diff --git a/src/nvim/testdir/Makefile b/src/nvim/testdir/Makefile
index ff0f729460..10d26bd8cf 100644
--- a/src/nvim/testdir/Makefile
+++ b/src/nvim/testdir/Makefile
@@ -9,7 +9,6 @@ SCRIPTSOURCE := ../../../runtime
 
 SCRIPTS := \
            test8.out              \
-           test12.out             \
            test13.out             \
            test14.out             \
            test17.out             \
diff --git a/src/nvim/testdir/test12.in b/src/nvim/testdir/test12.in
deleted file mode 100644
index 0c0623e5d4..0000000000
--- a/src/nvim/testdir/test12.in
+++ /dev/null
@@ -1,50 +0,0 @@
-Tests for 'directory' option.
-- ".", in same dir as file
-- "./dir", in directory relative to file
-- "dir", in directory relative to current dir
-
-STARTTEST
-:set dir=.,~
-:/start of testfile/,/end of testfile/w! Xtest1
-:" do an ls of the current dir to find the swap file (should not be there)
-:if has("unix")
-:  !ls .X*.swp >test.out
-:else
-:  r !ls X*.swp >test.out
-:endif
-:!echo first line >>test.out
-:e Xtest1
-:if has("unix")
-:" Do an ls of the current dir to find the swap file, remove the leading dot
-:" to make the result the same for all systems.
-:  r!ls .X*.swp
-:  s/\.*X/X/
-:  .w >>test.out
-:  undo
-:else
-:  !ls X*.swp >>test.out
-:endif
-:!echo under Xtest1.swp >>test.out
-:!mkdir Xtest2
-:set dir=./Xtest2,.,~
-:e Xtest1
-:!ls X*.swp >>test.out
-:!echo under under >>test.out
-:!ls Xtest2 >>test.out
-:!echo under Xtest1.swp >>test.out
-:!mkdir Xtest.je
-:/start of testfile/,/end of testfile/w! Xtest2/Xtest3
-:set dir=Xtest.je,~
-:e Xtest2/Xtest3
-:swap
-:!ls Xtest2 >>test.out
-:!echo under Xtest3 >>test.out
-:!ls Xtest.je >>test.out
-:!echo under Xtest3.swp >>test.out
-:qa!
-ENDTEST
-
-start of testfile
-line 2 Abcdefghij
-line 3 Abcdefghij
-end of testfile
diff --git a/src/nvim/testdir/test12.ok b/src/nvim/testdir/test12.ok
deleted file mode 100644
index 605623b117..0000000000
--- a/src/nvim/testdir/test12.ok
+++ /dev/null
@@ -1,10 +0,0 @@
-first line
-Xtest1.swp
-under Xtest1.swp
-under under
-Xtest1.swp
-under Xtest1.swp
-Xtest3
-under Xtest3
-Xtest3.swp
-under Xtest3.swp
diff --git a/test/functional/legacy/012_directory_spec.lua b/test/functional/legacy/012_directory_spec.lua
new file mode 100644
index 0000000000..44e1c14d78
--- /dev/null
+++ b/test/functional/legacy/012_directory_spec.lua
@@ -0,0 +1,88 @@
+-- Tests for 'directory' option.
+-- - ".", in same dir as file
+-- - "./dir", in directory relative to file
+-- - "dir", in directory relative to current dir
+
+local helpers          = require('test.functional.helpers')(after_each)
+local lfs              = require('lfs')
+local insert, eq       = helpers.insert, helpers.eq
+local neq, eval        = helpers.neq, helpers.eval
+local clear, execute   = helpers.clear, helpers.execute
+local wait, write_file = helpers.wait, helpers.write_file
+
+local function ls_dir_sorted(dirname)
+  local files = {}
+  for f in lfs.dir(dirname) do
+    if f ~= "." and f~= ".." then
+      table.insert(files, f)
+    end
+  end
+  table.sort(files)
+  return files
+end
+
+describe("'directory' option", function()
+  setup(function()
+    local text = [[
+      start of testfile
+      line 2 Abcdefghij
+      line 3 Abcdefghij
+      end of testfile
+      ]]
+    write_file('Xtest1', text)
+    lfs.mkdir('Xtest.je')
+    lfs.mkdir('Xtest2')
+    write_file('Xtest2/Xtest3', text)
+    clear()
+  end)
+  teardown(function()
+    helpers.rmdir('Xtest.je')
+    helpers.rmdir('Xtest2')
+    os.remove('Xtest1')
+  end)
+
+  it('is working', function()
+    insert([[
+      start of testfile
+      line 2 Abcdefghij
+      line 3 Abcdefghij
+      end of testfile]])
+
+    execute('set swapfile')
+    execute('set dir=.,~')
+
+    -- sanity check: files should not exist yet.
+    eq(nil, lfs.attributes('.Xtest1.swp')) -- unix
+    eq(nil, lfs.attributes('Xtest1.swp'))  -- non-unix
+
+    execute('e! Xtest1')
+    wait()
+    eq('Xtest1', eval('buffer_name("%")'))
+    -- Verify that the swapfile exists. In the legacy test this was done by
+    -- reading the output from :!ls.
+    if eval('has("unix")') == 1 then
+      neq(nil, lfs.attributes('.Xtest1.swp'))
+    else
+      neq(nil, lfs.attributes('Xtest1.swp'))
+    end
+
+    execute('set dir=./Xtest2,.,~')
+    execute('e Xtest1')
+    wait()
+
+    -- swapfile should no longer exist in CWD.
+    eq(nil, lfs.attributes('.Xtest1.swp')) -- for unix
+    eq(nil, lfs.attributes('Xtest1.swp'))  -- for other systems
+
+    eq({ "Xtest1.swp", "Xtest3" }, ls_dir_sorted("Xtest2"))
+
+    execute('set dir=Xtest.je,~')
+    execute('e Xtest2/Xtest3')
+    eq(1, eval('&swapfile'))
+    execute('swap')
+    wait()
+
+    eq({ "Xtest3" }, ls_dir_sorted("Xtest2"))
+    eq({ "Xtest3.swp" }, ls_dir_sorted("Xtest.je"))
+  end)
+end)