diff --git a/mercurial/dispatch.py b/mercurial/dispatch.py
--- a/mercurial/dispatch.py
+++ b/mercurial/dispatch.py
@@ -952,14 +952,22 @@ def _getlocal(ui, rpath, wd=None):
 
     Takes paths in [cwd]/.hg/hgrc into account."
     """
+    try:
+        cwd = encoding.getcwd()
+    except OSError as e:
+        raise error.Abort(
+            _(b"error getting current working directory: %s")
+            % encoding.strtolocal(e.strerror)
+        )
+
+    # If using an alternate wd, temporarily switch to it so that relative
+    # paths are resolved correctly during config loading.
+    oldcwd = None
     if wd is None:
-        try:
-            wd = encoding.getcwd()
-        except OSError as e:
-            raise error.Abort(
-                _(b"error getting current working directory: %s")
-                % encoding.strtolocal(e.strerror)
-            )
+        wd = cwd
+    else:
+        oldcwd = cwd
+        os.chdir(wd)
 
     path = cmdutil.findrepo(wd) or b""
     if not path:
@@ -979,6 +987,9 @@ def _getlocal(ui, rpath, wd=None):
             lui.readconfig(os.path.join(path, b".hg", b"hgrc"), path)
             lui.readconfig(os.path.join(path, b".hg", b"hgrc-not-shared"), path)
 
+    if oldcwd:
+        os.chdir(oldcwd)
+
     return path, lui
 
 
diff --git a/tests/test-chg.t b/tests/test-chg.t
--- a/tests/test-chg.t
+++ b/tests/test-chg.t
@@ -432,6 +432,20 @@ check server log:
   YYYY/MM/DD HH:MM:SS (PID)> log -R cached
   YYYY/MM/DD HH:MM:SS (PID)> loaded repo into cache: $TESTTMP/cached (in  ...s)
 
+Test that -R is interpreted relative to --cwd.
+
+  $ hg init repo1
+  $ mkdir -p a/b
+  $ hg init a/b/repo2
+  $ printf "[alias]\ntest=repo1\n" >> repo1/.hg/hgrc
+  $ printf "[alias]\ntest=repo2\n" >> a/b/repo2/.hg/hgrc
+  $ cd a
+  $ chg --cwd .. -R repo1 show alias.test
+  repo1
+  $ chg --cwd . -R b/repo2 show alias.test
+  repo2
+  $ cd ..
+
 Test that chg works (sets to the user's actual LC_CTYPE) even when python
 "coerces" the locale (py3.7+)