diff --git a/src/bin.ts b/src/bin.ts
index f470a2c83..580f6256a 100644
--- a/src/bin.ts
+++ b/src/bin.ts
@@ -28,8 +28,9 @@ import {
 } from './index';
 import type { TSInternal } from './ts-compiler-types';
 import { addBuiltinLibsToObject } from '../dist-raw/node-internal-modules-cjs-helpers';
-import { callInChild } from './child/spawn-child';
+import { callInChildWithEsm } from './child/spawn-child-with-esm';
 import { findAndReadConfig } from './configuration';
+import { getChildProcessArguments } from './child/child-exec-args';
 
 /**
  * Main `bin` functionality.
@@ -46,10 +47,6 @@ export function main(
 ) {
   const args = parseArgv(argv, entrypointArgs);
   const state: BootstrapState = {
-    shouldUseChildProcess: false,
-    isInChildProcess: false,
-    isCli: true,
-    tsNodeScript: __filename,
     parseArgvResult: args,
   };
   return bootstrap(state);
@@ -61,37 +58,78 @@ export function main(
  * Can be marshalled when necessary to resume bootstrapping in a child process.
  */
 export interface BootstrapState {
-  isInChildProcess: boolean;
-  shouldUseChildProcess: boolean;
-  /**
-   * True if bootstrapping the ts-node CLI process or the direct child necessitated by `--esm`.
-   * false if bootstrapping a subsequently `fork()`ed child.
-   */
-  isCli: boolean;
-  tsNodeScript: string;
   parseArgvResult: ReturnType<typeof parseArgv>;
   phase2Result?: ReturnType<typeof phase2>;
   phase3Result?: ReturnType<typeof phase3>;
 }
 
+/**
+ * Bootstrap state that is passed to the child process used to execute
+ * the final bootstrap phase.
+ *
+ * This state may be encoded in process command line arguments and should
+ * only capture information that should be persisted to e.g. forked child processes.
+ */
+export interface BootstrapStateForForkedProcesses {
+  // For the final bootstrap we are only interested in the user arguments
+  // that should be passed to the entry-point script (or eval script).
+  // We don't want to encode any options that would break child forking. e.g.
+  // persisting the `--eval` option would break `child_process.fork` in scripts.
+  parseArgvResult: Pick<ReturnType<typeof parseArgv>, 'restArgs'>;
+  phase3Result: Pick<
+    ReturnType<typeof phase3>,
+    'enableEsmLoader' | 'preloadedConfig'
+  >;
+}
+
+export interface BootstrapStateInitialProcessChild
+  extends Omit<BootstrapStateForForkedProcesses, 'initialProcessOptions'> {
+  initialProcessOptions: { resolutionCwd: string } & Pick<
+    ReturnType<typeof parseArgv>,
+    // These are options which should not persist into forked child processes,
+    // but can be passed-through in the initial child process creation -- but should
+    // not be encoded in the Brotli state for child process forks (through `execArgv`.)
+    'version' | 'showConfig' | 'code' | 'print' | 'interactive'
+  >;
+}
+
+export type BootstrapStateForChild = Omit<
+  BootstrapStateForForkedProcesses,
+  'initialProcessOptions'
+> &
+  Partial<BootstrapStateInitialProcessChild>;
+
 /** @internal */
 export function bootstrap(state: BootstrapState) {
-  if (!state.phase2Result) {
-    state.phase2Result = phase2(state);
-    if (state.shouldUseChildProcess && !state.isInChildProcess) {
-      // Note: When transitioning into the child-process after `phase2`,
-      // the updated working directory needs to be preserved.
-      return callInChild(state);
-    }
-  }
-  if (!state.phase3Result) {
-    state.phase3Result = phase3(state);
-    if (state.shouldUseChildProcess && !state.isInChildProcess) {
-      // Note: When transitioning into the child-process after `phase2`,
-      // the updated working directory needs to be preserved.
-      return callInChild(state);
-    }
+  state.phase2Result = phase2(state);
+  state.phase3Result = phase3(state);
+
+  const initialChildState: BootstrapStateInitialProcessChild = {
+    ...createBootstrapStateForChildProcess(state as Required<BootstrapState>),
+    // Aside with the default child process state, we attach the initial process
+    // options since this `callInChild` invocation is from the initial process.
+    // Later when forking, the initial process options are omitted / not persisted.
+    initialProcessOptions: {
+      code: state.parseArgvResult.code,
+      interactive: state.parseArgvResult.interactive,
+      print: state.parseArgvResult.print,
+      showConfig: state.parseArgvResult.showConfig,
+      version: state.parseArgvResult.version,
+      resolutionCwd: state.phase2Result.resolutionCwd,
+    },
+  };
+
+  // For ESM, we need to spawn a new Node process to be able to register our hooks.
+  if (state.phase3Result.enableEsmLoader) {
+    // Note: When transitioning into the child process for the final phase,
+    // we want to preserve the initial user working directory.
+    callInChildWithEsm(initialChildState, process.cwd());
+  } else {
+    completeBootstrap(initialChildState);
   }
+}
+/** Final phase of the bootstrap. */
+export function completeBootstrap(state: BootstrapStateForChild) {
   return phase4(state);
 }
 
@@ -274,7 +312,7 @@ function parseArgv(argv: string[], entrypointArgs: Record<string, any>) {
 }
 
 function phase2(payload: BootstrapState) {
-  const { help, version, cwdArg, esm } = payload.parseArgvResult;
+  const { help, version, cwdArg } = payload.parseArgvResult;
 
   if (help) {
     console.log(`
@@ -328,14 +366,15 @@ Options:
     process.exit(0);
   }
 
-  const cwd = cwdArg ? resolve(cwdArg) : process.cwd();
-
-  // If ESM is explicitly enabled through the flag, stage3 should be run in a child process
-  // with the ESM loaders configured.
-  if (esm) payload.shouldUseChildProcess = true;
+  let resolutionCwd: string;
+  if (cwdArg !== undefined) {
+    resolutionCwd = resolve(cwdArg);
+  } else {
+    resolutionCwd = process.cwd();
+  }
 
   return {
-    cwd,
+    resolutionCwd,
   };
 }
 
@@ -367,7 +406,7 @@ function phase3(payload: BootstrapState) {
     esm,
     experimentalSpecifierResolution,
   } = payload.parseArgvResult;
-  const { cwd } = payload.phase2Result!;
+  const { resolutionCwd } = payload.phase2Result!;
 
