Index: Lib/distutils/core.py
===================================================================
--- Lib/distutils/core.py	(revision 62142)
+++ Lib/distutils/core.py	(working copy)
@@ -210,6 +210,7 @@
     _setup_stop_after = stop_after
 
     save_argv = sys.argv
+    save_dir = os.getcwd()
     g = {'__file__': script_name}
     l = {}
     os.chdir(os.path.dirname(script_name) or os.curdir)
@@ -220,6 +221,7 @@
                 sys.argv[1:] = script_args
             execfile(script_name, g, l)
         finally:
+            os.chdir(save_dir)
             sys.argv = save_argv
             _setup_stop_after = None
     except SystemExit:
Index: Lib/distutils/tests/test_core.py
===================================================================
--- Lib/distutils/tests/test_core.py	(revision 62142)
+++ Lib/distutils/tests/test_core.py	(working copy)
@@ -3,6 +3,7 @@
 import StringIO
 import distutils.core
 import os
+import sys
 import test.test_support
 import unittest
 
@@ -16,25 +17,48 @@
 setup()
 """
 
+setup_changing_cwd = """\
+from distutils.core import setup
+import os
 
+os.chdir(os.pardir)  # Not so great; assumes we're not at the top dir.
+
+setup()
+"""
+
+
 class CoreTestCase(unittest.TestCase):
 
+    def setUp(self):
+        self._old_stdout = sys.stdout
+        sys.stdout = StringIO.StringIO()
+
     def tearDown(self):
         os.remove(test.test_support.TESTFN)
+        sys.stdout = self._old_stdout
 
     def write_setup(self, text):
+        fn = test.test_support.TESTFN
+        open(fn, "w").write(text)
         return fn
 
     def test_run_setup_provides_file(self):
         # Make sure the script can use __file__; if that's missing, the test
         # setup.py script will raise NameError.
-        fn = test.test_support.TESTFN
-        open(fn, "w").write(setup_using___file__)
-        distutils.core.run_setup(fn)
+        distutils.core.run_setup(
+            self.write_setup(setup_using___file__))
 
+    def test_run_setup_saves_and_restores_cwd(self):
+        starting_dir = os.getcwd()
+        distutils.core.run_setup(
+            self.write_setup(setup_changing_cwd))
+        ending_dir = os.getcwd()
+        self.assertEqual(starting_dir, ending_dir)
 
+
 def test_suite():
     return unittest.makeSuite(CoreTestCase)
 
 if __name__ == "__main__":
     unittest.main(defaultTest="test_suite")
+