diff --git a/test/acceptance/support/isolated_environment.rb b/test/acceptance/support/isolated_environment.rb
index b45781596..b08f0fdbf 100644
--- a/test/acceptance/support/isolated_environment.rb
+++ b/test/acceptance/support/isolated_environment.rb
@@ -54,8 +54,11 @@ module Acceptance
     def execute(command, *argN)
       command = replace_command(command)
 
-      # Add our hash options to the arguments list
-      argN << { :chdir => @workdir.to_s }
+      # Setup the options that will be passed to the ``popen4``
+      # method.
+      argN << {} if !argN.last.is_a?(Hash)
+      options = argN.last
+      options[:chdir] ||= @workdir.to_s
 
       # Execute in a separate process, wait for it to complete, and
       # return the IO streams.
diff --git a/test/acceptance/up_basic_test.rb b/test/acceptance/up_basic_test.rb
index a2f62d638..bf2829412 100644
--- a/test/acceptance/up_basic_test.rb
+++ b/test/acceptance/up_basic_test.rb
@@ -19,6 +19,16 @@ describe "vagrant up", "basics" do
     result.stdout.should match_output(:status, "default", "running")
   end
 
+  it "is able to run if Vagrantfile is in a parent directory" do
+    initialize_valid_environment
+
+    # Create a subdirectory in the working directory and use
+    # that as the CWD for `vagrant up` and verify it still works
+    foodir = environment.workdir.join("foo")
+    foodir.mkdir
+    assert_execute("vagrant", "up", :chdir => foodir.to_s)
+  end
+
   it "should have a '/vagrant' shared folder" do
     initialize_valid_environment
 
@@ -38,7 +48,6 @@ describe "vagrant up", "basics" do
 
 TODO:
 
-  should "be able to run if `Vagrantfile` is in parent directory"
   should "destroy a running virtual machine"
   should "save then restore a virtual machine using `vagrant up`"
   should "halt then start a virtual machine using `vagrant up`"