diff --git a/packages/aws-cdk/bin/cdk.ts b/packages/aws-cdk/bin/cdk.ts
index e96084d5c2c3b..2563ba389d260 100644
--- a/packages/aws-cdk/bin/cdk.ts
+++ b/packages/aws-cdk/bin/cdk.ts
@@ -3,6 +3,7 @@ import 'source-map-support/register';
 
 import * as cxapi from '@aws-cdk/cx-api';
 import * as colors from 'colors/safe';
+import * as fs from 'fs-extra';
 import * as path from 'path';
 import * as yargs from 'yargs';
 
@@ -17,7 +18,7 @@ import { availableInitLanguages, cliInit, printAvailableTemplates } from '../lib
 import { data, debug, error, print, setVerbose, success } from '../lib/logging';
 import { PluginHost } from '../lib/plugin';
 import { serializeStructure } from '../lib/serialize';
-import { Configuration, Settings } from '../lib/settings';
+import { Configuration, PROJECT_CONFIG, Settings } from '../lib/settings';
 import * as version from '../lib/version';
 
 // tslint:disable:no-shadowed-variable max-line-length
@@ -103,6 +104,16 @@ async function initCommandLine() {
   if (argv.verbose) {
     setVerbose();
   }
+
+  const projectRootDirectory = await lookupProjectRoot();
+
+  if (projectRootDirectory) {
+    // We change to the project root directory to maintian the behavior prior to (1.21.0) this feature, where
+    // cdk commands had to be executed from the project root.
+    // Note that if we cannot locate the project root, then we proceed anyway because the user might have the "app" configured in some other way.
+    process.chdir(projectRootDirectory);
+  }
+
   debug('CDK toolkit version:', version.DISPLAY_VERSION);
   debug('Command line arguments:', argv);
 
@@ -382,6 +393,31 @@ async function initCommandLine() {
   }
 }
 
+async function lookupProjectRoot(): Promise<string | undefined> {
+
+  async function ascend(directory: string): Promise<string | undefined> {
+
+    const filePath = path.join(directory, PROJECT_CONFIG);
+
+    if (await fs.pathExists(filePath)) {
+      return directory;
+    }
+
+    const parentDir = path.dirname(directory);
+
+    if (parentDir === directory) {
+      // We reached the file system root, give up.
+      return undefined;
+    }
+
+    return ascend(parentDir);
+
+  }
+
+  return ascend(path.resolve(process.cwd()));
+
+}
+
 initCommandLine()
   .then(value => {
     if (value == null) { return; }
diff --git a/packages/aws-cdk/test/integ/cli/test-cdk-from-inner-directory.sh b/packages/aws-cdk/test/integ/cli/test-cdk-from-inner-directory.sh
new file mode 100755
index 0000000000000..2d9305d19e24e
--- /dev/null
+++ b/packages/aws-cdk/test/integ/cli/test-cdk-from-inner-directory.sh
@@ -0,0 +1,12 @@
+#!/bin/bash
+set -euo pipefail
+scriptdir=$(cd $(dirname $0) && pwd)
+source ${scriptdir}/common.bash
+# ----------------------------------------------------------
+
+setup
+
+pushd docker
+cdk diff ${STACK_NAME_PREFIX}-test-1
+
+echo "✅  success"
diff --git a/packages/aws-cdk/test/integ/cli/test-cdk-from-outer-directory.sh b/packages/aws-cdk/test/integ/cli/test-cdk-from-outer-directory.sh
new file mode 100755
index 0000000000000..cc9bbe934ad22
--- /dev/null
+++ b/packages/aws-cdk/test/integ/cli/test-cdk-from-outer-directory.sh
@@ -0,0 +1,26 @@
+#!/bin/bash
+set -euo pipefail
+scriptdir=$(cd $(dirname $0) && pwd)
+source ${scriptdir}/common.bash
+# ----------------------------------------------------------
+
+setup
+
+temp_dir=$(mktemp -d)
+
+function cleanup() {
+  rm -rf ${temp_dir}
+}
+
+trap cleanup EXIT INT
+
+pushd ${temp_dir}
+set +e
+output="$(cdk diff ${STACK_NAME_PREFIX}-test-1 2>&1)"
+set -e
+
+if [[ "${output}" != *"--app is required"* ]]; then
+  fail "unexpected output when running 'cdk diff' from outer directory: ${output}"
+fi
+
+echo "✅  success"