diff --git a/src/broker/runat.c b/src/broker/runat.c
index 868860e6a2cd..f806d966787a 100644
--- a/src/broker/runat.c
+++ b/src/broker/runat.c
@@ -351,10 +351,10 @@ static struct runat_command *runat_command_create (char **env, int flags)
     if (flags & RUNAT_FLAG_FORK_EXEC)
         cmd->flags |= FLUX_SUBPROCESS_FLAGS_FORK_EXEC;
     /*
-     * Always run runat command in separate process group so that any
-     * processes spawned by command are signaled by flux_subprocess_signal()
+     * N.B. By default subprocesses call setpgrp() before exec(2).  So
+     * any processes spawned by command are also signaled by
+     * flux_subprocess_signal()
      */
-    cmd->flags |= FLUX_SUBPROCESS_FLAGS_SETPGRP;
     if (!(cmd->cmd = flux_cmd_create (0, NULL, env)))
         goto error;
     return cmd;
diff --git a/src/cmd/builtin/proxy.c b/src/cmd/builtin/proxy.c
index 1352ffbf6934..b4af9c6bd9aa 100644
--- a/src/cmd/builtin/proxy.c
+++ b/src/cmd/builtin/proxy.c
@@ -114,6 +114,7 @@ static int child_create (struct proxy_command *ctx,
         .on_stderr = NULL,
     };
     flux_cmd_t *cmd = NULL;
+    int flags = 0;
     int i;
 
     if (!shell)
@@ -154,10 +155,12 @@ static int child_create (struct proxy_command *ctx,
         goto error;
 
     /* We want stdio fallthrough so subprocess can capture tty if
-     * necessary (i.e. an interactive shell)
+     * necessary (i.e. an interactive shell).
      */
+    flags |= FLUX_SUBPROCESS_FLAGS_STDIO_FALLTHROUGH;
+    flags |= FLUX_SUBPROCESS_FLAGS_NO_SETPGRP;
     if (!(p = flux_local_exec (flux_get_reactor (ctx->h),
-                               FLUX_SUBPROCESS_FLAGS_STDIO_FALLTHROUGH,
+                               flags,
                                cmd,
                                &ops)))
         goto error;
diff --git a/src/cmd/flux-start.c b/src/cmd/flux-start.c
index aa98854f86eb..9710732c4f88 100644
--- a/src/cmd/flux-start.c
+++ b/src/cmd/flux-start.c
@@ -735,6 +735,7 @@ int client_run (struct client *cli)
         .on_stdout = NULL,
         .on_stderr = NULL,
     };
+    int flags = 0;
     if (cli->p) {
         errno = EEXIST;
         return -1;
@@ -742,8 +743,10 @@ int client_run (struct client *cli)
     /* We want stdio fallthrough so subprocess can capture tty if
      * necessary (i.e. an interactive shell)
      */
+    flags |= FLUX_SUBPROCESS_FLAGS_STDIO_FALLTHROUGH;
+    flags |= FLUX_SUBPROCESS_FLAGS_NO_SETPGRP;
     if (!(cli->p = flux_local_exec (ctx.reactor,
-                                    FLUX_SUBPROCESS_FLAGS_STDIO_FALLTHROUGH,
+                                    flags,
                                     cli->cmd,
                                     &ops)))
         log_err_exit ("flux_exec");
diff --git a/src/common/libsubprocess/fork.c b/src/common/libsubprocess/fork.c
index 524b0a29fcc2..4d00e3961bff 100644
--- a/src/common/libsubprocess/fork.c
+++ b/src/common/libsubprocess/fork.c
@@ -166,7 +166,7 @@ static int local_child (flux_subprocess_t *p)
         p->in_hook = false;
     }
 
-    if (p->flags & FLUX_SUBPROCESS_FLAGS_SETPGRP
+    if (!(p->flags & FLUX_SUBPROCESS_FLAGS_NO_SETPGRP)
         && getpgrp () != getpid ()) {
         if (setpgrp () < 0) {
             fprintf (stderr, "setpgrp: %s\n", strerror (errno));
diff --git a/src/common/libsubprocess/posix_spawn.c b/src/common/libsubprocess/posix_spawn.c
index 84121271f162..f4306473bdd0 100644
--- a/src/common/libsubprocess/posix_spawn.c
+++ b/src/common/libsubprocess/posix_spawn.c
@@ -136,7 +136,7 @@ int create_process_spawn (flux_subprocess_t *p)
     /*  If setpgrp(2) is desired for the child process, then add this
      *  flag to the spawnattr flags.
      */
-    if (p->flags & FLUX_SUBPROCESS_FLAGS_SETPGRP)
+    if (!(p->flags & FLUX_SUBPROCESS_FLAGS_NO_SETPGRP))
         flags |= POSIX_SPAWN_SETPGROUP;
     posix_spawnattr_setflags (&attr, flags);
 
