diff --git a/jupyter_server/serverapp.py b/jupyter_server/serverapp.py
index dd9939ca5d..49e9687d76 100755
--- a/jupyter_server/serverapp.py
+++ b/jupyter_server/serverapp.py
@@ -610,6 +610,7 @@ def start(self):
     'certfile': 'ServerApp.certfile',
     'client-ca': 'ServerApp.client_ca',
     'notebook-dir': 'ServerApp.root_dir',
+    'preferred-dir': 'ServerApp.preferred_dir',
     'browser': 'ServerApp.browser',
     'pylab': 'ServerApp.pylab',
     'gateway-url': 'GatewayClient.url',
@@ -1355,9 +1356,7 @@ def _default_root_dir(self):
         else:
             return os.getcwd()
 
-    @validate('root_dir')
-    def _root_dir_validate(self, proposal):
-        value = proposal['value']
+    def _normalize_dir(self, value):
         # Strip any trailing slashes
         # *except* if it's root
         _, path = os.path.splitdrive(value)
@@ -1367,13 +1366,41 @@ def _root_dir_validate(self, proposal):
         if not os.path.isabs(value):
             # If we receive a non-absolute path, make it absolute.
             value = os.path.abspath(value)
+        return value
+
+    @validate('root_dir')
+    def _root_dir_validate(self, proposal):
+        value = self._normalize_dir(proposal['value'])
         if not os.path.isdir(value):
             raise TraitError(trans.gettext("No such directory: '%r'") % value)
         return value
 
+    preferred_dir = Unicode(config=True,
+        help=trans.gettext("Preferred starting directory to use for notebooks and kernels.")
+    )
+
+    @default('preferred_dir')
+    def _default_prefered_dir(self):
+        return self.root_dir
+
+    @validate('preferred_dir')
+    def _preferred_dir_validate(self, proposal):
+        value = self._normalize_dir(proposal['value'])
+        if not os.path.isdir(value):
+            raise TraitError(trans.gettext("No such preferred dir: '%r'") % value)
+
+        # preferred_dir must be equal or a subdir of root_dir
+        if not value.startswith(self.root_dir):
+            raise TraitError(trans.gettext("preferred_dir must be equal or a subdir of root_dir: '%r'") % value)
+
+        return value
+
     @observe('root_dir')
     def _root_dir_changed(self, change):
         self._root_dir_set = True
+        if not self.preferred_dir.startswith(change['new']):
+            self.log.warning(trans.gettext("Value of preferred_dir updated to use value of root_dir"))
+            self.preferred_dir = change['new']
 
     @observe('server_extensions')
     def _update_server_extensions(self, change):
diff --git a/jupyter_server/tests/test_serverapp.py b/jupyter_server/tests/test_serverapp.py
index a74b731469..a850abd067 100644
--- a/jupyter_server/tests/test_serverapp.py
+++ b/jupyter_server/tests/test_serverapp.py
@@ -286,3 +286,93 @@ def test_urls(config, public_url, local_url, connection_url):
     assert serverapp.connection_url == connection_url
     # Cleanup singleton after test.
     ServerApp.clear_instance()
+
+
+# Preferred dir tests
+# ----------------------------------------------------------------------------
+def test_valid_preferred_dir(tmp_path, jp_configurable_serverapp):
+    path = str(tmp_path)
+    app = jp_configurable_serverapp(root_dir=path, preferred_dir=path)
+    assert app.root_dir == path
+    assert app.preferred_dir == path
+    assert app.root_dir == app.preferred_dir
+
+
+def test_valid_preferred_dir_is_root_subdir(tmp_path, jp_configurable_serverapp):
+    path = str(tmp_path)
+    path_subdir = str(tmp_path / 'subdir')
+    os.makedirs(path_subdir, exist_ok=True)
+    app = jp_configurable_serverapp(root_dir=path, preferred_dir=path_subdir)
+    assert app.root_dir == path
+    assert app.preferred_dir == path_subdir
+    assert app.preferred_dir.startswith(app.root_dir)
+
+
+def test_valid_preferred_dir_does_not_exist(tmp_path, jp_configurable_serverapp):
+    path = str(tmp_path)
+    path_subdir = str(tmp_path / 'subdir')
+    with pytest.raises(TraitError) as error:
+        app = jp_configurable_serverapp(root_dir=path, preferred_dir=path_subdir)
+
+    assert "No such preferred dir:" in str(error)
+
+
+def test_invalid_preferred_dir_does_not_exist(tmp_path, jp_configurable_serverapp):
+    path = str(tmp_path)
+    path_subdir = str(tmp_path / 'subdir')
+    with pytest.raises(TraitError) as error:
+        app = jp_configurable_serverapp(root_dir=path, preferred_dir=path_subdir)
+
+    assert "No such preferred dir:" in str(error)
+
+
+def test_invalid_preferred_dir_does_not_exist_set(tmp_path, jp_configurable_serverapp):
+    path = str(tmp_path)
+    path_subdir = str(tmp_path / 'subdir')
+
+    app = jp_configurable_serverapp(root_dir=path)
+    with pytest.raises(TraitError) as error:
+        app.preferred_dir = path_subdir
+
+    assert "No such preferred dir:" in str(error)
+
+
+def test_invalid_preferred_dir_not_root_subdir(tmp_path, jp_configurable_serverapp):
+    path = str(tmp_path / 'subdir')
+    os.makedirs(path, exist_ok=True)
+    not_subdir_path = str(tmp_path)
+
+    with pytest.raises(TraitError) as error:
+        app = jp_configurable_serverapp(root_dir=path, preferred_dir=not_subdir_path)
+
+    assert "preferred_dir must be equal or a subdir of root_dir:" in str(error)
+
+
+def test_invalid_preferred_dir_not_root_subdir_set(tmp_path, jp_configurable_serverapp):
+    path = str(tmp_path / 'subdir')
+    os.makedirs(path, exist_ok=True)
+    not_subdir_path = str(tmp_path)
+
+    app = jp_configurable_serverapp(root_dir=path)
+    with pytest.raises(TraitError) as error:
+        app.preferred_dir = not_subdir_path
+
+    assert "preferred_dir must be equal or a subdir of root_dir:" in str(error)
+
+
+def test_observed_root_dir_updates_preferred_dir(tmp_path, jp_configurable_serverapp):
+    path = str(tmp_path)
+    new_path = str(tmp_path / 'subdir')
+    os.makedirs(new_path, exist_ok=True)
+
+    app = jp_configurable_serverapp(root_dir=path, preferred_dir=path)
+    app.root_dir = new_path
+    assert app.preferred_dir == new_path
+
+
+def test_observed_root_dir_does_not_update_preferred_dir(tmp_path, jp_configurable_serverapp):
+    path = str(tmp_path)
+    new_path = str(tmp_path.parent)
+    app = jp_configurable_serverapp(root_dir=path, preferred_dir=path)
+    app.root_dir = new_path
+    assert app.preferred_dir == path