diff --git a/changelog/7336.breaking.rst b/changelog/7336.breaking.rst
new file mode 100644
index 00000000000..dc48bab92e5
--- /dev/null
+++ b/changelog/7336.breaking.rst
@@ -0,0 +1 @@
+The pytest ``log_file`` ini marker is now relative to the configs ``inifile`` directory, as it was always the intention. It was originally introduced as relative to the current working directory unintentionally.
diff --git a/src/_pytest/logging.py b/src/_pytest/logging.py
index 0163554bae4..e26991c7669 100644
--- a/src/_pytest/logging.py
+++ b/src/_pytest/logging.py
@@ -560,6 +560,12 @@ def __init__(self, config: Config) -> None:
             if not os.path.isdir(directory):
                 os.makedirs(directory)
 
+            # Log file should be relative to invocation location when passed as a cli argument
+            # and relative to the config file otherwise.
+            is_inifile_argument = "--log-file" not in config.invocation_params.args
+            if config.inipath is not None and is_inifile_argument:
+                log_file = os.path.join(config.inipath.parent, log_file)
+
         self.log_file_handler = _FileHandler(log_file, mode="w", encoding="UTF-8")
         log_file_format = get_option_ini(config, "log_file_format", "log_format")
         log_file_date_format = get_option_ini(
diff --git a/testing/logging/test_reporting.py b/testing/logging/test_reporting.py
index 323ff7b2446..736ec3a5bde 100644
--- a/testing/logging/test_reporting.py
+++ b/testing/logging/test_reporting.py
@@ -1165,3 +1165,92 @@ def test_log_file_cli_subdirectories_are_successfully_created(
     result = pytester.runpytest("--log-file=foo/bar/logf.log")
     assert "logf.log" in os.listdir(expected)
     assert result.ret == ExitCode.OK
+
+
+def test_log_file_in_root_dir_when_pytest_invoked_in_subdir(pytester, monkeypatch):
+    """Issue #7336 - log_file should be relative to the config file when it contains the log_file option."""
+    pytester.makeini(
+        """
+        [pytest]
+        log_file = pytest.log
+        """
+    )
+
+    subdir = pytester.mkdir("subdir")
+    testfile = pytester.makepyfile(
+        """
+        def test_this():
+            pass
+        """
+    )
+    testfile.replace(subdir / testfile)
+
+    monkeypatch.chdir(subdir)
+    pytester.runpytest()
+    pytester.chdir()  # Restore the initial cwd.
+
+    files_in_root_dir = set(os.listdir())
+    assert {"pytest.log", "tox.ini"}.issubset(files_in_root_dir)
+
+
+def test_log_file_in_subdir_when_specified_and_pytest_invoked_in_subdir(
+    pytester, monkeypatch
+):
+    """Issue #7336 - log_file should be relative to the config file when it contains the log_file option."""
+    pytester.makeini(
+        """
+        [pytest]
+        log_file = subdir/pytest.log
+        """
+    )
+
+    subdir = pytester.mkdir("subdir")
+    testfile = pytester.makepyfile(
+        """
+        def test_this():
+            pass
+        """
+    )
+    testfile.replace(subdir / testfile)
+
+    monkeypatch.chdir(subdir)
+    pytester.runpytest()
+
+    files_in_subdir = set(os.listdir())
+    assert "pytest.log" in files_in_subdir
+    assert "tox.ini" not in files_in_subdir
+
+
+def test_log_file_relative_to_invocation_dir_when_passed_as_cli_argument(
+    pytester, monkeypatch
+):
+    """PR #7350 comment related to issue #7350 (https://github.com/pytest-dev/pytest/pull/7350#pullrequestreview-429803796).
+
+    Log_file should be relative to the invocation dir when passed as a commandline argument.
+    """
+    pytester.makeini(
+        """
+        [pytest]
+        """
+    )
+
+    subdir = pytester.mkdir("subdir")
+    testfile = pytester.makepyfile(
+        """
+        def test_this():
+            pass
+        """
+    )
+    testfile.replace(subdir / testfile)
+
+    monkeypatch.chdir(subdir)
+    pytester.runpytest("--log-file", "pytest.log")
+
+    files_in_subdir = set(os.listdir())
+    assert "pytest.log" in files_in_subdir
+    assert "tox.ini" not in files_in_subdir
+
+    pytester.chdir()  # Restore the initial cwd.
+    files_in_root_dir = set(os.listdir())
+    assert "pytest.log" not in files_in_root_dir
+    assert "tox.ini" in files_in_root_dir