diff --git a/CHANGES.rst b/CHANGES.rst
index 2ba51b6b2..570a22f91 100644
--- a/CHANGES.rst
+++ b/CHANGES.rst
@@ -23,7 +23,8 @@ upgrading your version of coverage.py.
 Unreleased
 ----------
 
-Nothing yet.
+- Fix: the PYTHONSAFEPATH environment variable new in Python 3.11 is properly
+  supported, closing `issue 1696`_.  Thanks, `Philipp A. <pull 1700_>`_.
 
 
 .. start-releases
@@ -554,6 +555,8 @@ Version 7.3.3 — 2023-12-14
 
   - ``dataop2`` writes the full data being added to CoverageData objects.
 
+.. _issue 1696: https://github.com/nedbat/coveragepy/issues/1696
+.. _pull 1700: https://github.com/nedbat/coveragepy/pull/1700
 .. _issue 684: https://github.com/nedbat/coveragepy/issues/684
 .. _pull 1705: https://github.com/nedbat/coveragepy/pull/1705
 .. _issue 1709: https://github.com/nedbat/coveragepy/issues/1709
diff --git a/coverage/execfile.py b/coverage/execfile.py
index cbecec847..847685469 100644
--- a/coverage/execfile.py
+++ b/coverage/execfile.py
@@ -89,7 +89,10 @@ def prepare(self) -> None:
         This needs to happen before any importing, and without importing anything.
         """
         path0: str | None
-        if self.as_module:
+        if env.PYVERSION >= (3, 11) and os.getenv('PYTHONSAFEPATH'):
+            # See https://docs.python.org/3/using/cmdline.html#cmdoption-P
+            path0 = None
+        elif self.as_module:
             path0 = os.getcwd()
         elif os.path.isdir(self.arg0):
             # Running a directory means running the __main__.py file in that
diff --git a/tests/test_execfile.py b/tests/test_execfile.py
index cd12dea99..f8d405220 100644
--- a/tests/test_execfile.py
+++ b/tests/test_execfile.py
@@ -13,7 +13,7 @@
 import py_compile
 import re
 import sys
-
+from pathlib import Path
 from typing import Any
 from collections.abc import Iterator
 
@@ -24,6 +24,7 @@
 from coverage.files import python_reported_file
 
 from tests.coveragetest import CoverageTest, TESTS_DIR, UsingModulesMixin
+from tests.helpers import change_dir
 
 TRY_EXECFILE = os.path.join(TESTS_DIR, "modules/process_test/try_execfile.py")
 
@@ -307,6 +308,15 @@ def test_pkg1_init(self) -> None:
         assert out == "pkg1.__init__: pkg1\npkg1.__init__: __main__\n"
         assert err == ""
 
+    def test_pythonpath(self, tmp_path: Path) -> None:
+        self.set_environ("PYTHONSAFEPATH", "1")
+        with change_dir(tmp_path):
+            run_python_module(["process_test.try_execfile"])
+        out, err = self.stdouterr()
+        mod_globs = json.loads(out)
+        assert tmp_path not in mod_globs["path"]
+        assert err == ""
+
     def test_no_such_module(self) -> None:
         with pytest.raises(NoSource, match="No module named '?i_dont_exist'?"):
             run_python_module(["i_dont_exist"])
diff --git a/tests/test_process.py b/tests/test_process.py
index 082fa917f..6834fbbba 100644
--- a/tests/test_process.py
+++ b/tests/test_process.py
@@ -807,6 +807,25 @@ def test_coverage_zip_is_like_python(self) -> None:
         actual = self.run_command(f"python {cov_main} run run_me.py")
         self.assert_tryexecfile_output(expected, actual)
 
+    def test_pythonsafepath(self) -> None:
+        with open(TRY_EXECFILE) as f:
+            self.make_file("run_me.py", f.read())
+        self.set_environ("PYTHONSAFEPATH", "1")
+        expected = self.run_command("python run_me.py")
+        actual = self.run_command("coverage run run_me.py")
+        self.assert_tryexecfile_output(expected, actual)
+
+    @pytest.mark.skipif(env.PYVERSION < (3, 11), reason="PYTHONSAFEPATH is new in 3.11")
+    def test_pythonsafepath_dashm(self) -> None:
+        with open(TRY_EXECFILE) as f:
+            self.make_file("with_main/__main__.py", f.read())
+
+        self.set_environ("PYTHONSAFEPATH", "1")
+        expected = self.run_command("python -m with_main")
+        actual = self.run_command("coverage run -m with_main")
+        assert re.search("No module named '?with_main'?", actual)
+        assert re.search("No module named '?with_main'?", expected)
+
     def test_coverage_custom_script(self) -> None:
         # https://github.com/nedbat/coveragepy/issues/678
         # If sys.path[0] isn't the Python default, then coverage.py won't