   // NOTE: When we transition to a child process for ESM, the entry-point script determined
   // here might not be the one used later in `phase4`. This can happen when we execute the
@@ -375,10 +414,13 @@ function phase3(payload: BootstrapState) {
   // We will always use the original TS project in forked processes anyway, so it is
   // expected and acceptable to retrieve the entry-point information here in `phase2`.
   // See: https://github.com/TypeStrong/ts-node/issues/1812.
-  const { entryPointPath } = getEntryPointInfo(payload);
+  const { entryPointPath } = getEntryPointInfo(
+    resolutionCwd,
+    payload.parseArgvResult!
+  );
 
   const preloadedConfig = findAndReadConfig({
-    cwd,
+    cwd: resolutionCwd,
     emit,
     files,
     pretty,
@@ -391,7 +433,7 @@ function phase3(payload: BootstrapState) {
     ignore,
     logError,
     projectSearchDir: getProjectSearchDir(
-      cwd,
+      resolutionCwd,
       scriptMode,
       cwdMode,
       entryPointPath
@@ -411,11 +453,10 @@ function phase3(payload: BootstrapState) {
       experimentalSpecifierResolution as ExperimentalSpecifierResolution,
   });
 
-  // If ESM is enabled through the parsed tsconfig, stage4 should be run in a child
-  // process with the ESM loaders configured.
-  if (preloadedConfig.options.esm) payload.shouldUseChildProcess = true;
-
-  return { preloadedConfig };
+  return {
+    preloadedConfig,
+    enableEsmLoader: !!(preloadedConfig.options.esm || esm),
+  };
 }
 
 /**
@@ -433,10 +474,15 @@ function phase3(payload: BootstrapState) {
  * configuration and entry-point information is only reliable in the final phase. More
  * details can be found in here: https://github.com/TypeStrong/ts-node/issues/1812.
  */
-function getEntryPointInfo(state: BootstrapState) {
-  const { code, interactive, restArgs } = state.parseArgvResult!;
-  const { cwd } = state.phase2Result!;
-  const { isCli } = state;
+function getEntryPointInfo(
+  resolutionCwd: string,
+  argvResult: {
+    code: string | undefined;
+    interactive: boolean | undefined;
+    restArgs: string[];
+  }
+) {
+  const { code, interactive, restArgs } = argvResult;
 
   // Figure out which we are executing: piped stdin, --eval, REPL, and/or entrypoint
   // This is complicated because node's behavior is complicated
@@ -448,14 +494,9 @@ function getEntryPointInfo(state: BootstrapState) {
     (interactive || (process.stdin.isTTY && !executeEval));
   const executeStdin = !executeEval && !executeRepl && !executeEntrypoint;
 
-  /**
-   * Unresolved. May point to a symlink, not realpath. May be missing file extension
-   * NOTE: resolution relative to cwd option (not `process.cwd()`) is legacy backwards-compat; should be changed in next major: https://github.com/TypeStrong/ts-node/issues/1834
-   */
+  /** Unresolved. May point to a symlink, not realpath. May be missing file extension */
   const entryPointPath = executeEntrypoint
-    ? isCli
-      ? resolve(cwd, restArgs[0])
-      : resolve(restArgs[0])
+    ? resolve(resolutionCwd, restArgs[0])
     : undefined;
 
   return {
@@ -467,12 +508,11 @@ function getEntryPointInfo(state: BootstrapState) {
   };
 }
 
-function phase4(payload: BootstrapState) {
-  const { isInChildProcess, tsNodeScript } = payload;
-  const { version, showConfig, restArgs, code, print, argv } =
-    payload.parseArgvResult;
-  const { cwd } = payload.phase2Result!;
-  const { preloadedConfig } = payload.phase3Result!;
+function phase4(payload: BootstrapStateForChild) {
+  const { restArgs } = payload.parseArgvResult;
+  const { preloadedConfig } = payload.phase3Result;
+  const resolutionCwd =
+    payload.initialProcessOptions?.resolutionCwd ?? process.cwd();
 
   const {
     entryPointPath,
@@ -480,7 +520,11 @@ function phase4(payload: BootstrapState) {
     executeEval,
     executeRepl,
     executeStdin,
-  } = getEntryPointInfo(payload);
+  } = getEntryPointInfo(resolutionCwd, {
+    code: payload.initialProcessOptions?.code,
+    interactive: payload.initialProcessOptions?.interactive,
+    restArgs: payload.parseArgvResult.restArgs,
+  });
 
   /**
    * <repl>, [stdin], and [eval] are all essentially virtual files that do not exist on disc and are backed by a REPL
@@ -496,7 +540,7 @@ function phase4(payload: BootstrapState) {
   let stdinStuff: VirtualFileState | undefined;
   let evalAwarePartialHost: EvalAwarePartialHost | undefined = undefined;
   if (executeEval) {
-    const state = new EvalState(join(cwd, EVAL_FILENAME));
+    const state = new EvalState(join(resolutionCwd, EVAL_FILENAME));
     evalStuff = {
       state,
       repl: createRepl({
@@ -509,10 +553,10 @@ function phase4(payload: BootstrapState) {
     // Create a local module instance based on `cwd`.
     const module = (evalStuff.module = new Module(EVAL_NAME));
     module.filename = evalStuff.state.path;
-    module.paths = (Module as any)._nodeModulePaths(cwd);
+    module.paths = (Module as any)._nodeModulePaths(resolutionCwd);
   }
   if (executeStdin) {
-    const state = new EvalState(join(cwd, STDIN_FILENAME));
+    const state = new EvalState(join(resolutionCwd, STDIN_FILENAME));
     stdinStuff = {
       state,
       repl: createRepl({
@@ -525,10 +569,10 @@ function phase4(payload: BootstrapState) {
     // Create a local module instance based on `cwd`.
     const module = (stdinStuff.module = new Module(STDIN_NAME));
     module.filename = stdinStuff.state.path;
-    module.paths = (Module as any)._nodeModulePaths(cwd);
+    module.paths = (Module as any)._nodeModulePaths(resolutionCwd);
   }
   if (executeRepl) {
-    const state = new EvalState(join(cwd, REPL_FILENAME));
+    const state = new EvalState(join(resolutionCwd, REPL_FILENAME));
     replStuff = {
       state,
       repl: createRepl({
@@ -552,7 +596,8 @@ function phase4(payload: BootstrapState) {
     },
   });
   register(service);
-  if (isInChildProcess)
+
+  if (payload.phase3Result.enableEsmLoader)
     (
       require('./child/child-loader') as typeof import('./child/child-loader')
     ).lateBindHooks(createEsmHooks(service));
@@ -563,13 +608,13 @@ function phase4(payload: BootstrapState) {
   stdinStuff?.repl.setService(service);
 
