diff --git a/cmd/sourced/cmd/prune.go b/cmd/sourced/cmd/prune.go
index e44cc50..78b0fcf 100644
--- a/cmd/sourced/cmd/prune.go
+++ b/cmd/sourced/cmd/prune.go
@@ -8,7 +8,7 @@ import (
 )
 
 type pruneCmd struct {
-	Command `name:"prune" short-description:"Stop and remove containers and resources" long-description:"Stops containers and removes containers, networks, and volumes created by 'init' for the current working directory.\nTo delete resources for all working directories pass --all flag.\nImages are not deleted unless you specify the --images flag."`
+	Command `name:"prune" short-description:"Stop and remove containers and resources" long-description:"Stops containers and removes containers, networks, volumes and configuration created by 'init' for the current working directory.\nTo delete resources for all working directories pass --all flag.\nImages are not deleted unless you specify the --images flag."`
 
 	All    bool `short:"a" long:"all" description:"Remove containers and resources for all working directories"`
 	Images bool `long:"images" description:"Remove docker images"`
@@ -43,7 +43,20 @@ func (c *pruneCmd) pruneActive() error {
 		a = append(a, "--rmi", "all")
 	}
 
-	return compose.Run(context.Background(), a...)
+	if err := compose.Run(context.Background(), a...); err != nil {
+		return err
+	}
+
+	dir, err := workdir.Active()
+	if err != nil {
+		return err
+	}
+
+	if err := workdir.Remove(dir); err != nil {
+		return err
+	}
+
+	return workdir.UnsetActive()
 }
 
 func init() {
diff --git a/cmd/sourced/cmd/workdirs.go b/cmd/sourced/cmd/workdirs.go
index 0adfeef..64e9961 100644
--- a/cmd/sourced/cmd/workdirs.go
+++ b/cmd/sourced/cmd/workdirs.go
@@ -16,11 +16,8 @@ func (c *workdirsCmd) Execute(args []string) error {
 		return err
 	}
 
-	active, err := workdir.ActiveRepoDir()
-	if err != nil {
-		return err
-	}
-
+	// ignore errors if active dir doesn't exist or unavailable
+	active, _ := workdir.ActiveRepoDir()
 	for _, dir := range dirs {
 		if dir == active {
 			fmt.Printf("* %s\n", dir)
diff --git a/cmd/sourced/compose/workdir/workdir.go b/cmd/sourced/compose/workdir/workdir.go
index a7e9162..d957aad 100644
--- a/cmd/sourced/compose/workdir/workdir.go
+++ b/cmd/sourced/compose/workdir/workdir.go
@@ -20,6 +20,9 @@ import (
 
 const activeDir = "__active__"
 
+// RequiredFiles list of required files in a directory to treat it as a working directory
+var RequiredFiles = []string{".env", "docker-compose.yml"}
+
 // Init creates a working directory in ~/.srcd for the given repositories
 // directory. The working directory will contain a docker-compose.yml and a
 // .env file.
@@ -124,22 +127,46 @@ func SetActive(reposdir string) error {
 	return os.Symlink(workdir, dir)
 }
 
+// UnsetActive removes symlink for active workdir
+func UnsetActive() error {
+	dir, err := Active()
+	if err != nil {
+		return err
+	}
+
+	_, err = os.Stat(dir)
+	if !os.IsNotExist(err) {
+		err = os.Remove(dir)
+		if err != nil {
+			return errors.Wrap(err, "could not delete active workdir directory symlink")
+		}
+	}
+
+	return nil
+}
+
 // Active returns the absolute path to $HOME/.srcd/workdirs/__active__
 func Active() (string, error) {
 	return path(activeDir)
 }
 
-// ActiveRepoDir return repositories directory for an active working directory
-func ActiveRepoDir() (string, error) {
-	wpath, err := workdirsPath()
+// EvalActive returns resolved path to $HOME/.srcd/workdirs/__active__
+func EvalActive() (string, error) {
+	active, err := Active()
 	if err != nil {
 		return "", err
 	}
-	active, err := Active()
+
+	return filepath.EvalSymlinks(active)
+}
+
+// ActiveRepoDir return repositories directory for an active working directory
+func ActiveRepoDir() (string, error) {
+	wpath, err := workdirsPath()
 	if err != nil {
 		return "", err
 	}
-	active, err = filepath.EvalSymlinks(active)
+	active, err := EvalActive()
 	if err != nil {
 		return "", err
 	}
@@ -162,11 +189,13 @@ func List() ([]string, error) {
 		if info.IsDir() {
 			return nil
 		}
-		if info.Name() == ".env" || info.Name() == "docker-compose.yml" {
-			if _, ok := dirs[filepath.Dir(path)]; !ok {
-				dirs[filepath.Dir(path)] = 0
+		for _, f := range RequiredFiles {
+			if info.Name() == f {
+				if _, ok := dirs[filepath.Dir(path)]; !ok {
+					dirs[filepath.Dir(path)] = 0
+				}
+				dirs[filepath.Dir(path)]++
 			}
-			dirs[filepath.Dir(path)]++
 		}
 		return nil
 	})
@@ -176,7 +205,7 @@ func List() ([]string, error) {
 
 	res := make([]string, 0)
 	for dir, files := range dirs {
-		if files != 2 {
+		if files != len(RequiredFiles) {
 			continue
 		}
 		res = append(res, dir)
@@ -243,3 +272,37 @@ func stripBase(base, target string) (string, error) {
 
 	return filepath.Join("/", p), nil
 }
+
+// Remove removes working directory by removing required files
+// and recursively removes directories up to the workdirs root as long as they are empty
+func Remove(path string) error {
+	workdirsRoot, err := workdirsPath()
+	if err != nil {
+		return err
+	}
+
+	for _, f := range RequiredFiles {
+		if err := os.Remove(filepath.Join(path, f)); err != nil {
+			return errors.Wrap(err, "could not remove from workdir directory")
+		}
+	}
+
+	for {
+		files, err := ioutil.ReadDir(path)
+		if err != nil {
+			return errors.Wrap(err, "could not read workdir directory")
+		}
+		if len(files) > 0 {
+			return nil
+		}
+
+		if err := os.Remove(path); err != nil {
+			return errors.Wrap(err, "could not delete workdir directory")
+		}
+
+		path = filepath.Dir(path)
+		if path == workdirsRoot {
+			return nil
+		}
+	}
+}