diff --git a/core/tarantool.c b/core/tarantool.c
index 67c74a29fac8575e16ab409323dea99833b90d02..0e6e4cac55c4e088bc3d0f3bbe2c53affd4c76ed 100644
--- a/core/tarantool.c
+++ b/core/tarantool.c
@@ -62,6 +62,7 @@ char *cfg_filename_fullpath = NULL;
 struct tbuf *cfg_out = NULL;
 char *binary_filename;
 struct tarantool_cfg cfg;
+struct recovery_state *recovery_state;
 
 bool init_storage, booting = true;
 
@@ -416,27 +417,6 @@ main(int argc, char **argv)
 		panic("can't load config:"
 		      "%.*s", cfg_out->len, (char *)cfg_out->data);
 
-#ifdef STORAGE
-	if (gopt_arg(opt, 'C', &cat_filename)) {
-		initialize_minimal();
-		if (access(cat_filename, R_OK) == -1) {
-			say_syserror("access(\"%s\")", cat_filename);
-			exit(EX_OSFILE);
-		}
-		return mod_cat(cat_filename);
-	}
-
-	if (gopt(opt, 'I')) {
-		init_storage = true;
-		initialize_minimal();
-		mod_init();
-		next_lsn(recovery_state, 1);
-		confirm_lsn(recovery_state, 1);
-		snapshot_save(recovery_state, mod_snapshot);
-		exit(EXIT_SUCCESS);
-	}
-#endif
-
 	if (gopt_arg(opt, 'g', &cfg_paramname)) {
 		tarantool_cfg_iterator_t *i;
 		char *key, *value;
@@ -494,6 +474,27 @@ main(int argc, char **argv)
 #endif
 	}
 
+#ifdef STORAGE
+	if (gopt_arg(opt, 'C', &cat_filename)) {
+		initialize_minimal();
+		if (access(cat_filename, R_OK) == -1) {
+			say_syserror("access(\"%s\")", cat_filename);
+			exit(EX_OSFILE);
+		}
+		return mod_cat(cat_filename);
+	}
+
+	if (gopt(opt, 'I')) {
+		init_storage = true;
+		initialize_minimal();
+		mod_init();
+		next_lsn(recovery_state, 1);
+		confirm_lsn(recovery_state, 1);
+		snapshot_save(recovery_state, mod_snapshot);
+		exit(EXIT_SUCCESS);
+	}
+#endif
+
 	if (gopt(opt, 'D'))
 		daemonize(1, 1);
 
diff --git a/include/log_io.h b/include/log_io.h
index 64fe367f4230781f36a8d39d55c9192d07388a93..12809677c9660349055dc3cc4a743248a295afdd 100644
--- a/include/log_io.h
+++ b/include/log_io.h
@@ -96,7 +96,7 @@ struct recovery_state {
 
 	bool finalize;
 
-	/* pointer to user supplied custom data */
+	/* Points to module-specific state */
 	void *data;
 };
 
diff --git a/include/tarantool.h b/include/tarantool.h
index 78b80b8c1fab950537f200c9dadd41c7d1c56d11..2e8d409d0977ae346349f0ad01b4e76b7237d59f 100644
--- a/include/tarantool.h
+++ b/include/tarantool.h
@@ -31,7 +31,7 @@
 #include <util.h>
 #include <log_io.h>
 
-struct recovery_state *recovery_state;
+extern struct recovery_state *recovery_state;
 void mod_init(void);
 struct tarantool_cfg;
 i32 mod_check_config(struct tarantool_cfg *conf);
diff --git a/test/box/args.result b/test/box/args.result
index 68b984bcfecf67a955553e0f5ba2dc0afa317e3a..70ecd41660aaf359c6b270762a1885283b415417 100644
--- a/test/box/args.result
+++ b/test/box/args.result
@@ -65,3 +65,18 @@ tarantool_silverbox --version
 tarantool_silverbox -V
 1.minor.patch-<rev>-<commit>
 
+#
+# A test case for Bug#726778 "Gopt broke wal_dir and snap_dir: they are no
+# longer relative to work_dir".
+# https://bugs.launchpad.net/tarantool/+bug/726778
+# After addition of gopt(), we started to chdir() to the working
+# directory after option parsing.
+# Verify that this is not the case, and snap_dir and xlog_dir
+# can be relative to work_dir.
+
+tarantool_silverbox --config=bug726778.cfg --init-storage
+tarantool_silverbox: namespace 0 successfully configured
+tarantool_silverbox: creating `snapshots/00000000000000000001.snap.inprogress'
+tarantool_silverbox: saving snapshot `snapshots/00000000000000000001.snap'
+tarantool_silverbox: done
+
diff --git a/test/box/args.test b/test/box/args.test
index fa2595804f4ed3fdf55572e6f2c929573f3a0867..5648a8704111a014690d6fe78f526970ea6d7fe0 100644
--- a/test/box/args.test
+++ b/test/box/args.test
@@ -13,3 +13,31 @@ sys.stdout.push_filter("(\d)\.\d\.\d(-\d+-\w+)?", "\\1.minor.patch-<rev>-<commit
 server.test_option("--version")
 server.test_option("-V          ")
 sys.stdout.pop_filter()
+
+print """#
+# A test case for Bug#726778 "Gopt broke wal_dir and snap_dir: they are no
+# longer relative to work_dir".
+# https://bugs.launchpad.net/tarantool/+bug/726778
+# After addition of gopt(), we started to chdir() to the working
+# directory after option parsing.
+# Verify that this is not the case, and snap_dir and xlog_dir
+# can be relative to work_dir.
+"""
+import shutil
+shutil.rmtree(os.path.join(vardir, "bug726778"), True)
+cfg = os.path.join(vardir, "bug726778.cfg")
+os.mkdir(os.path.join(vardir, "bug726778"))
+os.mkdir(os.path.join(vardir, "bug726778/snapshots"))
+os.mkdir(os.path.join(vardir, "bug726778/xlogs"))
+
+os.symlink(os.path.abspath("box/bug726778.cfg"), cfg)
+
+sys.stdout.push_filter("(/\S+)+/tarantool", "tarantool")
+server.test_option("--config=bug726778.cfg --init-storage")
+sys.stdout.pop_filter()
+
+os.unlink(cfg)
+shutil.rmtree(os.path.join(vardir, "bug726778"))
+
+# Args filter cleanup
+# vim: syntax=python
diff --git a/test/box/bug726778.cfg b/test/box/bug726778.cfg
new file mode 100644
index 0000000000000000000000000000000000000000..449c3986fec792578763065a20655a9131ee8ebf
--- /dev/null
+++ b/test/box/bug726778.cfg
@@ -0,0 +1,27 @@
+#
+# Used in args.test
+#
+slab_alloc_arena = 0.1
+
+pid_file = "box.pid"
+
+work_dir = "bug726778"
+snap_dir = "snapshots"
+wal_dir = "xlogs"
+
+# Use -a not -a to work correctly on FreeBSD
+#
+logger="tee -a tarantool.log"
+
+primary_port = 33013
+secondary_port = 33014
+admin_port = 33015
+
+rows_per_wal = 50
+
+namespace[0].enabled = 1
+namespace[0].index[0].type = "HASH"
+namespace[0].index[0].unique = 1
+namespace[0].index[0].key_field[0].fieldno = 0
+namespace[0].index[0].key_field[0].type = "NUM"
+