   // Output project information.
-  if (version === 2) {
+  if (payload.initialProcessOptions?.version === 2) {
     console.log(`ts-node v${VERSION}`);
     console.log(`node ${process.version}`);
     console.log(`compiler v${service.ts.version}`);
     process.exit(0);
   }
-  if (version >= 3) {
+  if ((payload.initialProcessOptions?.version ?? 0) >= 3) {
     console.log(`ts-node v${VERSION} ${dirname(__dirname)}`);
     console.log(`node ${process.version}`);
     console.log(
@@ -578,7 +623,7 @@ function phase4(payload: BootstrapState) {
     process.exit(0);
   }
 
-  if (showConfig) {
+  if (payload.initialProcessOptions?.showConfig) {
     const ts = service.ts as any as TSInternal;
     if (typeof ts.convertToTSConfig !== 'function') {
       console.error(
@@ -613,7 +658,8 @@ function phase4(payload: BootstrapState) {
       },
       ...ts.convertToTSConfig(
         service.config,
-        service.configFilePath ?? join(cwd, 'ts-node-implicit-tsconfig.json'),
+        service.configFilePath ??
+          join(resolutionCwd, 'ts-node-implicit-tsconfig.json'),
         service.ts.sys
       ),
     };
@@ -626,12 +672,21 @@ function phase4(payload: BootstrapState) {
     process.exit(0);
   }
 
-  // Prepend `ts-node` arguments to CLI for child processes.
-  process.execArgv.push(
-    tsNodeScript,
-    ...argv.slice(2, argv.length - restArgs.length)
+  const forkPersistentBootstrapState: BootstrapStateForForkedProcesses =
+    createBootstrapStateForChildProcess(payload);
+
+  const { childScriptPath, childScriptArgs } = getChildProcessArguments(
+    payload.phase3Result.enableEsmLoader,
+    forkPersistentBootstrapState
   );
 
+  // Append the child script path and arguments to the process `execArgv`.
+  // The final phase is always invoked with Node directly, but subsequent
+  // forked instances (of the user entry-point) should directly jump into
+  // the final phase by landing directly in the child script with the Brotli
+  // encoded bootstrap state (as computed above with `forkPersistentBootstrapState`).
+  process.execArgv.push(childScriptPath, ...childScriptArgs);
+
   // TODO this comes from BootstrapState
   process.argv = [process.argv[1]]
     .concat(executeEntrypoint ? ([entryPointPath] as string[]) : [])
@@ -640,7 +695,7 @@ function phase4(payload: BootstrapState) {
   // Execute the main contents (either eval, script or piped).
   if (executeEntrypoint) {
     if (
-      payload.isInChildProcess &&
+      payload.phase3Result.enableEsmLoader &&
       versionGteLt(process.versions.node, '18.6.0')
     ) {
       // HACK workaround node regression
@@ -656,8 +711,8 @@ function phase4(payload: BootstrapState) {
       evalAndExitOnTsError(
         evalStuff!.repl,
         evalStuff!.module!,
-        code!,
-        print,
+        payload.initialProcessOptions!.code!,
+        payload.initialProcessOptions!.print,
         'eval'
       );
     }
@@ -667,7 +722,7 @@ function phase4(payload: BootstrapState) {
     }
 
     if (executeStdin) {
-      let buffer = code || '';
+      let buffer = payload.initialProcessOptions?.code ?? '';
       process.stdin.on('data', (chunk: Buffer) => (buffer += chunk));
       process.stdin.on('end', () => {
         evalAndExitOnTsError(
@@ -675,7 +730,7 @@ function phase4(payload: BootstrapState) {
           stdinStuff!.module!,
           buffer,
           // `echo 123 | node -p` still prints 123
-          print,
+          payload.initialProcessOptions?.print ?? false,
           'stdin'
         );
       });
@@ -683,6 +738,22 @@ function phase4(payload: BootstrapState) {
   }
 }
 
+function createBootstrapStateForChildProcess(
+  state: BootstrapStateInitialProcessChild | BootstrapStateForForkedProcesses
+): BootstrapStateForForkedProcesses {
+  // NOTE: Build up the child process fork bootstrap state manually so that we do
+  // not encode unnecessary properties into the bootstrap state that is persisted
+  return {
+    parseArgvResult: {
+      restArgs: state.parseArgvResult.restArgs,
+    },
+    phase3Result: {
+      enableEsmLoader: state.phase3Result!.enableEsmLoader,
+      preloadedConfig: state.phase3Result!.preloadedConfig,
+    },
+  };
+}
+
 /**
  * Get project search path from args.
  */
diff --git a/src/child/child-entrypoint.ts b/src/child/child-entrypoint.ts
index 0550170bf..1e5e874e9 100644
--- a/src/child/child-entrypoint.ts
+++ b/src/child/child-entrypoint.ts
@@ -1,24 +1,11 @@
-import { BootstrapState, bootstrap } from '../bin';
+import { completeBootstrap, BootstrapStateForChild } from '../bin';
 import { argPrefix, compress, decompress } from './argv-payload';
 
 const base64ConfigArg = process.argv[2];
 if (!base64ConfigArg.startsWith(argPrefix)) throw new Error('unexpected argv');
 const base64Payload = base64ConfigArg.slice(argPrefix.length);
-const state = decompress(base64Payload) as BootstrapState;
+const state = decompress(base64Payload) as BootstrapStateForChild;
 
-state.isInChildProcess = true;
-state.tsNodeScript = __filename;
-state.parseArgvResult.argv = process.argv;
 state.parseArgvResult.restArgs = process.argv.slice(3);
 
