diff --git a/src/terminal/osc.zig b/src/terminal/osc.zig
index 7e93b48d7..34bc46745 100644
--- a/src/terminal/osc.zig
+++ b/src/terminal/osc.zig
@@ -641,7 +641,7 @@ pub const Parser = struct {
             .@"7" => switch (c) {
                 ';' => {
                     self.command = .{ .report_pwd = .{ .value = "" } };
-
+                    self.complete = true;
                     self.state = .string;
                     self.temp_state = .{ .str = &self.command.report_pwd.value };
                     self.buf_start = self.buf_idx;
@@ -1382,6 +1382,18 @@ test "OSC: report pwd" {
     try testing.expect(std.mem.eql(u8, "file:///tmp/example", cmd.report_pwd.value));
 }
 
+test "OSC: report pwd empty" {
+    const testing = std.testing;
+
+    var p: Parser = .{};
+
+    const input = "7;";
+    for (input) |ch| p.next(ch);
+    const cmd = p.end(null).?;
+    try testing.expect(cmd == .report_pwd);
+    try testing.expect(std.mem.eql(u8, "", cmd.report_pwd.value));
+}
+
 test "OSC: pointer cursor" {
     const testing = std.testing;
 
@@ -1395,17 +1407,6 @@ test "OSC: pointer cursor" {
     try testing.expect(std.mem.eql(u8, "pointer", cmd.mouse_shape.value));
 }
 
-test "OSC: report pwd empty" {
-    const testing = std.testing;
-
-    var p: Parser = .{};
-
-    const input = "7;";
-    for (input) |ch| p.next(ch);
-
-    try testing.expect(p.end(null) == null);
-}
-
 test "OSC: longer than buffer" {
     const testing = std.testing;
 
diff --git a/src/termio/stream_handler.zig b/src/termio/stream_handler.zig
index 66c8359bd..dd7763334 100644
--- a/src/termio/stream_handler.zig
+++ b/src/termio/stream_handler.zig
@@ -1,5 +1,6 @@
 const std = @import("std");
 const builtin = @import("builtin");
+const assert = std.debug.assert;
 const Allocator = std.mem.Allocator;
 const xev = @import("xev");
 const apprt = @import("../apprt.zig");
@@ -1048,6 +1049,28 @@ pub const StreamHandler = struct {
     }
 
     pub fn reportPwd(self: *StreamHandler, url: []const u8) !void {
+        // Special handling for the empty URL. We treat the empty URL
+        // as resetting the pwd as if we never saw a pwd. I can't find any
+        // other terminal that does this but it seems like a reasonable
+        // behavior that enables some useful features. For example, the macOS
+        // proxy icon can be hidden when a program reports it doesn't know
+        // the pwd rather than showing a stale pwd.
+        if (url.len == 0) {
+            // Blank value can never fail because no allocs happen.
+            self.terminal.setPwd("") catch unreachable;
+
+            // If we haven't seen a title, we're using the pwd as our title.
+            // Set it to blank which will reset our title behavior.
+            if (!self.seen_title) {
+                try self.changeWindowTitle("");
+                assert(!self.seen_title);
+            }
+
+            // Report the change.
+            self.surfaceMessageWriter(.{ .pwd_change = .{ .stable = "" } });
+            return;
+        }
+
         if (builtin.os.tag == .windows) {
             log.warn("reportPwd unimplemented on windows", .{});
             return;