diff --git a/extensions/positron-python/python_files/unittestadapter/execution.py b/extensions/positron-python/python_files/unittestadapter/execution.py
index 9394303b69a..6b925290647 100644
--- a/extensions/positron-python/python_files/unittestadapter/execution.py
+++ b/extensions/positron-python/python_files/unittestadapter/execution.py
@@ -171,6 +171,11 @@ def run_tests(
     locals: Optional[bool] = None,
 ) -> PayloadDict:
     cwd = os.path.abspath(start_dir)
+    if "/" in start_dir:  #  is a subdir
+        parent_dir = os.path.dirname(start_dir)
+        sys.path.insert(0, parent_dir)
+    else:
+        sys.path.insert(0, cwd)
     status = TestExecutionStatus.error
     error = None
     payload: PayloadDict = {"cwd": cwd, "status": status, "result": None}