-// Modify and re-compress the payload delivered to subsequent child processes.
-// This logic may be refactored into bin.ts by https://github.com/TypeStrong/ts-node/issues/1831
-if (state.isCli) {
-  const stateForChildren: BootstrapState = {
-    ...state,
-    isCli: false,
-  };
-  state.parseArgvResult.argv[2] = `${argPrefix}${compress(stateForChildren)}`;
-}
-
-bootstrap(state);
+completeBootstrap(state);
diff --git a/src/child/child-exec-args.ts b/src/child/child-exec-args.ts
new file mode 100644
index 000000000..b96caeb8e
--- /dev/null
+++ b/src/child/child-exec-args.ts
@@ -0,0 +1,40 @@
+import { pathToFileURL } from 'url';
+import { brotliCompressSync } from 'zlib';
+import type { BootstrapStateForChild } from '../bin';
+import { versionGteLt } from '../util';
+import { argPrefix } from './argv-payload';
+
+export function getChildProcessArguments(
+  enableEsmLoader: boolean,
+  state: BootstrapStateForChild
+) {
+  if (enableEsmLoader && !versionGteLt(process.versions.node, '12.17.0')) {
+    throw new Error(
+      '`ts-node-esm` and `ts-node --esm` require node version 12.17.0 or newer.'
+    );
+  }
+
+  const nodeExecArgs = [];
+
+  if (enableEsmLoader) {
+    nodeExecArgs.push(
+      '--require',
+      require.resolve('./child-require.js'),
+      '--loader',
+      // Node on Windows doesn't like `c:\` absolute paths here; must be `file:///c:/`
+      pathToFileURL(require.resolve('../../child-loader.mjs')).toString()
+    );
+  }
+
+  const childScriptArgs = [
+    `${argPrefix}${brotliCompressSync(
+      Buffer.from(JSON.stringify(state), 'utf8')
+    ).toString('base64')}`,
+  ];
+
+  return {
+    nodeExecArgs,
+    childScriptArgs,
+    childScriptPath: require.resolve('./child-entrypoint.js'),
+  };
+}
diff --git a/src/child/spawn-child-with-esm.ts b/src/child/spawn-child-with-esm.ts
new file mode 100644
index 000000000..ca8892923
--- /dev/null
+++ b/src/child/spawn-child-with-esm.ts
@@ -0,0 +1,43 @@
+import { fork } from 'child_process';
+import type { BootstrapStateForChild } from '../bin';
+import { getChildProcessArguments } from './child-exec-args';
+
+/**
+ * @internal
+ * @param state Bootstrap state to be transferred into the child process.
+ * @param enableEsmLoader Whether to enable the ESM loader or not. This option may
+ *   be removed in the future when `--esm` is no longer a choice.
+ * @param targetCwd Working directory to be preserved when transitioning to
+ *   the child process.
+ */
+export function callInChildWithEsm(
+  state: BootstrapStateForChild,
+  targetCwd: string
+) {
+  const { childScriptArgs, childScriptPath, nodeExecArgs } =
+    getChildProcessArguments(/* enableEsmLoader */ true, state);
+
+  childScriptArgs.push(...state.parseArgvResult.restArgs);
+
+  const child = fork(childScriptPath, childScriptArgs, {
+    stdio: 'inherit',
+    execArgv: [...process.execArgv, ...nodeExecArgs],
+    cwd: targetCwd,
+  });
+  child.on('error', (error) => {
+    console.error(error);
+    process.exit(1);
+  });
+  child.on('exit', (code) => {
+    child.removeAllListeners();
+    process.off('SIGINT', sendSignalToChild);
+    process.off('SIGTERM', sendSignalToChild);
+    process.exitCode = code === null ? 1 : code;
+  });
+  // Ignore sigint and sigterm in parent; pass them to child
+  process.on('SIGINT', sendSignalToChild);
+  process.on('SIGTERM', sendSignalToChild);
+  function sendSignalToChild(signal: string) {
+    process.kill(child.pid, signal);
+  }
+}
diff --git a/src/child/spawn-child.ts b/src/child/spawn-child.ts
deleted file mode 100644
index 618b8190a..000000000
--- a/src/child/spawn-child.ts
+++ /dev/null
@@ -1,52 +0,0 @@
-import type { BootstrapState } from '../bin';
-import { spawn } from 'child_process';
-import { pathToFileURL } from 'url';
-import { versionGteLt } from '../util';
-import { argPrefix, compress } from './argv-payload';
-
-/**
- * @internal
- * @param state Bootstrap state to be transferred into the child process.
- * @param targetCwd Working directory to be preserved when transitioning to
- *   the child process.
- */
-export function callInChild(state: BootstrapState) {
-  if (!versionGteLt(process.versions.node, '12.17.0')) {
-    throw new Error(
-      '`ts-node-esm` and `ts-node --esm` require node version 12.17.0 or newer.'
-    );
-  }
-  const child = spawn(
-    process.execPath,
-    [
-      '--require',
-      require.resolve('./child-require.js'),
-      '--loader',
-      // Node on Windows doesn't like `c:\` absolute paths here; must be `file:///c:/`
-      pathToFileURL(require.resolve('../../child-loader.mjs')).toString(),
-      require.resolve('./child-entrypoint.js'),
-      `${argPrefix}${compress(state)}`,
-      ...state.parseArgvResult.restArgs,
-    ],
-    {
-      stdio: 'inherit',
-      argv0: process.argv0,
-    }
-  );
-  child.on('error', (error) => {
-    console.error(error);
-    process.exit(1);
-  });
-  child.on('exit', (code) => {
-    child.removeAllListeners();
-    process.off('SIGINT', sendSignalToChild);
-    process.off('SIGTERM', sendSignalToChild);
-    process.exitCode = code === null ? 1 : code;
-  });
-  // Ignore sigint and sigterm in parent; pass them to child
-  process.on('SIGINT', sendSignalToChild);
-  process.on('SIGTERM', sendSignalToChild);
-  function sendSignalToChild(signal: string) {
-    process.kill(child.pid, signal);
-  }
-}
diff --git a/src/test/esm-loader.spec.ts b/src/test/esm-loader.spec.ts
index 375012a76..d6172a8c1 100644
--- a/src/test/esm-loader.spec.ts
+++ b/src/test/esm-loader.spec.ts
@@ -362,10 +362,8 @@ test.suite('esm', (test) => {
       test.suite('esm child process working directory', (test) => {
         test('should have the correct working directory in the user entry-point', async () => {
           const { err, stdout, stderr } = await exec(
-            `${BIN_PATH} --esm --cwd ./esm/ index.ts`,
-            {
-              cwd: resolve(TEST_DIR, 'working-dir'),
-            }
+            `${BIN_PATH} --esm index.ts`,
+            { cwd: './working-dir/esm/' }
           );
 
           expect(err).toBe(null);
@@ -377,7 +375,8 @@ test.suite('esm', (test) => {
       test.suite('esm child process and forking', (test) => {
         test('should be able to fork vanilla NodeJS script', async () => {
           const { err, stdout, stderr } = await exec(
-            `${BIN_PATH} --esm --cwd ./esm-child-process/ ./process-forking-js/index.ts`
+            `${BIN_PATH} --esm index.ts`,
+            { cwd: './esm-child-process/process-forking-js-worker/' }
           );
 
           expect(err).toBe(null);
@@ -385,9 +384,10 @@ test.suite('esm', (test) => {
           expect(stderr).toBe('');
         });
 
