(not(unix))]
         let args: Vec<String> = Vec::new();
diff --git a/alacritty_terminal/src/tty/unix.rs b/alacritty_terminal/src/tty/unix.rs
index 3998d9e6..c52da34d 100644
--- a/alacritty_terminal/src/tty/unix.rs
+++ b/alacritty_terminal/src/tty/unix.rs
@@ -13,7 +13,7 @@ use std::os::unix::{
 };
 use std::process::{Child, Command, Stdio};
 use std::ptr;
-use std::sync::atomic::{AtomicUsize, Ordering};
+use std::sync::atomic::{AtomicI32, AtomicUsize, Ordering};
 
 use libc::{self, c_int, pid_t, winsize, TIOCSCTTY};
 use log::error;
@@ -33,6 +33,9 @@ use crate::tty::{ChildEvent, EventedPty, EventedReadWrite};
 /// Necessary to put this in static storage for `SIGCHLD` to have access.
 static PID: AtomicUsize = AtomicUsize::new(0);
 
+/// File descriptor of terminal master.
+static FD: AtomicI32 = AtomicI32::new(-1);
+
 macro_rules! die {
     ($($arg:tt)*) => {{
         error!($($arg)*);
@@ -44,6 +47,10 @@ pub fn child_pid() -> pid_t {
     PID.load(Ordering::Relaxed) as pid_t
 }
 
+pub fn master_fd() -> RawFd {
+    FD.load(Ordering::Relaxed) as RawFd
+}
+
 /// Get raw fds for master/slave ends of a new PTY.
 fn make_pty(size: winsize) -> (RawFd, RawFd) {
     let mut win_size = size;
@@ -224,8 +231,9 @@ pub fn new<C>(config: &Config<C>, size: &SizeInfo, window_id: Option<usize>) ->
 
     match builder.spawn() {
         Ok(child) => {
-            // Remember child PID so other modules can use it.
+            // Remember master FD and child PID so other modules can use it.
             PID.store(child.id() as usize, Ordering::Relaxed);
+            FD.store(master, Ordering::Relaxed);
 
             unsafe {
                 // Maybe this should be done outside of this function so nonblocking