diff --git a/bin/cli.js b/bin/cli.js
index 3c58182053..771425c6c0 100755
--- a/bin/cli.js
+++ b/bin/cli.js
@@ -28,26 +28,18 @@ const fsPromised = {
   writeFile: promisify(fs.writeFile),
 };
 
-function initKnex(env, opts) {
-  if (opts.esm) {
-    // enable esm interop via 'esm' module
-    require = require('esm')(module);
-  }
-
-  env.configuration = env.configPath
-    ? require(env.configPath)
-    : mkConfigObj(opts);
+function openKnexfile(configPath) {
+  const config = require(configPath);
 
   // FYI: By default, the extension for the migration files is inferred
   //      from the knexfile's extension. So, the following lines are in
   //      place for backwards compatibility purposes.
-  if (!env.configuration.ext) {
-    const p = env.configPath || opts.knexpath;
+  config.ext = config.ext || path.extname(configPath).replace('.', '');
 
-    // TODO: Should this property be documented somewhere?
-    env.configuration.ext = path.extname(p).replace('.', '');
-  }
+  return config;
+}
 
+function initKnex(env, opts) {
   checkLocalModule(env);
   if (process.cwd() !== env.cwd) {
     process.chdir(env.cwd);
@@ -57,6 +49,15 @@ function initKnex(env, opts) {
     );
   }
 
+  if (opts.esm) {
+    // enable esm interop via 'esm' module
+    require = require('esm')(module);
+  }
+
+  env.configuration = env.configPath
+    ? openKnexfile(env.configPath)
+    : mkConfigObj(opts);
+
   const resolvedConfig = resolveEnvironmentConfig(opts, env.configuration);
   const knex = require(env.modulePath);
   return knex(resolvedConfig);
diff --git a/test/cli/knexfile-test.spec.js b/test/cli/knexfile-test.spec.js
index e84f58edc0..159e94d088 100644
--- a/test/cli/knexfile-test.spec.js
+++ b/test/cli/knexfile-test.spec.js
@@ -77,6 +77,27 @@ module.exports = {
         );
       });
 
+      // This addresses the issue that was reported here:
+      //
+      //   https://github.com/knex/knex/issues/3660
+      //
+      context(
+        'and the knexfile itself resolves paths relative to process.cwd()',
+        function() {
+          it("changes the process's cwd to the directory that contains the knexfile before opening the knexfile", () => {
+            const knexfile = 'test/jake-util/knexfile-relative/knexfile.js';
+            const expectedCWD = tildify(path.resolve(path.dirname(knexfile)));
+
+            return execCommand(
+              `node ${KNEX} migrate:latest --knexfile=test/jake-util/knexfile-relative/knexfile-with-resolve.js --knexpath=../knex.js`,
+              {
+                expectedOutput: `Working directory changed to ${expectedCWD}`,
+              }
+            );
+          });
+        }
+      );
+
       // FYI: This is only true because the Knex CLI changes the CWD to
       //      the directory of the knexfile.
       it('Resolves migrations relatively to knexfile', () => {
diff --git a/test/jake-util/knexfile-relative/knexfile-with-resolve.js b/test/jake-util/knexfile-relative/knexfile-with-resolve.js
new file mode 100644
index 0000000000..52c4322529
--- /dev/null
+++ b/test/jake-util/knexfile-relative/knexfile-with-resolve.js
@@ -0,0 +1,24 @@
+// This knexfile recreates the issue that was identified here:
+//
+//   https://github.com/knex/knex/issues/3660
+//
+
+const path = require('path');
+
+// Notice: this path will resolve relative to `process.cwd()` .
+// This will cause a problem if the Knex CLI opens the knexfile
+// before changing the cwd.
+const MIGRATIONS_DIR = path.resolve('knexfile_migrations');
+
+module.exports = {
+  client: 'sqlite3',
+  connection: {
+    filename: __dirname + '/../test.sqlite3',
+  },
+  migrations: {
+    directory: MIGRATIONS_DIR,
+  },
+  seeds: {
+    directory: './knexfile_seeds',
+  },
+};