diff --git a/runtime/doc/options.txt b/runtime/doc/options.txt
index bedd423e37..af3d8d57b3 100644
--- a/runtime/doc/options.txt
+++ b/runtime/doc/options.txt
@@ -6969,7 +6969,7 @@ A jump table for the options with a short description can be found at |Q_op|.
 	error will be given.
 
 	The default (empty) behaviour is equivalent to: >vim
-	    set titlestring=%t%(\ %M%)%(\ \(%{expand(\"%:~:h\")}\)%)%a\ -\ Nvim
+	    set titlestring=%t%(\ %M%)%(\ \(%{expand('%:p:~:h')}\)%)%a\ -\ Nvim
 <
 	Example: >vim
 	    auto BufEnter * let &titlestring = hostname() .. "/" .. expand("%:p")
diff --git a/runtime/lua/vim/_meta/options.gen.lua b/runtime/lua/vim/_meta/options.gen.lua
index 38fdaa774c..29bab51233 100644
--- a/runtime/lua/vim/_meta/options.gen.lua
+++ b/runtime/lua/vim/_meta/options.gen.lua
@@ -7499,7 +7499,7 @@ vim.go.titleold = vim.o.titleold
 --- The default (empty) behaviour is equivalent to:
 ---
 --- ```vim
----     set titlestring=%t%(\ %M%)%(\ \(%{expand(\"%:~:h\")}\)%)%a\ -\ Nvim
+---     set titlestring=%t%(\ %M%)%(\ \(%{expand('%:p:~:h')}\)%)%a\ -\ Nvim
 --- ```
 ---
 --- Example:
diff --git a/src/nvim/buffer.c b/src/nvim/buffer.c
index d1aa32be48..1f860a305b 100644
--- a/src/nvim/buffer.c
+++ b/src/nvim/buffer.c
@@ -3433,7 +3433,7 @@ void maketitle(void)
       }
     } else {
       // Format: "fname + (path) (1 of 2) - Nvim".
-      char *default_titlestring = "%t%( %M%)%( (%{expand(\"%:~:h\")})%)%a - Nvim";
+      char *default_titlestring = "%t%( %M%)%( (%{expand('%:p:~:h')})%)%a - Nvim";
       build_stl_str_hl(curwin, buf, sizeof(buf), default_titlestring,
                        kOptTitlestring, 0, 0, maxlen, NULL, NULL, NULL, NULL);
       title_str = buf;
diff --git a/src/nvim/options.lua b/src/nvim/options.lua
index 666888abcd..3ab60f0af9 100644
--- a/src/nvim/options.lua
+++ b/src/nvim/options.lua
@@ -9711,7 +9711,7 @@ local options = {
         error will be given.
 
         The default (empty) behaviour is equivalent to: >vim
-            set titlestring=%t%(\ %M%)%(\ \(%{expand(\"%:~:h\")}\)%)%a\ -\ Nvim
+            set titlestring=%t%(\ %M%)%(\ \(%{expand('%:p:~:h')}\)%)%a\ -\ Nvim
         <
         Example: >vim
             auto BufEnter * let &titlestring = hostname() .. "/" .. expand("%:p")
diff --git a/test/functional/terminal/tui_spec.lua b/test/functional/terminal/tui_spec.lua
index f4a38e27ff..b1e22ef191 100644
--- a/test/functional/terminal/tui_spec.lua
+++ b/test/functional/terminal/tui_spec.lua
@@ -2626,6 +2626,7 @@ describe('TUI', function()
       vim.o.ruler = false
       vim.o.showcmd = false
       vim.o.termsync = false
+      vim.o.titlestring = '%t%( %M%) - Nvim'
       vim.o.title = true
     ]])
     retry(nil, nil, function()
@@ -4528,6 +4529,7 @@ describe('TUI client', function()
       pending('N/A: missing LuaJIT FFI')
     end
 
+    server:request('nvim_set_option_value', 'titlestring', '%t%( %M%) - Nvim', {})
     local bufname = api.nvim_buf_get_name(0)
     local old_title = api.nvim_buf_get_var(0, 'term_title')
     if not is_os('win') then
diff --git a/test/functional/ui/title_spec.lua b/test/functional/ui/title_spec.lua
index 5e7c9c74b9..1004c1e77b 100644
--- a/test/functional/ui/title_spec.lua
+++ b/test/functional/ui/title_spec.lua
@@ -20,31 +20,51 @@ describe('title', function()
     screen = Screen.new()
   end)
 
-  it('has correct default title with unnamed file', function()
-    local expected = '[No Name] - Nvim'
+  it('defaults to "No Name" and the PWD in the title if the buffer is unnamed', function()
+    local expected = (is_os('win') and '[No Name] (C:\\) - Nvim' or '[No Name] (/) - Nvim')
+    command(is_os('win') and 'cd C:\\' or 'cd /')
     command('set title')
     screen:expect(function()
       eq(expected, screen.title)
     end)
   end)
 
-  it('has correct default title with named file', function()
-    local expected = (is_os('win') and 'myfile (C:\\mydir) - Nvim' or 'myfile (/mydir) - Nvim')
-    command('set title')
-    command(is_os('win') and 'file C:\\mydir\\myfile' or 'file /mydir/myfile')
-    screen:expect(function()
-      eq(expected, screen.title)
-    end)
-  end)
+  it(
+    'defaults to the filename and its directory in the title if the buffer is named as a path outside the PWD',
+    function()
+      local expected = (is_os('win') and 'myfile (C:\\mydir) - Nvim' or 'myfile (/mydir) - Nvim')
+      command('set title')
+      command(is_os('win') and 'file C:\\mydir\\myfile' or 'file /mydir/myfile')
+      screen:expect(function()
+        eq(expected, screen.title)
+      end)
+    end
+  )
+
+  it(
+    'defaults to the filename and the PWD in the title if the buffer is a file in the PWD',
+    function()
+      local expected = (is_os('win') and 'myfile (C:\\) - Nvim' or 'myfile (/) - Nvim')
+      command('set title')
+      command(is_os('win') and 'cd C:\\' or 'cd /')
+      command('file myfile')
+      screen:expect(function()
+        eq(expected, screen.title)
+      end)
+    end
+  )
 
   it('is updated in Insert mode', function()
+    command(is_os('win') and 'cd C:\\' or 'cd /')
     api.nvim_set_option_value('title', true, {})
     screen:expect(function()
-      eq('[No Name] - Nvim', screen.title)
+      local expected = (is_os('win') and '[No Name] (C:\\) - Nvim' or '[No Name] (/) - Nvim')
+      eq(expected, screen.title)
     end)
     feed('ifoo')
     screen:expect(function()
-      eq('[No Name] + - Nvim', screen.title)
+      local expected = (is_os('win') and '[No Name] + (C:\\) - Nvim' or '[No Name] + (/) - Nvim')
+      eq(expected, screen.title)
     end)
     feed('<Esc>')
     api.nvim_set_option_value('titlestring', '%m %f (%{mode(1)}) | nvim', {})