-        test('should be able to fork TypeScript script', async () => {
+        test('should be able to fork into a nested TypeScript ESM script', async () => {
           const { err, stdout, stderr } = await exec(
-            `${BIN_PATH} --esm --cwd ./esm-child-process/ ./process-forking-ts/index.ts`
+            `${BIN_PATH} --esm index.ts`,
+            { cwd: './esm-child-process/process-forking-esm-worker/' }
           );
 
           expect(err).toBe(null);
@@ -395,15 +395,37 @@ test.suite('esm', (test) => {
           expect(stderr).toBe('');
         });
 
-        test('should be able to fork TypeScript script by absolute path', async () => {
-          const { err, stdout, stderr } = await exec(
-            `${BIN_PATH} --esm --cwd ./esm-child-process/ ./process-forking-ts-abs/index.ts`
-          );
+        test(
+          'should be possible to fork into a nested TypeScript script with respect to ' +
+            'the working directory',
+          async () => {
+            const { err, stdout, stderr } = await exec(
+              `${BIN_PATH} --esm index.ts`,
+              { cwd: './esm-child-process/process-forking-subdir-relative/' }
+            );
 
-          expect(err).toBe(null);
-          expect(stdout.trim()).toBe('Passing: from main');
-          expect(stderr).toBe('');
-        });
+            expect(err).toBe(null);
+            expect(stdout.trim()).toBe('Passing: from main');
+            expect(stderr).toBe('');
+          }
+        );
+
+        test.suite(
+          'with NodeNext TypeScript resolution and `.mts` extension',
+          (test) => {
+            test.runIf(tsSupportsStableNodeNextNode16);
+
+            test('should be able to fork into a nested TypeScript ESM script', async () => {
+              const { err, stdout, stderr } = await exec(
+                `${BIN_PATH} --esm ./esm-child-process/process-forking-esm-worker-next/index.mts`
+              );
+
+              expect(err).toBe(null);
+              expect(stdout.trim()).toBe('Passing: from main');
+              expect(stderr).toBe('');
+            });
+          }
+        );
       });
 
       test.suite('parent passes signals to child', (test) => {
diff --git a/src/test/helpers.ts b/src/test/helpers.ts
index da86bddc2..20916a9f7 100644
--- a/src/test/helpers.ts
+++ b/src/test/helpers.ts
@@ -33,6 +33,10 @@ export const BIN_SCRIPT_PATH = join(
   TEST_DIR,
   'node_modules/.bin/ts-node-script'
 );
+export const CHILD_ENTRY_POINT_SCRIPT = join(
+  TEST_DIR,
+  'node_modules/ts-node/dist/child/child-entrypoint.js'
+);
 export const BIN_CWD_PATH = join(TEST_DIR, 'node_modules/.bin/ts-node-cwd');
 export const BIN_ESM_PATH = join(TEST_DIR, 'node_modules/.bin/ts-node-esm');
 
diff --git a/src/test/index.spec.ts b/src/test/index.spec.ts
index f085a3639..fef5037f6 100644
--- a/src/test/index.spec.ts
+++ b/src/test/index.spec.ts
@@ -5,6 +5,7 @@ import { tmpdir } from 'os';
 import semver = require('semver');
 import {
   BIN_PATH_JS,
+  CHILD_ENTRY_POINT_SCRIPT,
   CMD_TS_NODE_WITH_PROJECT_TRANSPILE_ONLY_FLAG,
   nodeSupportsEsmHooks,
   nodeSupportsSpawningChildProcess,
@@ -619,10 +620,7 @@ test.suite('ts-node', (test) => {
 
     test('should have the correct working directory in the user entry-point', async () => {
       const { err, stdout, stderr } = await exec(
-        `${BIN_PATH} --cwd ./cjs index.ts`,
-        {
-          cwd: resolve(TEST_DIR, 'working-dir'),
-        }
+        `${BIN_PATH} --cwd ./working-dir/cjs/ index.ts`
       );
 
       expect(err).toBe(null);
@@ -630,19 +628,19 @@ test.suite('ts-node', (test) => {
       expect(stderr).toBe('');
     });
 
-    // Disabled due to bug:
-    // --cwd is passed to forked children when not using --esm, erroneously affects their entrypoint resolution.
-    // tracked/fixed by either https://github.com/TypeStrong/ts-node/issues/1834
-    // or https://github.com/TypeStrong/ts-node/issues/1831
-    test.skip('should be able to fork into a nested TypeScript script with a modified working directory', async () => {
-      const { err, stdout, stderr } = await exec(
-        `${BIN_PATH} --cwd ./working-dir/forking/ index.ts`
-      );
+    test(
+      'should be able to fork into a nested TypeScript script with a modified ' +
+        'working directory',
+      async () => {
+        const { err, stdout, stderr } = await exec(
+          `${BIN_PATH} --cwd ./working-dir/forking/ index.ts`
+        );
 
-      expect(err).toBe(null);
-      expect(stdout.trim()).toBe('Passing: from main');
-      expect(stderr).toBe('');
-    });
+        expect(err).toBe(null);
+        expect(stdout.trim()).toBe('Passing: from main');
+        expect(stderr).toBe('');
+      }
+    );
 
     test.suite('should read ts-node options from tsconfig.json', (test) => {
       const BIN_EXEC = `"${BIN_PATH}" --project tsconfig-options/tsconfig.json`;
@@ -1132,35 +1130,61 @@ test('Falls back to transpileOnly when ts compiler returns emitSkipped', async (
 
 test.suite('node environment', (test) => {
   test.suite('Sets argv and execArgv correctly in forked processes', (test) => {
-    forkTest(`node --no-warnings ${BIN_PATH_JS}`, BIN_PATH_JS, '--no-warnings');
+    forkTest(`node --no-warnings ${BIN_PATH_JS}`, BIN_PATH_JS, [
+      '--no-warnings',
+    ]);
     forkTest(
       `${BIN_PATH}`,
       process.platform === 'win32' ? BIN_PATH_JS : BIN_PATH
     );
 
