diff --git a/src/plugins/terminal/shellintegration.cpp b/src/plugins/terminal/shellintegration.cpp
index 60b08de5917..2d3e8f986f7 100644
--- a/src/plugins/terminal/shellintegration.cpp
+++ b/src/plugins/terminal/shellintegration.cpp
@@ -84,6 +84,30 @@ bool ShellIntegration::canIntegrate(const Utils::CommandLine &cmdLine)
     return false;
 }
 
+static QString unescape(QStringView str)
+{
+    QString result;
+    result.reserve(str.length());
+    for (int i = 0; i < str.length(); ++i) {
+        if (str[i] == '\\' && str.length() > i + 1) {
+            if (str[i + 1] == '\\') {
+                // e.g. \\ -> "\"
+                result.append('\\');
+                i++;
+                continue;
+            } else if (str[i + 1] == 'x' && str.length() > i + 3) {
+                // e.g.: \x5c -> \ (0x5c is the ASCII code for \)
+                result.append(QChar(str.sliced(i + 2, 2).toUShort(nullptr, 16)));
+                i += 3;
+                continue;
+            }
+        }
+
+        result.append(str[i]);
+    }
+    return result;
+}
+
 void ShellIntegration::onOsc(int cmd, std::string_view str, bool initial, bool final)
 {
     if (initial)
@@ -116,7 +140,7 @@ void ShellIntegration::onOsc(int cmd, std::string_view str, bool initial, bool f
         } else if (command[0] == 'P') {
             const auto [key, value] = Utils::splitAtFirst(data, '=');
             if (key == QStringView(u"Cwd"))
-                emit currentDirChanged(value.toString());
+                emit currentDirChanged(unescape(value.toString()));
         }
     }
 }