diff --git a/crates/nu-lsp/src/diagnostics.rs b/crates/nu-lsp/src/diagnostics.rs
index b6bf751fa5..cdb6a35962 100644
--- a/crates/nu-lsp/src/diagnostics.rs
+++ b/crates/nu-lsp/src/diagnostics.rs
@@ -118,4 +118,28 @@ mod tests {
             })
         );
     }
+
+    #[test]
+    fn publish_diagnostics_none() {
+        let (client_connection, _recv) = initialize_language_server();
+
+        let mut script = fixtures();
+        script.push("lsp");
+        script.push("diagnostics");
+        script.push("pwd.nu");
+        let script = path_to_uri(&script);
+
+        let notification = open_unchecked(&client_connection, script.clone());
+
+        assert_json_eq!(
+            notification,
+            serde_json::json!({
+                "method": "textDocument/publishDiagnostics",
+                "params": {
+                    "uri": script,
+                    "diagnostics": []
+                }
+            })
+        );
+    }
 }
diff --git a/crates/nu-lsp/src/lib.rs b/crates/nu-lsp/src/lib.rs
index 60a214ac7a..0bf83e6dfe 100644
--- a/crates/nu-lsp/src/lib.rs
+++ b/crates/nu-lsp/src/lib.rs
@@ -189,7 +189,8 @@ impl LanguageServer {
 
     pub fn new_engine_state(&self) -> EngineState {
         let mut engine_state = self.engine_state.clone();
-        engine_state.add_env_var("PWD".into(), Value::test_string("."));
+        let cwd = std::env::current_dir().expect("Could not get current working directory.");
+        engine_state.add_env_var("PWD".into(), Value::test_string(cwd.to_string_lossy()));
         engine_state
     }
 
diff --git a/tests/fixtures/lsp/diagnostics/pwd.nu b/tests/fixtures/lsp/diagnostics/pwd.nu
new file mode 100644
index 0000000000..fed8808e22
--- /dev/null
+++ b/tests/fixtures/lsp/diagnostics/pwd.nu
@@ -0,0 +1 @@
+const toolkit_dir = path self .