diff --git a/docs/installation.rst b/docs/installation.rst
index 01cf5ec7..e41a8ff4 100644
--- a/docs/installation.rst
+++ b/docs/installation.rst
@@ -8,15 +8,15 @@ Using pip
 
 You can install the package without being root by adding the ``--user`` flag::
 
-    pip2 install neovim
-    pip3 install neovim
+    pip2 install --user neovim
+    pip3 install --user neovim
 
 .. note::
   
     If you only use one of python2 or python3,
     it is enough to install that version.
 
-If you follow Neovim master,
+If you follow Neovim HEAD,
 make sure to upgrade the ``python-client`` when you upgrade Neovim::
 
     pip2 install --upgrade neovim
diff --git a/neovim/plugin/script_host.py b/neovim/plugin/script_host.py
index 8993cb8d..3c21089e 100644
--- a/neovim/plugin/script_host.py
+++ b/neovim/plugin/script_host.py
@@ -45,6 +45,14 @@ def __init__(self, nvim):
         self.legacy_vim = LegacyVim.from_nvim(nvim)
         sys.modules['vim'] = self.legacy_vim
 
+        # Handle DirChanged. #296
+        nvim.command(
+            'autocmd DirChanged * call rpcrequest({}, "python_chdir", v:event)'
+            .format(nvim.channel_id), async=True)
+        # XXX: Avoid race condition.
+        # https://github.com/neovim/python-client/pull/296#issuecomment-358970531
+        os.chdir(nvim.eval('getcwd()', async=False))
+
     def setup(self, nvim):
         """Setup import hooks and global streams.
 
@@ -153,6 +161,11 @@ def python_eval(self, expr):
         """Handle the `pyeval` vim function."""
         return eval(expr, self.module.__dict__)
 
+    @rpc_export('python_chdir', sync=True)
+    def python_chdir(self, args):
+        """Handle working directory changes."""
+        os.chdir(args['cwd'])
+
     def _set_current_range(self, start, stop):
         current = self.legacy_vim.current
         current.range = current.buffer.range(start, stop)
diff --git a/test/test_vim.py b/test/test_vim.py
index 40d72512..df51ba37 100644
--- a/test/test_vim.py
+++ b/test/test_vim.py
@@ -1,5 +1,5 @@
 # -*- coding: utf-8 -*-
-import os, tempfile
+import os, sys, tempfile
 from nose.tools import with_setup, eq_ as eq, ok_ as ok
 from test_common import vim, cleanup
 
@@ -15,7 +15,7 @@ def source(code):
 def test_command():
     fname = tempfile.mkstemp()[1]
     vim.command('new')
-    vim.command('edit %s' % fname)
+    vim.command('edit {}'.format(fname))
     # skip the "press return" state, which does not handle deferred calls
     vim.input('\r')
     vim.command('normal itesting\npython\napi')
@@ -162,3 +162,20 @@ def test_hash():
     eq(d[vim.current.buffer], "alpha")
     vim.command('winc w')
     eq(d[vim.current.buffer], "beta")
+
+
+@with_setup(setup=cleanup)
+def test_cwd():
+    pycmd = 'python'
+    if sys.version_info >= (3, 0):
+        pycmd = 'python3'
+
+    vim.command('{} import os'.format(pycmd))
+    cwd_before = vim.command_output('{} print(os.getcwd())'.format(pycmd))
+
+    vim.command('cd test')
+    cwd_vim = vim.command_output('pwd')
+    cwd_python = vim.command_output('{} print(os.getcwd())'.format(pycmd))
+    eq(cwd_vim, cwd_python)
+    ok(cwd_python != cwd_before)
+