diff --git a/src/vs/vscode.d.ts b/src/vs/vscode.d.ts
index 1fa633997a92c..430c42aca4de6 100644
--- a/src/vs/vscode.d.ts
+++ b/src/vs/vscode.d.ts
@@ -6835,9 +6835,9 @@ declare module 'vscode' {
 		shellArgs?: string[];
 
 		/**
-		 * A path for the current working directory to be used for the terminal.
+		 * A path or Uri for the current working directory to be used for the terminal.
 		 */
-		cwd?: string;
+		cwd?: string | Uri;
 
 		/**
 		 * Object with environment variables that will be added to the VS Code process.
diff --git a/src/vs/workbench/api/node/extHost.protocol.ts b/src/vs/workbench/api/node/extHost.protocol.ts
index 7c71fc1cf5688..4281c255422e6 100644
--- a/src/vs/workbench/api/node/extHost.protocol.ts
+++ b/src/vs/workbench/api/node/extHost.protocol.ts
@@ -343,7 +343,7 @@ export interface MainThreadProgressShape extends IDisposable {
 }
 
 export interface MainThreadTerminalServiceShape extends IDisposable {
-	$createTerminal(name?: string, shellPath?: string, shellArgs?: string[], cwd?: string, env?: { [key: string]: string }, waitOnExit?: boolean): Promise<{ id: number, name: string }>;
+	$createTerminal(name?: string, shellPath?: string, shellArgs?: string[], cwd?: string | URI, env?: { [key: string]: string }, waitOnExit?: boolean): Promise<{ id: number, name: string }>;
 	$createTerminalRenderer(name: string): Promise<number>;
 	$dispose(terminalId: number): void;
 	$hide(terminalId: number): void;
@@ -904,7 +904,7 @@ export interface ShellLaunchConfigDto {
 	name?: string;
 	executable?: string;
 	args?: string[] | string;
-	cwd?: string;
+	cwd?: string | URI;
 	env?: { [key: string]: string };
 }
 
diff --git a/src/vs/workbench/api/node/extHostTerminalService.ts b/src/vs/workbench/api/node/extHostTerminalService.ts
index a1e4524223421..cd535a6baeda0 100644
--- a/src/vs/workbench/api/node/extHostTerminalService.ts
+++ b/src/vs/workbench/api/node/extHostTerminalService.ts
@@ -102,7 +102,7 @@ export class ExtHostTerminal extends BaseExtHostTerminal implements vscode.Termi
 	public create(
 		shellPath?: string,
 		shellArgs?: string[],
-		cwd?: string,
+		cwd?: string | URI,
 		env?: { [key: string]: string },
 		waitOnExit?: boolean
 	): void {
diff --git a/src/vs/workbench/parts/terminal/common/terminal.ts b/src/vs/workbench/parts/terminal/common/terminal.ts
index 41114e0c75b1b..82de1acdc4424 100644
--- a/src/vs/workbench/parts/terminal/common/terminal.ts
+++ b/src/vs/workbench/parts/terminal/common/terminal.ts
@@ -150,7 +150,7 @@ export interface IShellLaunchConfig {
 	 * The current working directory of the terminal, this overrides the `terminal.integrated.cwd`
 	 * settings key.
 	 */
-	cwd?: string;
+	cwd?: string | URI;
 
 	/**
 	 * A custom environment for the terminal, if this is not set the environment will be inherited
diff --git a/src/vs/workbench/parts/terminal/electron-browser/terminalProcessManager.ts b/src/vs/workbench/parts/terminal/electron-browser/terminalProcessManager.ts
index fb18ad12c0ecd..f3ca4f93453ba 100644
--- a/src/vs/workbench/parts/terminal/electron-browser/terminalProcessManager.ts
+++ b/src/vs/workbench/parts/terminal/electron-browser/terminalProcessManager.ts
@@ -18,7 +18,7 @@ import { IWorkspaceContextService } from 'vs/platform/workspace/common/workspace
 import { IConfigurationResolverService } from 'vs/workbench/services/configurationResolver/common/configurationResolver';
 import { IWindowService } from 'vs/platform/windows/common/windows';
 import { Schemas } from 'vs/base/common/network';
-import { REMOTE_HOST_SCHEME } from 'vs/platform/remote/common/remoteHosts';
+import { REMOTE_HOST_SCHEME, getRemoteAuthority } from 'vs/platform/remote/common/remoteHosts';
 
 /** The amount of time to consider terminal errors to be related to the launch */
 const LAUNCHING_DURATION = 500;
@@ -90,7 +90,17 @@ export class TerminalProcessManager implements ITerminalProcessManager {
 		cols: number,
 		rows: number
 	): void {
-		if (this._windowService.getConfiguration().remoteAuthority) {
+
+		let launchRemotely = false;
+
+		if (shellLaunchConfig.cwd && typeof shellLaunchConfig.cwd === 'object') {
+			launchRemotely = !!getRemoteAuthority(shellLaunchConfig.cwd);
+			shellLaunchConfig.cwd = shellLaunchConfig.cwd.path;
+		} else {
+			launchRemotely = !!this._windowService.getConfiguration().remoteAuthority;
+		}
+
+		if (launchRemotely) {
 			const activeWorkspaceRootUri = this._historyService.getLastActiveWorkspaceRoot(REMOTE_HOST_SCHEME);
 			this._process = this._instantiationService.createInstance(TerminalProcessExtHostProxy, this._terminalId, shellLaunchConfig, activeWorkspaceRootUri, cols, rows);
 		} else {
diff --git a/src/vs/workbench/parts/terminal/node/terminalEnvironment.ts b/src/vs/workbench/parts/terminal/node/terminalEnvironment.ts
index 5f8e53e0993d3..c5729bc158e34 100644
--- a/src/vs/workbench/parts/terminal/node/terminalEnvironment.ts
+++ b/src/vs/workbench/parts/terminal/node/terminalEnvironment.ts
@@ -129,7 +129,7 @@ function _getLangEnvVariable(locale?: string) {
 
 export function getCwd(shell: IShellLaunchConfig, root: Uri, customCwd: string): string {
 	if (shell.cwd) {
-		return shell.cwd;
+		return (typeof shell.cwd === 'object') ? shell.cwd.path : shell.cwd;
 	}
 
 	let cwd: string | undefined;