+    test.suite('with esm enabled', (test) => {
+      test.runIf(nodeSupportsSpawningChildProcess);
+
+      forkTest(
+        `node --no-warnings ${BIN_PATH_JS} --esm`,
+        CHILD_ENTRY_POINT_SCRIPT,
+        [
+          '--no-warnings',
+          // Forked child processes should directly receive the necessary ESM loader
+          // Node flags through `execArgv`, avoiding doubled child process spawns.
+          '--require',
+          expect.stringMatching(/child-require.js$/),
+          '--loader',
+          expect.stringMatching(/child-loader.mjs$/),
+        ],
+        './recursive-fork-esm/index.ts'
+      );
+    });
+
     function forkTest(
       command: string,
       expectParentArgv0: string,
-      nodeFlag?: string
+      nodeFlags?: (string | ReturnType<typeof expect.stringMatching>)[],
+      testFixturePath = './recursive-fork/index.ts'
     ) {
       test(command, async (t) => {
         const { err, stderr, stdout } = await exec(
-          `${command} --skipIgnore ./recursive-fork/index.ts argv2`
+          `${command} --skipIgnore ${testFixturePath} argv2`
         );
         expect(err).toBeNull();
         expect(stderr).toBe('');
         const generations = stdout.split('\n');
         const expectation = {
-          execArgv: [nodeFlag, BIN_PATH_JS, '--skipIgnore'].filter((v) => v),
+          execArgv: [
+            ...(nodeFlags || []),
+            CHILD_ENTRY_POINT_SCRIPT,
+            expect.stringMatching(/^--brotli-base64-config=.*/),
+          ],
           argv: [
-            // Note: argv[0] is *always* BIN_PATH_JS in child & grandchild
+            // Note: argv[0] is *always* CHILD_ENTRY_POINT_SCRIPT in child & grandchild
             expectParentArgv0,
-            resolve(TEST_DIR, 'recursive-fork/index.ts'),
+            resolve(TEST_DIR, testFixturePath),
             'argv2',
           ],
         };
         expect(JSON.parse(generations[0])).toMatchObject(expectation);
-        expectation.argv[0] = BIN_PATH_JS;
+        expectation.argv[0] = CHILD_ENTRY_POINT_SCRIPT;
         expect(JSON.parse(generations[1])).toMatchObject(expectation);
         expect(JSON.parse(generations[2])).toMatchObject(expectation);
       });
diff --git a/tests/esm-child-process/process-forking-ts-abs/index.ts b/tests/esm-child-process/process-forking-esm-worker-next/index.mts
similarity index 80%
rename from tests/esm-child-process/process-forking-ts-abs/index.ts
rename to tests/esm-child-process/process-forking-esm-worker-next/index.mts
index ec94e846d..e3c56655d 100644
--- a/tests/esm-child-process/process-forking-ts-abs/index.ts
+++ b/tests/esm-child-process/process-forking-esm-worker-next/index.mts
@@ -6,13 +6,10 @@ import { fileURLToPath } from 'url';
 // worker process finishes properly with the expected stdout message.
 process.exitCode = 1;
 
-const workerProcess = fork(
-  join(dirname(fileURLToPath(import.meta.url)), 'subfolder/worker.ts'),
-  [],
-  {
-    stdio: 'pipe',
-  }
-);
+const containingDir = dirname(fileURLToPath(import.meta.url));
+const workerProcess = fork(join(containingDir, 'worker.mts'), [], {
+  stdio: 'pipe',
+});
 
 let stdout = '';
 
diff --git a/tests/esm-child-process/process-forking-esm-worker-next/tsconfig.json b/tests/esm-child-process/process-forking-esm-worker-next/tsconfig.json
new file mode 100644
index 000000000..0b0d8971d
--- /dev/null
+++ b/tests/esm-child-process/process-forking-esm-worker-next/tsconfig.json
@@ -0,0 +1,8 @@
+{
+  "compilerOptions": {
+    "module": "NodeNext"
+  },
+  "ts-node": {
+    "transpileOnly": true
+  }
+}
diff --git a/tests/esm-child-process/process-forking-ts-abs/subfolder/worker.ts b/tests/esm-child-process/process-forking-esm-worker-next/worker.mts
similarity index 100%
rename from tests/esm-child-process/process-forking-ts-abs/subfolder/worker.ts
rename to tests/esm-child-process/process-forking-esm-worker-next/worker.mts
diff --git a/tests/esm-child-process/process-forking-js/index.ts b/tests/esm-child-process/process-forking-esm-worker/index.ts
similarity index 76%
rename from tests/esm-child-process/process-forking-js/index.ts
rename to tests/esm-child-process/process-forking-esm-worker/index.ts
index 88a3bd61a..ff0f2e61b 100644
--- a/tests/esm-child-process/process-forking-js/index.ts
+++ b/tests/esm-child-process/process-forking-esm-worker/index.ts
@@ -1,14 +1,10 @@
 import { fork } from 'child_process';
-import { dirname } from 'path';
-import { fileURLToPath } from 'url';
 
 // Initially set the exit code to non-zero. We only set it to `0` when the
 // worker process finishes properly with the expected stdout message.
 process.exitCode = 1;
 
