diff --git a/packages/generate-loader/README.md b/packages/generate-loader/README.md
index 8f23e52343c..8d719e8062a 100644
--- a/packages/generate-loader/README.md
+++ b/packages/generate-loader/README.md
@@ -27,7 +27,13 @@ generateLoader();
 ### CLI (via `webpack-cli`)
 
 ```bash
-npx webpack-cli generate-loader
+npx webpack-cli loader
+```
+
+> Optionally specify a path for generating the loader template.
+
+```bash
+npx webpack-cli loader [path]
 ```
 
 [downloads]: https://img.shields.io/npm/dm/@webpack-cli/generate-loader.svg
diff --git a/packages/generate-loader/src/index.ts b/packages/generate-loader/src/index.ts
index ee7a7a6fa63..599d39abf6d 100644
--- a/packages/generate-loader/src/index.ts
+++ b/packages/generate-loader/src/index.ts
@@ -9,8 +9,9 @@ const { logger } = utils;
  * @returns {void}
  */
 
-export default function loaderCreator(): void {
-    const env = yeoman.createEnv();
+export default function loaderCreator(...args: string[]): void {
+    const generationPath = args[0];
+    const env = yeoman.createEnv([], { cwd: generationPath });
     const generatorName = 'webpack-loader-generator';
 
     env.registerStub(loaderGenerator, generatorName);
diff --git a/test/loader/loader.test.js b/test/loader/loader.test.js
index 239e69247d2..bf1638a239d 100644
--- a/test/loader/loader.test.js
+++ b/test/loader/loader.test.js
@@ -1,6 +1,6 @@
 'use strict';
 
-const { existsSync } = require('fs');
+const { existsSync, mkdirSync } = require('fs');
 const { join, resolve } = require('path');
 const rimraf = require('rimraf');
 const stripAnsi = require('strip-ansi');
@@ -10,13 +10,16 @@ const firstPrompt = '? Loader name (my-loader)';
 const ENTER = '\x0D';
 const loaderName = 'test-loader';
 const loaderPath = join(__dirname, loaderName);
+const genPath = join(__dirname, 'test-assets');
+const customLoaderPath = join(genPath, loaderName);
 
 describe('loader command', () => {
-    beforeAll(() => {
+    beforeEach(() => {
         rimraf.sync(loaderPath);
+        rimraf.sync(genPath);
     });
 
-    it('Should ask the loader name when invoked', () => {
+    it('should ask the loader name when invoked', () => {
         const { stdout, stderr } = run(__dirname, ['loader'], false);
         expect(stdout).toBeTruthy();
         expect(stderr).toBeFalsy();
@@ -33,19 +36,74 @@ describe('loader command', () => {
             return;
         }
 
-        // check if the output directory exists with the appropriate loader name
-        expect(existsSync(join(__dirname, loaderName))).toBeTruthy();
+        // Check if the output directory exists with the appropriate loader name
+        expect(existsSync(loaderPath)).toBeTruthy();
 
         // All test files are scaffolded
         const files = ['package.json', 'examples', 'src', 'test', 'src/index.js', 'examples/simple/webpack.config.js'];
 
         files.forEach((file) => {
-            expect(existsSync(join(__dirname, `${loaderName}/${file}`))).toBeTruthy();
+            expect(existsSync(loaderPath, file)).toBeTruthy();
         });
 
-        //check if the the generated plugin works successfully
+        // Check if the the generated loader works successfully
         const path = resolve(__dirname, './test-loader/examples/simple/');
         ({ stdout } = run(path, [], false));
         expect(stdout).toContain('test-loader');
     });
+
+    it('should scaffold loader template in the specified path', async () => {
+        let { stdout } = await runPromptWithAnswers(__dirname, ['loader', 'test-assets'], [`${loaderName}${ENTER}`]);
+
+        expect(stripAnsi(stdout)).toContain(firstPrompt);
+
+        // Skip test in case installation fails
+        if (!existsSync(resolve(customLoaderPath, './yarn.lock'))) {
+            return;
+        }
+
+        // Check if the output directory exists with the appropriate loader name
+        expect(existsSync(customLoaderPath)).toBeTruthy();
+
+        // All test files are scaffolded
+        const files = ['package.json', 'examples', 'src', 'test', 'src/index.js', 'examples/simple/webpack.config.js'];
+
+        files.forEach((file) => {
+            expect(existsSync(customLoaderPath, file)).toBeTruthy();
+        });
+
+        // Check if the the generated loader works successfully
+        const path = resolve(customLoaderPath, './examples/simple/');
+        ({ stdout } = run(path, [], false));
+        expect(stdout).toContain('test-loader');
+    });
+
+    it('should scaffold loader template in the current directory', async () => {
+        // Create test-assets directory
+        mkdirSync(genPath);
+
+        let { stdout } = await runPromptWithAnswers(genPath, ['loader', './'], [`${loaderName}${ENTER}`]);
+
+        expect(stripAnsi(stdout)).toContain(firstPrompt);
+
+        // Skip test in case installation fails
+        if (!existsSync(resolve(customLoaderPath, './yarn.lock'))) {
+            return;
+        }
+
+        // Check if the output directory exists with the appropriate loader name
+        expect(existsSync(customLoaderPath)).toBeTruthy();
+
+        // All test files are scaffolded
+        const files = ['package.json', 'examples', 'src', 'test', 'src/index.js', 'examples/simple/webpack.config.js'];
+
+        files.forEach((file) => {
+            expect(existsSync(customLoaderPath, file)).toBeTruthy();
+        });
+
+        // Check if the the generated loader works successfully
+        const path = resolve(customLoaderPath, './examples/simple/');
+        ({ stdout } = run(path, [], false));
+        expect(stdout).toContain('test-loader');
+    });
 });