diff --git a/src/ansible_runner/config/runner.py b/src/ansible_runner/config/runner.py
index 70379ef3..26be235e 100644
--- a/src/ansible_runner/config/runner.py
+++ b/src/ansible_runner/config/runner.py
@@ -158,14 +158,20 @@ def prepare(self):
     def prepare_inventory(self):
         """
         Prepares the inventory default under ``private_data_dir`` if it's not overridden by the constructor.
+
+        We make sure that if inventory is a path, that it is an absolute path.
         """
         if self.containerized:
             self.inventory = '/runner/inventory'
             return
 
         if self.inventory is None:
+            # At this point we expect self.private_data_dir to be an absolute path
+            # since that is expanded in the base class.
             if os.path.exists(os.path.join(self.private_data_dir, "inventory")):
                 self.inventory = os.path.join(self.private_data_dir, "inventory")
+        elif isinstance(self.inventory, str) and os.path.exists(self.inventory):
+            self.inventory = os.path.abspath(self.inventory)
 
     def prepare_env(self):
         """
diff --git a/test/integration/test_interface.py b/test/integration/test_interface.py
index 4e17503e..457ea719 100644
--- a/test/integration/test_interface.py
+++ b/test/integration/test_interface.py
@@ -559,3 +559,51 @@ def test_get_role_argspec_within_container(project_fixtures, runtime, skipif_pre
     assert isinstance(resp, dict)
     assert 'Into_The_Mystic' in resp
     assert resp['Into_The_Mystic']['entry_points'] == expected_epoint
+
+
+class TestRelativePvtDataDirPaths:
+    """
+    Class to handle test setup/teardown of tests that need to change working
+    directory to test relative paths.
+    """
+
+    def setup_method(self):
+        self._old_workdir = os.getcwd()  # pylint: disable=W0201
+
+    def teardown_method(self):
+        os.chdir(self._old_workdir)
+
+    def test_inventory_as_string(self, project_fixtures):
+        """
+        Test of bug fix for GH issue #1216: https://github.com/ansible/ansible-runner/issues/1216
+
+        A relative private data directory combined with an inventory specified as a string
+        would produce an invalid inventory path being passed along to ansible.
+        """
+        os.chdir(str(project_fixtures))
+
+        inventory = 'hostA ansible_connection=local ansible_python_interpreter="{{ ansible_playbook_python }}"'
+
+        r = run(private_data_dir='debug',
+                inventory=inventory,
+                playbook='debug.yml')
+
+        with r.stdout as output:
+            text = output.read()
+
+        assert r.status == 'successful'
+        assert "No inventory was parsed" not in text
+
+    def test_default_inventory(self, project_fixtures):
+        """
+        Test relative pvt data dir with the default inventory.
+        """
+        os.chdir(str(project_fixtures))
+
+        r = run(private_data_dir='debug', playbook='debug.yml')
+
+        with r.stdout as output:
+            text = output.read()
+
+        assert r.status == 'successful'
+        assert "No inventory was parsed" not in text
diff --git a/test/unit/config/test_runner.py b/test/unit/config/test_runner.py
index 397fd9a5..8929139e 100644
--- a/test/unit/config/test_runner.py
+++ b/test/unit/config/test_runner.py
@@ -249,13 +249,16 @@ def test_prepare_inventory(mocker):
     rc = RunnerConfig(private_data_dir='/')
     rc.prepare_inventory()
     assert rc.inventory == '/inventory'
+
     rc.inventory = '/tmp/inventory'
     rc.prepare_inventory()
     assert rc.inventory == '/tmp/inventory'
+
+    path_exists.return_value = False
     rc.inventory = 'localhost,anotherhost,'
     rc.prepare_inventory()
     assert rc.inventory == 'localhost,anotherhost,'
-    path_exists.return_value = False
+
     rc.inventory = None
     rc.prepare_inventory()
     assert rc.inventory is None