-process.chdir(dirname(fileURLToPath(import.meta.url)));
-
-const workerProcess = fork('./worker.js', [], {
+const workerProcess = fork('./worker.ts', [], {
   stdio: 'pipe',
 });
 
diff --git a/tests/esm-child-process/process-forking-js/package.json b/tests/esm-child-process/process-forking-esm-worker/package.json
similarity index 100%
rename from tests/esm-child-process/process-forking-js/package.json
rename to tests/esm-child-process/process-forking-esm-worker/package.json
diff --git a/tests/esm-child-process/process-forking-ts-abs/tsconfig.json b/tests/esm-child-process/process-forking-esm-worker/tsconfig.json
similarity index 74%
rename from tests/esm-child-process/process-forking-ts-abs/tsconfig.json
rename to tests/esm-child-process/process-forking-esm-worker/tsconfig.json
index 04e93e5c7..f16e691d2 100644
--- a/tests/esm-child-process/process-forking-ts-abs/tsconfig.json
+++ b/tests/esm-child-process/process-forking-esm-worker/tsconfig.json
@@ -3,6 +3,6 @@
     "module": "ESNext"
   },
   "ts-node": {
-    "swc": true
+    "transpileOnly": true
   }
 }
diff --git a/tests/esm-child-process/process-forking-ts/subfolder/worker.ts b/tests/esm-child-process/process-forking-esm-worker/worker.ts
similarity index 100%
rename from tests/esm-child-process/process-forking-ts/subfolder/worker.ts
rename to tests/esm-child-process/process-forking-esm-worker/worker.ts
diff --git a/tests/esm-child-process/process-forking-ts/index.ts b/tests/esm-child-process/process-forking-js-worker/index.ts
similarity index 83%
rename from tests/esm-child-process/process-forking-ts/index.ts
rename to tests/esm-child-process/process-forking-js-worker/index.ts
index 2d59e0aab..22963dced 100644
--- a/tests/esm-child-process/process-forking-ts/index.ts
+++ b/tests/esm-child-process/process-forking-js-worker/index.ts
@@ -6,9 +6,8 @@ import { fileURLToPath } from 'url';
 // worker process finishes properly with the expected stdout message.
 process.exitCode = 1;
 
-process.chdir(join(dirname(fileURLToPath(import.meta.url)), 'subfolder'));
-
-const workerProcess = fork('./worker.ts', [], {
+const workerPath = join(dirname(fileURLToPath(import.meta.url)), './worker.js');
+const workerProcess = fork(workerPath, [], {
   stdio: 'pipe',
 });
 
diff --git a/tests/esm-child-process/process-forking-ts-abs/package.json b/tests/esm-child-process/process-forking-js-worker/package.json
similarity index 100%
rename from tests/esm-child-process/process-forking-ts-abs/package.json
rename to tests/esm-child-process/process-forking-js-worker/package.json
diff --git a/tests/esm-child-process/process-forking-ts/tsconfig.json b/tests/esm-child-process/process-forking-js-worker/tsconfig.json
similarity index 74%
rename from tests/esm-child-process/process-forking-ts/tsconfig.json
rename to tests/esm-child-process/process-forking-js-worker/tsconfig.json
index 04e93e5c7..f16e691d2 100644
--- a/tests/esm-child-process/process-forking-ts/tsconfig.json
+++ b/tests/esm-child-process/process-forking-js-worker/tsconfig.json
@@ -3,6 +3,6 @@
     "module": "ESNext"
   },
   "ts-node": {
-    "swc": true
+    "transpileOnly": true
   }
 }
diff --git a/tests/esm-child-process/process-forking-js/worker.js b/tests/esm-child-process/process-forking-js-worker/worker.js
similarity index 100%
rename from tests/esm-child-process/process-forking-js/worker.js
rename to tests/esm-child-process/process-forking-js-worker/worker.js
diff --git a/tests/esm-child-process/process-forking-subdir-relative/index.ts b/tests/esm-child-process/process-forking-subdir-relative/index.ts
new file mode 100644
index 000000000..e0b27f3cf
--- /dev/null
+++ b/tests/esm-child-process/process-forking-subdir-relative/index.ts
@@ -0,0 +1,22 @@
+import { fork } from 'child_process';
+import { join } from 'path';
+
+// Initially set the exit code to non-zero. We only set it to `0` when the
+// worker process finishes properly with the expected stdout message.
+process.exitCode = 1;
+
+const workerProcess = fork('./worker.ts', [], {
+  stdio: 'pipe',
+  cwd: join(process.cwd(), 'subfolder/'),
+});
+
+let stdout = '';
+
+workerProcess.stdout.on('data', (chunk) => (stdout += chunk.toString('utf8')));
+workerProcess.on('error', () => (process.exitCode = 1));
+workerProcess.on('close', (status, signal) => {
+  if (status === 0 && signal === null && stdout.trim() === 'Works') {
+    console.log('Passing: from main');
+    process.exitCode = 0;
+  }
+});
diff --git a/tests/esm-child-process/process-forking-ts/package.json b/tests/esm-child-process/process-forking-subdir-relative/package.json
similarity index 100%
rename from tests/esm-child-process/process-forking-ts/package.json
rename to tests/esm-child-process/process-forking-subdir-relative/package.json
diff --git a/tests/esm-child-process/process-forking-subdir-relative/subfolder/worker.ts b/tests/esm-child-process/process-forking-subdir-relative/subfolder/worker.ts
new file mode 100644
index 000000000..4114d5ab0
--- /dev/null
+++ b/tests/esm-child-process/process-forking-subdir-relative/subfolder/worker.ts
@@ -0,0 +1,3 @@
+const message: string = 'Works';
+
+console.log(message);
diff --git a/tests/esm-child-process/process-forking-js/tsconfig.json b/tests/esm-child-process/process-forking-subdir-relative/tsconfig.json
similarity index 74%
rename from tests/esm-child-process/process-forking-js/tsconfig.json
rename to tests/esm-child-process/process-forking-subdir-relative/tsconfig.json
index 04e93e5c7..f16e691d2 100644
--- a/tests/esm-child-process/process-forking-js/tsconfig.json
+++ b/tests/esm-child-process/process-forking-subdir-relative/tsconfig.json
@@ -3,6 +3,6 @@
     "module": "ESNext"
   },
   "ts-node": {
-    "swc": true
+    "transpileOnly": true
   }
 }
diff --git a/tests/project-resolution/a/index.ts b/tests/project-resolution/a/index.ts
new file mode 100644
index 000000000..230f5ea09
--- /dev/null
+++ b/tests/project-resolution/a/index.ts
@@ -0,0 +1,9 @@
+export {};
+// Type assertion to please TS 2.7
+const register = process[(Symbol as any).for('ts-node.register.instance')];
+console.log(
+  JSON.stringify({
+    options: register.options,
+    config: register.config,
+  })
+);
diff --git a/tests/project-resolution/a/tsconfig.json b/tests/project-resolution/a/tsconfig.json
new file mode 100644
index 000000000..377a86016
--- /dev/null
+++ b/tests/project-resolution/a/tsconfig.json
@@ -0,0 +1,12 @@
+{
+  "ts-node": {
+    "transpileOnly": true
+  },
+  "compilerOptions": {
+    "plugins": [
+      {
+        "name": "plugin-a"
+      }
+    ]
+  }
+}
diff --git a/tests/project-resolution/b/index.ts b/tests/project-resolution/b/index.ts
new file mode 100644
index 000000000..230f5ea09
--- /dev/null
+++ b/tests/project-resolution/b/index.ts
@@ -0,0 +1,9 @@
+export {};
+// Type assertion to please TS 2.7
+const register = process[(Symbol as any).for('ts-node.register.instance')];
+console.log(
+  JSON.stringify({
+    options: register.options,
+    config: register.config,
+  })
+);
diff --git a/tests/project-resolution/b/tsconfig.json b/tests/project-resolution/b/tsconfig.json
new file mode 100644
index 000000000..dd98865c1
--- /dev/null
+++ b/tests/project-resolution/b/tsconfig.json
@@ -0,0 +1,12 @@
+{
+  "ts-node": {
+    "transpileOnly": true
+  },
+  "compilerOptions": {
+    "plugins": [
+      {
+        "name": "plugin-b"
+      }
+    ]
+  }
+}
diff --git a/tests/recursive-fork-esm/index.ts b/tests/recursive-fork-esm/index.ts
new file mode 100644
index 000000000..380d6a644
--- /dev/null
+++ b/tests/recursive-fork-esm/index.ts
@@ -0,0 +1,17 @@
+import { fork } from 'child_process';
+import { fileURLToPath } from 'url';
+
+// Type syntax to prove its compiled, though the import above should also
+// prove the same
+const a = null as any;
+const currentScript = fileURLToPath(import.meta.url);
+
+console.log(JSON.stringify({ execArgv: process.execArgv, argv: process.argv }));
+if (process.env.generation !== 'grandchild') {
+  const nextGeneration =
+    process.env.generation === 'child' ? 'grandchild' : 'child';
+  fork(currentScript, process.argv.slice(2), {
+    env: { ...process.env, generation: nextGeneration },
+    stdio: 'inherit',
+  });
+}
diff --git a/tests/recursive-fork-esm/package.json b/tests/recursive-fork-esm/package.json
new file mode 100644
index 000000000..3dbc1ca59
--- /dev/null
+++ b/tests/recursive-fork-esm/package.json
@@ -0,0 +1,3 @@
+{
+  "type": "module"
+}
diff --git a/tests/recursive-fork-esm/tsconfig.json b/tests/recursive-fork-esm/tsconfig.json
new file mode 100644
index 000000000..e005d7499
--- /dev/null
+++ b/tests/recursive-fork-esm/tsconfig.json
@@ -0,0 +1,8 @@
+{
+  "compilerOptions": {
+    "module": "NodeNext"
+  },
+  "ts-node": {
+    "swc": true
+  }
+}
diff --git a/tests/working-dir/cjs/index.ts b/tests/working-dir/cjs/index.ts
index f3ba1b30a..597b779e6 100644
--- a/tests/working-dir/cjs/index.ts
+++ b/tests/working-dir/cjs/index.ts
@@ -1,7 +1,7 @@
 import { strictEqual } from 'assert';
-import { normalize, dirname } from 'path';
+import { join, normalize } from 'path';
 
