diff --git a/CHANGELOG.rst b/CHANGELOG.rst
index 919f3898..d131e9d0 100644
--- a/CHANGELOG.rst
+++ b/CHANGELOG.rst
@@ -2,6 +2,15 @@
 Changelog
 =========
 
+Unreleased
+----------
+
+* Coverage's configuration file (and the data file) are now resolved relative to
+  pytest's rootdir instead of the current working directory, so running pytest
+  from a subdirectory no longer ignores the project's ``pyproject.toml`` /
+  ``setup.cfg`` / ``tox.ini`` / ``.coveragerc``.
+  See `#692 <https://github.com/pytest-dev/pytest-cov/issues/692>`_.
+
 7.1.0 (2026-03-21)
 ------------------
 
diff --git a/src/pytest_cov/engine.py b/src/pytest_cov/engine.py
index a6a465fa..97541d94 100644
--- a/src/pytest_cov/engine.py
+++ b/src/pytest_cov/engine.py
@@ -52,8 +52,14 @@ def ensure_topdir_wrapper(self, *args, **kwargs):
 class CovController:
     """Base class for different plugin implementations."""
 
-    def __init__(self, options: argparse.Namespace, config: Union[None, object], nodeid: Union[None, str]):
-        """Get some common config used by multiple derived classes."""
+    def __init__(
+        self,
+        options: argparse.Namespace,
+        config: Union[None, object],
+        nodeid: Union[None, str],
+        rootdir: Union[None, str, Path] = None,
+    ):
+        """Get some common config used to get to the various derived classes."""
         self.cov_source = options.cov_source
         self.cov_report = options.cov_report
         self.cov_config = options.cov_config
@@ -68,7 +74,14 @@ def __init__(self, options: argparse.Namespace, config: Union[None, object], nod
         self.data_file = None
         self.node_descs = set()
         self.failed_workers = []
-        self.topdir = os.fspath(Path.cwd())
+        # Coverage resolves a relative ``config_file`` (the default
+        # ``.coveragerc``, and the ``pyproject.toml`` / ``setup.cfg`` /
+        # ``tox.ini`` fallbacks) and a relative ``data_file`` against the
+        # current working directory. pytest's rootdir is what the user means by
+        # "the project", so anchor to it when we know it -- otherwise running
+        # from a subdirectory silently ignores the project's coverage config
+        # (#692). It only differs from ``cwd`` in exactly that case.
+        self.topdir = os.fspath(rootdir) if rootdir is not None else os.fspath(Path.cwd())
         self.is_collocated = None
         self.started = False
 
diff --git a/src/pytest_cov/plugin.py b/src/pytest_cov/plugin.py
index 9f5c3f76..d3f6a690 100644
--- a/src/pytest_cov/plugin.py
+++ b/src/pytest_cov/plugin.py
@@ -200,7 +200,11 @@ def pytest_load_initial_conftests(early_config, parser, args):
             break
 
     if early_config.known_args_namespace.cov_source:
-        plugin = CovPlugin(options, early_config.pluginmanager)
+        plugin = CovPlugin(
+            options,
+            early_config.pluginmanager,
+            rootdir=getattr(early_config, 'rootpath', None),
+        )
         early_config.pluginmanager.register(plugin, '_cov')
 
 
@@ -212,7 +216,14 @@ class CovPlugin:
     distributed worker.
     """
 
-    def __init__(self, options: argparse.Namespace, pluginmanager, start=True, no_cov_should_warn=False):
+    def __init__(
+        self,
+        options: argparse.Namespace,
+        pluginmanager,
+        start=True,
+        no_cov_should_warn=False,
+        rootdir=None,
+    ):
         """Creates a coverage pytest plugin.
 
         We read the rc file that coverage uses to get the data file
@@ -231,6 +242,10 @@ def __init__(self, options: argparse.Namespace, pluginmanager, start=True, no_co
         self._disabled = False
         self.options = options
         self._wrote_heading = False
+        # pytest's rootdir, used by the controllers to anchor coverage's
+        # config/data file lookup to the project root rather than the current
+        # working directory (#692).
+        self.rootdir = rootdir
 
         is_dist = getattr(options, 'numprocesses', False) or getattr(options, 'distload', False) or getattr(options, 'dist', 'no') != 'no'
         if getattr(options, 'no_cov', False):
@@ -262,7 +277,7 @@ class Config:
 
             config = Config()
 
-        self.cov_controller = controller_cls(self.options, config, nodeid)
+        self.cov_controller = controller_cls(self.options, config, nodeid, self.rootdir)
         self.cov_controller.start()
         self._started = True
         self._start_path = Path.cwd()
diff --git a/tests/test_pytest_cov.py b/tests/test_pytest_cov.py
index b291f432..0b9dd539 100644
--- a/tests/test_pytest_cov.py
+++ b/tests/test_pytest_cov.py
@@ -1577,6 +1577,22 @@ def test_pyproject_toml(testdir):
     result.stdout.fnmatch_lines([f'test_pyproject_toml* {EXCLUDED_RESULT}'])
 
 
+def test_config_at_rootdir_used_from_subdirectory(testdir, monkeypatch):
+    # The project's coverage config lives at the rootdir; running pytest from a
+    # subdirectory must still pick it up, instead of looking only in the cwd
+    # (#692).
+    testdir.makefile('.toml', pyproject=PYPROJECTTOML)
+    subdir = testdir.mkdir('subdir')
+    script = subdir.join('test_in_subdir.py')
+    script.write(EXCLUDED_TEST)
+    monkeypatch.chdir(subdir)
+    result = testdir.runpytest(
+        '-v', f'--cov={subdir}', '--cov-report=term-missing', 'test_in_subdir.py'
+    )
+    assert result.ret == 0
+    result.stdout.fnmatch_lines([f'*test_in_subdir* {EXCLUDED_RESULT}'])
+
+
 @pytest.mark.skipif('sys.platform == "win32" and platform.python_implementation() == "PyPy"')
 def test_coveragerc_dist(testdir):
     testdir.makefile('', coveragerc=COVERAGERC)