diff --git a/src/cli/run_command.zig b/src/cli/run_command.zig
index 94821e2209..044bd7b1d4 100644
--- a/src/cli/run_command.zig
+++ b/src/cli/run_command.zig
@@ -830,7 +830,7 @@ pub const RunCommand = struct {
             this_transpiler.runEnvLoader(true) catch {};
         }
 
-        this_transpiler.env.map.putDefault("npm_config_local_prefix", this_transpiler.fs.top_level_dir) catch unreachable;
+        this_transpiler.env.map.put("INIT_CWD", this_transpiler.fs.top_level_dir) catch unreachable;
 
         // we have no way of knowing what version they're expecting without running the node executable
         // running the node executable is too slow
@@ -872,6 +872,10 @@ pub const RunCommand = struct {
                     this_transpiler.env.map.putAssumeCapacity(key, v);
                 }
             }
+
+            this_transpiler.env.map.put("npm_config_local_prefix", package_json.source.path.name.dir) catch unreachable;
+        } else {
+            this_transpiler.env.map.put("npm_config_local_prefix", this_transpiler.fs.top_level_dir) catch unreachable;
         }
 
         return root_dir_info;
@@ -1381,7 +1385,7 @@ pub const RunCommand = struct {
         var this_transpiler: transpiler.Transpiler = undefined;
         const root_dir_info = try configureEnvForRun(ctx, &this_transpiler, null, log_errors, false);
         try configurePathForRun(ctx, root_dir_info, &this_transpiler, &ORIGINAL_PATH, root_dir_info.abs_path, force_using_bun);
-        this_transpiler.env.map.put("npm_command", "run-script") catch unreachable;
+        this_transpiler.env.map.put("npm_command", "run") catch unreachable;
 
         if (!ctx.debug.loaded_bunfig) {
             bun.CLI.Arguments.loadConfigPath(ctx.allocator, true, "bunfig.toml", ctx, .RunCommand) catch {};
diff --git a/test/cli/install/bun-run.test.ts b/test/cli/install/bun-run.test.ts
index d9cfbc96fa..3d457b01ff 100644
--- a/test/cli/install/bun-run.test.ts
+++ b/test/cli/install/bun-run.test.ts
@@ -12,7 +12,7 @@ import {
   tempDirWithFiles,
   tmpdirSync,
 } from "harness";
-import { join } from "path";
+import { join, sep } from "node:path";
 
 let run_dir: string;
 
@@ -505,7 +505,63 @@ it("$npm_command is accurate", async () => {
   });
   expect(await p.exited).toBe(0);
   expect(await new Response(p.stderr).text()).toBe(`$ echo $npm_command\n`);
-  expect(await new Response(p.stdout).text()).toBe(`run-script\n`);
+  expect(await new Response(p.stdout).text()).toBe(`run\n`);
+});
+
+it("$INIT_CWD is accurate", async () => {
+  await writeFile(
+    join(run_dir, "package.json"),
+    `{
+      "scripts": {
+        "sample": "echo $INIT_CWD",
+        "sample2": "cd subdir && INIT_CWD=OVERRIDE ${bunExe()} run sample",
+      },
+    }
+    `,
+  );
+
+  const p = spawn({
+    cmd: [bunExe(), "run", "sample"],
+    cwd: run_dir,
+    stdio: ["ignore", "pipe", "pipe"],
+    env: bunEnv,
+  });
+  expect(await p.exited).toBe(0);
+  expect(await new Response(p.stderr).text()).toBe(`$ echo $INIT_CWD\n`);
+  expect(await new Response(p.stdout).text()).toBe(`${run_dir}\n`);
+
+  await mkdir(join(run_dir, "subdir"));
+  const p2 = spawn({
+    cmd: [bunExe(), "run", "sample2"],
+    cwd: run_dir,
+    stdio: ["ignore", "pipe", "pipe"],
+    env: bunEnv,
+  });
+  expect(await p2.exited).toBe(0);
+  expect(await new Response(p2.stdout).text()).toBe(`${run_dir}${sep}subdir\n`);
+});
+
+it("npm_config_local_prefix is accurate", async () => {
+  await writeFile(
+    join(run_dir, "package.json"),
+    `{
+      "scripts": {
+        "sample": "echo $npm_config_local_prefix",
+      },
+    }
+    `,
+  );
+  await mkdir(join(run_dir, "subdir"));
+
+  const p = spawn({
+    cmd: [bunExe(), "run", "sample"],
+    cwd: join(run_dir, "subdir"),
+    stdio: ["ignore", "pipe", "pipe"],
+    env: bunEnv,
+  });
+  expect(await p.exited).toBe(0);
+  expect(await new Response(p.stderr).text()).toBe(`$ echo $npm_config_local_prefix\n`);
+  expect(await new Response(p.stdout).text()).toBe(`${run_dir}\n`);
 });
 
 it("$npm_lifecycle_event is accurate", async () => {