diff --git a/AUTHORS b/AUTHORS
index b41e4c43d..d740fee5c 100644
--- a/AUTHORS
+++ b/AUTHORS
@@ -69,6 +69,7 @@ Mark Abramowitz
 Markus Unterwaditzer
 Martijn Faassen
 Martin Prusse
+Martin K. Scherer
 Matt Bachmann
 Michael Aquilina
 Michael Birtwell
diff --git a/CHANGELOG.rst b/CHANGELOG.rst
index 4783395a8..adc6993eb 100644
--- a/CHANGELOG.rst
+++ b/CHANGELOG.rst
@@ -10,6 +10,10 @@
 
 *
 
+* Fix exception visualization in case the current working directory (CWD) gets
+  deleted during testing. Fixes (`#1235`). Thanks `@bukzor` for reporting. PR by
+  `@marscher`. Thanks `@nicoddemus` for his help.
+
 .. _#1580: https://github.com/pytest-dev/pytest/issues/1580
 
 .. _@graingert: https://github.com/graingert
diff --git a/_pytest/_code/code.py b/_pytest/_code/code.py
index 8995cc1f7..c6f811c85 100644
--- a/_pytest/_code/code.py
+++ b/_pytest/_code/code.py
@@ -2,7 +2,6 @@ import sys
 from inspect import CO_VARARGS, CO_VARKEYWORDS
 
 import py
-
 builtin_repr = repr
 
 reprlib = py.builtin._tryimport('repr', 'reprlib')
@@ -35,12 +34,16 @@ class Code(object):
     def path(self):
         """ return a path object pointing to source code (note that it
         might not point to an actually existing file). """
-        p = py.path.local(self.raw.co_filename)
-        # maybe don't try this checking
-        if not p.check():
+        try:
+            p = py.path.local(self.raw.co_filename)
+            # maybe don't try this checking
+            if not p.check():
+                raise OSError("py.path check failed.")
+        except OSError:
             # XXX maybe try harder like the weird logic
             # in the standard lib [linecache.updatecache] does?
             p = self.raw.co_filename
+
         return p
 
     @property
diff --git a/_pytest/main.py b/_pytest/main.py
index 8654d7af6..f608a7ecd 100644
--- a/_pytest/main.py
+++ b/_pytest/main.py
@@ -403,7 +403,13 @@ class Node(object):
             else:
                 style = "long"
 
-        return excinfo.getrepr(funcargs=True,
+        try:
+            os.getcwd()
+            abspath = False
+        except OSError:
+            abspath = True
+
+        return excinfo.getrepr(funcargs=True, abspath=abspath,
                                showlocals=self.config.option.showlocals,
                                style=style, tbfilter=tbfilter)
 
diff --git a/testing/code/test_excinfo.py b/testing/code/test_excinfo.py
index 47ad50b06..ba047f2a9 100644
--- a/testing/code/test_excinfo.py
+++ b/testing/code/test_excinfo.py
@@ -925,3 +925,14 @@ def test_repr_traceback_with_unicode(style, encoding):
     repr_traceback = formatter.repr_traceback(e_info)
     assert repr_traceback is not None
 
+
+def test_cwd_deleted(testdir):
+    testdir.makepyfile("""
+        def test(tmpdir):
+            tmpdir.chdir()
+            tmpdir.remove()
+            assert False
+    """)
+    result = testdir.runpytest()
+    result.stdout.fnmatch_lines(['* 1 failed in *'])
+    assert 'INTERNALERROR' not in result.stdout.str() + result.stderr.str()