diff --git a/src/vs/workbench/parts/terminal/electron-browser/terminalInstance.ts b/src/vs/workbench/parts/terminal/electron-browser/terminalInstance.ts
index 98eba5e8ea0..0caa75aa89a 100644
--- a/src/vs/workbench/parts/terminal/electron-browser/terminalInstance.ts
+++ b/src/vs/workbench/parts/terminal/electron-browser/terminalInstance.ts
@@ -305,7 +305,10 @@ export class TerminalInstance implements ITerminalInstance {
 			this._processManager.onProcessData(data => this._onProcessData(data));
 			this._xterm.on('data', data => this._processManager.write(data));
 			// TODO: How does the cwd work on detached processes?
-			this._linkHandler = this._instantiationService.createInstance(TerminalLinkHandler, this._xterm, platform.platform, this._processManager.initialCwd);
+			this._linkHandler = this._instantiationService.createInstance(TerminalLinkHandler, this._xterm, platform.platform);
+			this.processReady.then(() => {
+				this._linkHandler.initialCwd = this._processManager.initialCwd;
+			});
 		}
 		this._xterm.on('focus', () => this._onFocus.fire(this));
 
diff --git a/src/vs/workbench/parts/terminal/electron-browser/terminalLinkHandler.ts b/src/vs/workbench/parts/terminal/electron-browser/terminalLinkHandler.ts
index 7ba13a4c9a7..9186939137f 100644
--- a/src/vs/workbench/parts/terminal/electron-browser/terminalLinkHandler.ts
+++ b/src/vs/workbench/parts/terminal/electron-browser/terminalLinkHandler.ts
@@ -61,13 +61,13 @@ export class TerminalLinkHandler {
 	private _hoverDisposables: IDisposable[] = [];
 	private _mouseMoveDisposable: IDisposable;
 	private _widgetManager: TerminalWidgetManager;
+	private _initialCwd: string;
 
 	private _localLinkPattern: RegExp;
 
 	constructor(
 		private _xterm: any,
 		private _platform: platform.Platform,
-		private _initialCwd: string,
 		@IOpenerService private readonly _openerService: IOpenerService,
 		@IEditorService private readonly _editorService: IEditorService,
 		@IConfigurationService private readonly _configurationService: IConfigurationService,
@@ -84,6 +84,10 @@ export class TerminalLinkHandler {
 		this._widgetManager = widgetManager;
 	}
 
+	public set initialCwd(initialCwd: string) {
+		this._initialCwd = initialCwd;
+	}
+
 	public registerCustomLinkHandler(regex: RegExp, handler: (uri: string) => void, matchIndex?: number, validationCallback?: XtermLinkMatcherValidationCallback): number {
 		return this._xterm.registerLinkMatcher(regex, this._wrapLinkHandler(handler), {
 			matchIndex,
@@ -147,10 +151,6 @@ export class TerminalLinkHandler {
 
 	private _handleLocalLink(link: string): TPromise<any> {
 		return this._resolvePath(link).then(resolvedLink => {
-			if (!resolvedLink) {
-				return void 0;
-			}
-
 			const normalizedPath = path.normalize(path.resolve(resolvedLink));
 			const normalizedUrl = this.extractLinkUrl(normalizedPath);
 			const resource = Uri.file(normalizedUrl);
diff --git a/src/vs/workbench/parts/terminal/test/electron-browser/terminalLinkHandler.test.ts b/src/vs/workbench/parts/terminal/test/electron-browser/terminalLinkHandler.test.ts
index 55e629b6feb..c26031468be 100644
--- a/src/vs/workbench/parts/terminal/test/electron-browser/terminalLinkHandler.test.ts
+++ b/src/vs/workbench/parts/terminal/test/electron-browser/terminalLinkHandler.test.ts
@@ -33,7 +33,7 @@ interface LinkFormatInfo {
 suite('Workbench - TerminalLinkHandler', () => {
 	suite('localLinkRegex', () => {
 		test('Windows', () => {
-			const terminalLinkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Windows, null, null, null, null, null);
+			const terminalLinkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Windows, null, null, null, null);
 			function testLink(link: string, linkUrl: string, lineNo?: string, columnNo?: string) {
 				assert.equal(terminalLinkHandler.extractLinkUrl(link), linkUrl);
 				assert.equal(terminalLinkHandler.extractLinkUrl(`:${link}:`), linkUrl);
@@ -103,7 +103,7 @@ suite('Workbench - TerminalLinkHandler', () => {
 		});
 
 		test('Linux', () => {
-			const terminalLinkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Linux, null, null, null, null, null);
+			const terminalLinkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Linux, null, null, null, null);
 			function testLink(link: string, linkUrl: string, lineNo?: string, columnNo?: string) {
 				assert.equal(terminalLinkHandler.extractLinkUrl(link), linkUrl);
 				assert.equal(terminalLinkHandler.extractLinkUrl(`:${link}:`), linkUrl);
@@ -167,7 +167,8 @@ suite('Workbench - TerminalLinkHandler', () => {
 
 	suite('preprocessPath', () => {
 		test('Windows', () => {
-			const linkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Windows, 'C:\\base', null, null, null, null);
+			const linkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Windows, null, null, null, null);
+			linkHandler.initialCwd = 'C:\\base';
 
 			let stub = sinon.stub(path, 'join', function (arg1: string, arg2: string) {
 				return arg1 + '\\' + arg2;
@@ -180,7 +181,8 @@ suite('Workbench - TerminalLinkHandler', () => {
 		});
 
 		test('Linux', () => {
-			const linkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Linux, '/base', null, null, null, null);
+			const linkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Linux, null, null, null, null);
+			linkHandler.initialCwd = '/base';
 
 			let stub = sinon.stub(path, 'join', function (arg1: string, arg2: string) {
 				return arg1 + '/' + arg2;
@@ -193,7 +195,7 @@ suite('Workbench - TerminalLinkHandler', () => {
 		});
 
 		test('No Workspace', () => {
-			const linkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Linux, null, null, null, null, null);
+			const linkHandler = new TestTerminalLinkHandler(new TestXterm(), Platform.Linux, null, null, null, null);
 
 			assert.equal(linkHandler.preprocessPath('./src/file1'), null);
 			assert.equal(linkHandler.preprocessPath('src/file2'), null);