diff --git a/packages/nx/src/generators/testing-utils/create-tree-with-empty-workspace.ts b/packages/nx/src/generators/testing-utils/create-tree-with-empty-workspace.ts
index 005fc37e25d9b..c7545096379a9 100644
--- a/packages/nx/src/generators/testing-utils/create-tree-with-empty-workspace.ts
+++ b/packages/nx/src/generators/testing-utils/create-tree-with-empty-workspace.ts
@@ -1,5 +1,6 @@
 import { FsTree } from '../tree';
 import type { Tree } from '../tree';
+import { workspaceRoot } from '../../utils/workspace-root';
 
 /**
  * Creates a host for testing.
@@ -8,6 +9,12 @@ export function createTreeWithEmptyWorkspace(
   opts = {} as { layout?: 'apps-libs' }
 ): Tree {
   const tree = new FsTree('/virtual', false);
+  // Our unit tests are all written as though they are at the root of a workspace
+  // However, when they are run in a subdirectory of the workspaceRoot,
+  // the relative path between workspaceRoot and the directory the tests are run
+  // is prepended to the paths created in the virtual tree.
+  // Setting this envVar to workspaceRoot prevents this behaviour
+  process.env.INIT_CWD = workspaceRoot;
   return addCommonFiles(tree, opts.layout === 'apps-libs');
 }