diff --git a/src/nvim/fileio.c b/src/nvim/fileio.c
index 465d9e2668..9a23cb7edf 100644
--- a/src/nvim/fileio.c
+++ b/src/nvim/fileio.c
@@ -2378,11 +2378,10 @@ void shorten_buf_fname(buf_T *buf, char *dirname, int force)
       XFREE_CLEAR(buf->b_sfname);
     }
     char *p = path_shorten_fname(buf->b_ffname, dirname);
-    if (p != NULL) {
+    if (p != NULL && *p != NUL) {
       buf->b_sfname = xstrdup(p);
       buf->b_fname = buf->b_sfname;
-    }
-    if (p == NULL) {
+    } else {
       buf->b_fname = buf->b_ffname;
     }
   }
diff --git a/test/functional/ex_cmds/mksession_spec.lua b/test/functional/ex_cmds/mksession_spec.lua
index 40d6564eba..81e39889de 100644
--- a/test/functional/ex_cmds/mksession_spec.lua
+++ b/test/functional/ex_cmds/mksession_spec.lua
@@ -188,6 +188,22 @@ describe(':mksession', function()
     eq(expected, api.nvim_buf_get_name(0))
   end)
 
+  it('restores a directory buffer for the CWD #40939', function()
+    local cwd_dir = t.fix_slashes(fn.getcwd())
+    local expected = cwd_dir .. '/'
+
+    command('set sessionoptions=buffers,curdir')
+    command('edit ' .. cwd_dir)
+    command('cd ' .. cwd_dir)
+    neq('', fn.bufname('%'))
+    eq(expected, api.nvim_buf_get_name(0))
+
+    command('mksession ' .. session_file)
+    command('%bwipeout!')
+    command('source ' .. session_file)
+    eq(expected, api.nvim_buf_get_name(0))
+  end)
+
   it('restores CWD for :terminal buffers #11288', function()
     local cwd_dir = fn.fnamemodify('.', ':p:~'):gsub([[/*$]], '')
     local session_path = cwd_dir .. '/' .. session_file