diff --git a/internal/command/init_test.go b/internal/command/init_test.go
index 1bb6a401d6..a522e49912 100644
--- a/internal/command/init_test.go
+++ b/internal/command/init_test.go
@@ -324,23 +324,19 @@ func TestInit_fromModule_cwdDest(t *testing.T) {
 	}
 }
 
-// https://github.com/hashicorp/terraform/issues/518
+// Regression test to check that Terraform doesn't recursively copy
+// a directory when the source module includes the current directory.
+// See: https://github.com/hashicorp/terraform/issues/518
 func TestInit_fromModule_dstInSrc(t *testing.T) {
-	dir := t.TempDir()
-	if err := os.MkdirAll(dir, 0755); err != nil {
-		t.Fatalf("err: %s", err)
-	}
-
-	// Change to the temporary directory
-	cwd, err := os.Getwd()
-	if err != nil {
-		t.Fatalf("err: %s", err)
-	}
-	if err := os.Chdir(dir); err != nil {
-		t.Fatalf("err: %s", err)
-	}
-	defer os.Chdir(cwd)
+	// Change to a temporary directory
+	td := t.TempDir()
+	t.Chdir(td)
 
+	// Create contents
+	// 	.
+	// ├── issue518.tf
+	// └── foo/
+	//     └── (empty)
 	if err := os.Mkdir("foo", os.ModePerm); err != nil {
 		t.Fatal(err)
 	}
@@ -349,6 +345,11 @@ func TestInit_fromModule_dstInSrc(t *testing.T) {
 		t.Fatalf("err: %s", err)
 	}
 
+	// Instead of using the -chdir flag, we change directory into the directory foo.
+	// 	.
+	// ├── issue518.tf
+	// └── foo/               << current directory
+	//     └── (empty)
 	if err := os.Chdir("foo"); err != nil {
 		t.Fatalf("err: %s", err)
 	}
@@ -363,6 +364,7 @@ func TestInit_fromModule_dstInSrc(t *testing.T) {
 		},
 	}
 
+	// The path ./.. includes the current directory foo.
 	args := []string{
 		"-from-module=./..",
 	}
@@ -370,9 +372,33 @@ func TestInit_fromModule_dstInSrc(t *testing.T) {
 		t.Fatalf("bad: \n%s", done(t).All())
 	}
 
-	if _, err := os.Stat(filepath.Join(dir, "foo", "issue518.tf")); err != nil {
+	// Assert this outcome
+	// 	.
+	// ├── issue518.tf
+	// └── foo/               << current directory
+	//     ├── issue518.tf
+	//     └── foo/
+	//         └── (empty)
+	if _, err := os.Stat(filepath.Join(td, "foo", "issue518.tf")); err != nil {
+		t.Fatalf("err: %s", err)
+	}
+	if _, err := os.Stat(filepath.Join(td, "foo", "foo")); err != nil {
+		// Note: originally foo was never copied into itself in this scenario,
+		// but behavior changed sometime around when -chdir replaced legacy positional
+		// path arguments. We may want to revert to the original behavior in a
+		// future major release.
+		// See: https://github.com/hashicorp/terraform/pull/38059
 		t.Fatalf("err: %s", err)
 	}
+
+	// We don't expect foo to be copied into itself multiple times
+	_, err := os.Stat(filepath.Join(td, "foo", "foo", "foo"))
+	if err == nil {
+		t.Fatal("expected directory ./foo/foo/foo to not exist, but it does")
+	}
+	if _, ok := err.(*os.PathError); !ok {
+		t.Fatalf("unexpected err: %s", err)
+	}
 }
 
 func TestInit_get(t *testing.T) {