diff --git a/agent/agent.go b/agent/agent.go
index f538ef93b4af8..5c171d7d513c7 100644
--- a/agent/agent.go
+++ b/agent/agent.go
@@ -1407,5 +1407,14 @@ func expandDirectory(dir string) (string, error) {
 		}
 		dir = filepath.Join(home, dir[1:])
 	}
-	return os.ExpandEnv(dir), nil
+	dir = os.ExpandEnv(dir)
+
+	if !filepath.IsAbs(dir) {
+		home, err := userHomeDir()
+		if err != nil {
+			return "", err
+		}
+		dir = filepath.Join(home, dir)
+	}
+	return dir, nil
 }
diff --git a/agent/agent_test.go b/agent/agent_test.go
index aa58f22ace474..effaa091b982d 100644
--- a/agent/agent_test.go
+++ b/agent/agent_test.go
@@ -1391,6 +1391,22 @@ func TestAgent_Startup(t *testing.T) {
 		require.Equal(t, homeDir, client.getStartup().ExpandedDirectory)
 	})
 
+	t.Run("NotAbsoluteDirectory", func(t *testing.T) {
+		t.Parallel()
+
+		_, client, _, _, _ := setupAgent(t, agentsdk.Manifest{
+			StartupScript:        "true",
+			StartupScriptTimeout: 30 * time.Second,
+			Directory:            "coder/coder",
+		}, 0)
+		assert.Eventually(t, func() bool {
+			return client.getStartup().Version != ""
+		}, testutil.WaitShort, testutil.IntervalFast)
+		homeDir, err := os.UserHomeDir()
+		require.NoError(t, err)
+		require.Equal(t, filepath.Join(homeDir, "coder/coder"), client.getStartup().ExpandedDirectory)
+	})
+
 	t.Run("HomeEnvironmentVariable", func(t *testing.T) {
 		t.Parallel()
 
diff --git a/docs/templates/open-in-coder.md b/docs/templates/open-in-coder.md
index de25e655f0ec4..aa8a0e978c858 100644
--- a/docs/templates/open-in-coder.md
+++ b/docs/templates/open-in-coder.md
@@ -38,6 +38,12 @@ To support any infrastructure and software stack, Coder provides a generic appro
      }
      ```
 
+     > Note: The `dir` attribute can be set in multiple ways, for example:
+     >
+     > - `~/coder`
+     > - `/home/coder/coder`
+     > - `coder` (relative to the home directory)
+
    - If you want the template to support any repository via [parameters](./parameters.md)
 
      ```hcl