-// Expect the working directory to be the parent directory.
-strictEqual(normalize(process.cwd()), normalize(dirname(__dirname)));
+// Expect the working directory to be the current directory.
+strictEqual(normalize(process.cwd()), normalize(join(__dirname, '../..')));
 
 console.log('Passing');
diff --git a/tests/working-dir/esm-node-next/index.ts b/tests/working-dir/esm-node-next/index.ts
new file mode 100644
index 000000000..f290171a9
--- /dev/null
+++ b/tests/working-dir/esm-node-next/index.ts
@@ -0,0 +1,11 @@
+import { strictEqual } from 'assert';
+import { normalize, dirname } from 'path';
+import { fileURLToPath } from 'url';
+
+// Expect the working directory to be the current directory.
+strictEqual(
+  normalize(process.cwd()),
+  normalize(dirname(fileURLToPath(import.meta.url)))
+);
+
+console.log('Passing');
diff --git a/tests/working-dir/esm-node-next/package.json b/tests/working-dir/esm-node-next/package.json
new file mode 100644
index 000000000..3dbc1ca59
--- /dev/null
+++ b/tests/working-dir/esm-node-next/package.json
@@ -0,0 +1,3 @@
+{
+  "type": "module"
+}
diff --git a/tests/working-dir/esm-node-next/tsconfig.json b/tests/working-dir/esm-node-next/tsconfig.json
new file mode 100644
index 000000000..3998b5074
--- /dev/null
+++ b/tests/working-dir/esm-node-next/tsconfig.json
@@ -0,0 +1,5 @@
+{
+  "compilerOptions": {
+    "module": "NodeNext"
+  }
+}
diff --git a/tests/working-dir/esm/index.ts b/tests/working-dir/esm/index.ts
index 21230f9d8..0f6220303 100644
--- a/tests/working-dir/esm/index.ts
+++ b/tests/working-dir/esm/index.ts
@@ -1,11 +1,8 @@
-import { strictEqual } from 'assert';
-import { normalize, dirname } from 'path';
-import { fileURLToPath } from 'url';
+import { ok } from 'assert';
 
-// Expect the working directory to be the parent directory.
-strictEqual(
-  normalize(process.cwd()),
-  normalize(dirname(dirname(fileURLToPath(import.meta.url))))
-);
+// Expect the working directory to be the current directory.
+// Note: Cannot use `import.meta.url` in this variant of the test
+// because older TypeScript versions do not know about this syntax.
+ok(/working-dir[\/\\]esm[\/\\]?/.test(process.cwd()));
 
 console.log('Passing');
diff --git a/tests/working-dir/esm/tsconfig.json b/tests/working-dir/esm/tsconfig.json
index 04e93e5c7..f16e691d2 100644
--- a/tests/working-dir/esm/tsconfig.json
+++ b/tests/working-dir/esm/tsconfig.json
@@ -3,6 +3,6 @@
     "module": "ESNext"
   },
   "ts-node": {
-    "swc": true
+    "transpileOnly": true
   }
 }