diff --git a/app/Commands/Extra/Compile.hs b/app/Commands/Extra/Compile.hs
index c34a02d38..45f9b7ad4 100644
--- a/app/Commands/Extra/Compile.hs
+++ b/app/Commands/Extra/Compile.hs
@@ -73,32 +73,35 @@ prepareRuntime buildDir o = do
       ensureDir (includeDir <//> parent filePath)
       BS.writeFile (toFilePath (includeDir <//> filePath)) contents
 
-outputFile :: Member App r => CompileOptions -> Path Abs File -> Sem r (Path Abs File)
+outputFile :: forall r. Member App r => CompileOptions -> Path Abs File -> Sem r (Path Abs File)
 outputFile opts inputFile =
-  maybe (return defaultOutputFile) someBaseToAbs' (opts ^? compileOutputFile . _Just . pathPath)
+  maybe defaultOutputFile someBaseToAbs' (opts ^? compileOutputFile . _Just . pathPath)
   where
-    defaultOutputFile :: Path Abs File
-    defaultOutputFile = case opts ^. compileTarget of
-      TargetNative64 ->
-        if
-            | opts ^. compileCOutput -> replaceExtension' ".c" inputFile
-            | opts ^. compilePreprocess -> addExtension' ".c" (addExtension' ".out" (removeExtension' inputFile))
-            | opts ^. compileAssembly -> replaceExtension' ".s" inputFile
-            | otherwise -> removeExtension' inputFile
-      TargetWasm32Wasi ->
-        if
-            | opts ^. compileCOutput -> replaceExtension' ".c" inputFile
-            | opts ^. compilePreprocess -> addExtension' ".c" (addExtension' ".out" (removeExtension' inputFile))
-            | opts ^. compileAssembly -> replaceExtension' ".wat" inputFile
-            | otherwise -> replaceExtension' ".wasm" inputFile
-      TargetGeb ->
-        if
-            | opts ^. compileTerm -> replaceExtension' ".geb" inputFile
-            | otherwise -> replaceExtension' ".lisp" inputFile
-      TargetCore ->
-        replaceExtension' ".jvc" inputFile
-      TargetAsm ->
-        replaceExtension' ".jva" inputFile
+    defaultOutputFile :: Sem r (Path Abs File)
+    defaultOutputFile = do
+      invokeDir <- askInvokeDir
+      let baseOutputFile = invokeDir <//> filename inputFile
+      return $ case opts ^. compileTarget of
+        TargetNative64 ->
+          if
+              | opts ^. compileCOutput -> replaceExtension' ".c" inputFile
+              | opts ^. compilePreprocess -> addExtension' ".c" (addExtension' ".out" (removeExtension' inputFile))
+              | opts ^. compileAssembly -> replaceExtension' ".s" inputFile
+              | otherwise -> removeExtension' baseOutputFile
+        TargetWasm32Wasi ->
+          if
+              | opts ^. compileCOutput -> replaceExtension' ".c" inputFile
+              | opts ^. compilePreprocess -> addExtension' ".c" (addExtension' ".out" (removeExtension' inputFile))
+              | opts ^. compileAssembly -> replaceExtension' ".wat" inputFile
+              | otherwise -> replaceExtension' ".wasm" baseOutputFile
+        TargetGeb ->
+          if
+              | opts ^. compileTerm -> replaceExtension' ".geb" inputFile
+              | otherwise -> replaceExtension' ".lisp" baseOutputFile
+        TargetCore ->
+          replaceExtension' ".jvc" baseOutputFile
+        TargetAsm ->
+          replaceExtension' ".jva" baseOutputFile
 
 clangNativeCompile ::
   forall r.
diff --git a/tests/smoke/Commands/compile.smoke.yaml b/tests/smoke/Commands/compile.smoke.yaml
index 008c42b31..fdb72561a 100644
--- a/tests/smoke/Commands/compile.smoke.yaml
+++ b/tests/smoke/Commands/compile.smoke.yaml
@@ -1,4 +1,4 @@
-working-directory: ./../../../tests
+working-directory: ./../../../
 
 tests:
   - name: shows-file-argument-for-autocompletion
@@ -16,21 +16,34 @@ tests:
       shell:
         - bash
       script: |
-        cd ./../examples/milestone/HelloWorld
+        cd ./examples/milestone/HelloWorld
         juvix compile HelloWorld.juvix
-        [ -f HelloWorld ]
         ./HelloWorld
     exit-status: 0
     stdout: |
       hello world!
 
+  - name: option-output-file
+    command:
+      shell:
+        - bash
+      script: |
+        temp=$(mktemp -d)
+        trap 'rm -rf -- "$temp"' EXIT
+        cd ./examples/milestone/HelloWorld
+        juvix compile -o $temp/Hello HelloWorld.juvix
+        $temp/Hello
+    exit-status: 0
+    stdout: |
+      hello world!
+
   - name: flag-internal-build-dir
     command:
       shell:
         - bash
       script: |
         temp=$(mktemp -d)
-        cd ./../examples/milestone/HelloWorld
+        cd ./examples/milestone/HelloWorld
         juvix compile HelloWorld.juvix --internal-build-dir "$temp"
         find "$temp" | wc -l
         rm -rf "$temp"
@@ -38,3 +51,46 @@ tests:
       matches: |
         \s*([2-9]|[1-9][0-9]+)
     exit-status: 0
+
+  - name: default-output-file-in-invoke-dir
+    command:
+      shell:
+        - bash
+      script: |
+        temp=$(mktemp -d)
+        trap 'rm -rf -- "$temp"' EXIT
+        testdir=$PWD/examples/milestone/HelloWorld
+        cd $temp
+        juvix compile $testdir/HelloWorld.juvix
+        ./HelloWorld
+    stdout: |
+      hello world!
+    exit-status: 0
+
+  - name: target-wasm
+    command:
+      shell:
+        - bash
+      script: |
+        temp=$(mktemp -d)
+        trap 'rm -rf -- "$temp"' EXIT
+        testdir=$PWD/examples/milestone/HelloWorld
+        cd $temp
+        juvix compile -t wasm32-wasi $testdir/HelloWorld.juvix
+        [ -f HelloWorld.wasm ]
+    stdout: ""
+    exit-status: 0
+
+  - name: target-geb
+    command:
+      shell:
+        - bash
+      script: |
+        temp=$(mktemp -d)
+        trap 'rm -rf -- "$temp"' EXIT
+        testdir=$PWD/tests/Geb/positive/Compilation
+        cd $temp
+        juvix compile -t geb $testdir/test001.juvix
+        [ -f test001.lisp ]
+    stdout: ""
+    exit-status: 0