diff --git a/src/core/exec-invoke.c b/src/core/exec-invoke.c
index 31493049a17..9d636f55295 100644
--- a/src/core/exec-invoke.c
+++ b/src/core/exec-invoke.c
@@ -855,10 +855,7 @@ static int get_fixed_user(
         assert(user_or_uid);
         assert(ret_username);
 
-        /* Note that we don't set $HOME or $SHELL if they are not particularly enlightening anyway
-         * (i.e. are "/" or "/bin/nologin"). */
-
-        r = get_user_creds(&user_or_uid, ret_uid, ret_gid, ret_home, ret_shell, USER_CREDS_CLEAN|USER_CREDS_SUPPRESS_PLACEHOLDER);
+        r = get_user_creds(&user_or_uid, ret_uid, ret_gid, ret_home, ret_shell, USER_CREDS_CLEAN);
         if (r < 0)
                 return r;
 
@@ -1883,7 +1880,10 @@ static int build_environment(
                 }
         }
 
-        if (home && set_user_login_env) {
+        /* Note that we don't set $HOME or $SHELL if they are not particularly enlightening anyway
+         * (i.e. are "/" or "/bin/nologin"). */
+
+        if (home && set_user_login_env && !empty_or_root(home)) {
                 x = strjoin("HOME=", home);
                 if (!x)
                         return -ENOMEM;
@@ -1892,7 +1892,7 @@ static int build_environment(
                 our_env[n_env++] = x;
         }
 
-        if (shell && set_user_login_env) {
+        if (shell && set_user_login_env && !shell_is_placeholder(shell)) {
                 x = strjoin("SHELL=", shell);
                 if (!x)
                         return -ENOMEM;
@@ -3775,7 +3775,7 @@ static int acquire_home(const ExecContext *c, const char **home, char **ret_buf)
         if (!c->working_directory_home)
                 return 0;
 
-        if (c->dynamic_user)
+        if (c->dynamic_user || (c->user && is_this_me(c->user) <= 0))
                 return -EADDRNOTAVAIL;
 
         r = get_home_dir(ret_buf);
@@ -4533,7 +4533,7 @@ int exec_invoke(
         r = acquire_home(context, &home, &home_buffer);
         if (r < 0) {
                 *exit_status = EXIT_CHDIR;
-                return log_exec_error_errno(context, params, r, "Failed to determine $HOME for user: %m");
+                return log_exec_error_errno(context, params, r, "Failed to determine $HOME for the invoking user: %m");
         }
 
         /* If a socket is connected to STDIN/STDOUT/STDERR, we must drop O_NONBLOCK */
diff --git a/test/units/TEST-07-PID1.working-directory.sh b/test/units/TEST-07-PID1.working-directory.sh
new file mode 100755
index 00000000000..1cff3e0602c
--- /dev/null
+++ b/test/units/TEST-07-PID1.working-directory.sh
@@ -0,0 +1,20 @@
+#!/usr/bin/env bash
+# SPDX-License-Identifier: LGPL-2.1-or-later
+
+set -eux
+set -o pipefail
+
+# shellcheck source=test/units/util.sh
+. "$(dirname "$0")"/util.sh
+
+(! systemd-run --wait -p DynamicUser=yes \
+                      -p EnvironmentFile=-/usr/lib/systemd/systemd-asan-env \
+                      -p WorkingDirectory='~' true)
+
+assert_eq "$(systemd-run --pipe --uid=root -p WorkingDirectory='~' pwd)" "/root"
+assert_eq "$(systemd-run --pipe --uid=nobody -p WorkingDirectory='~' pwd)" "/"
+assert_eq "$(systemd-run --pipe --uid=testuser -p WorkingDirectory='~' pwd)" "/home/testuser"
+
+(! systemd-run --wait -p DynamicUser=yes -p User=testuser \
+                      -p EnvironmentFile=-/usr/lib/systemd/systemd-asan-env \
+                      -p WorkingDirectory='~' true)