diff --git a/src/common/libsubprocess/server.c b/src/common/libsubprocess/server.c
index 913d4b9d291e..41c4c4c21e9d 100644
--- a/src/common/libsubprocess/server.c
+++ b/src/common/libsubprocess/server.c
@@ -365,7 +365,7 @@ static void server_exec_cb (flux_t *h,
     flux_cmd_unsetenv (cmd, "FLUX_PROXY_REMOTE");
 
     if (!(p = flux_local_exec_ex (flux_get_reactor (s->h),
-                                  FLUX_SUBPROCESS_FLAGS_SETPGRP,
+                                  0,
                                   cmd,
                                   &ops,
                                   NULL,
diff --git a/src/common/libsubprocess/subprocess.c b/src/common/libsubprocess/subprocess.c
index 71e599792df5..73ec096c4e66 100644
--- a/src/common/libsubprocess/subprocess.c
+++ b/src/common/libsubprocess/subprocess.c
@@ -463,7 +463,7 @@ flux_subprocess_t *flux_local_exec_ex (flux_reactor_t *r,
 {
     flux_subprocess_t *p = NULL;
     int valid_flags = (FLUX_SUBPROCESS_FLAGS_STDIO_FALLTHROUGH
-                       | FLUX_SUBPROCESS_FLAGS_SETPGRP
+                       | FLUX_SUBPROCESS_FLAGS_NO_SETPGRP
                        | FLUX_SUBPROCESS_FLAGS_FORK_EXEC);
 
     if (!r || !cmd) {
@@ -946,7 +946,7 @@ flux_future_t *flux_subprocess_kill (flux_subprocess_t *p, int signum)
             errno = ESRCH;
             return NULL;
         }
-        if (p->flags & FLUX_SUBPROCESS_FLAGS_SETPGRP)
+        if (!(p->flags & FLUX_SUBPROCESS_FLAGS_NO_SETPGRP))
             ret = killpg (p->pid, signum);
         else
             ret = kill (p->pid, signum);
diff --git a/src/common/libsubprocess/subprocess.h b/src/common/libsubprocess/subprocess.h
index b0a941543a2f..28471928d387 100644
--- a/src/common/libsubprocess/subprocess.h
+++ b/src/common/libsubprocess/subprocess.h
@@ -57,8 +57,8 @@ enum {
      * will fail on streams of "stdin", "stdout", or "stderr".
      */
     FLUX_SUBPROCESS_FLAGS_STDIO_FALLTHROUGH = 1,
-    /* flux_local_exec(): call setpgrp() before exec(2) */
-    FLUX_SUBPROCESS_FLAGS_SETPGRP = 2,
+    /* flux_local_exec(): do not call setpgrp() before exec(2) */
+    FLUX_SUBPROCESS_FLAGS_NO_SETPGRP = 2,
     /* flux_local_exec(): use fork(2)/exec(2) even if posix_spawn(3)
      * available */
     FLUX_SUBPROCESS_FLAGS_FORK_EXEC = 4,
diff --git a/src/common/libsubprocess/test/subprocess.c b/src/common/libsubprocess/test/subprocess.c
index fc93d95b3d18..4c4b4cea079e 100644
--- a/src/common/libsubprocess/test/subprocess.c
+++ b/src/common/libsubprocess/test/subprocess.c
@@ -323,7 +323,7 @@ void test_basic_fail (flux_reactor_t *r)
     flux_cmd_destroy (cmd);
 }
 
-void test_flag_setpgrp (flux_reactor_t *r)
+void test_flag_no_setpgrp (flux_reactor_t *r)
 {
     char *av[] = { "/bin/true", NULL };
     flux_cmd_t *cmd;
@@ -335,7 +335,7 @@ void test_flag_setpgrp (flux_reactor_t *r)
         .on_completion = completion_cb
     };
     completion_cb_count = 0;
-    p = flux_local_exec (r, FLUX_SUBPROCESS_FLAGS_SETPGRP, cmd, &ops);
+    p = flux_local_exec (r, FLUX_SUBPROCESS_FLAGS_NO_SETPGRP, cmd, &ops);
     ok (p != NULL, "flux_local_exec");
 
     ok (flux_subprocess_state (p) == FLUX_SUBPROCESS_RUNNING,
@@ -551,7 +551,7 @@ void test_kill_setpgrp (flux_reactor_t *r)
     output_processes_cb_count = 0;
     parent_pid = -1;
     child_pid = -1;
-    p = flux_local_exec (r, FLUX_SUBPROCESS_FLAGS_SETPGRP, cmd, &ops);
+    p = flux_local_exec (r, 0, cmd, &ops);
     ok (p != NULL, "flux_local_exec");
 
     ok (flux_subprocess_state (p) == FLUX_SUBPROCESS_RUNNING,
@@ -1097,8 +1097,8 @@ int main (int argc, char *argv[])
     test_basic_fail (r);
     diag ("env_passed");
     test_env_passed (r);
-    diag ("flag_setpgrp");
-    test_flag_setpgrp (r);
+    diag ("flag_no_setpgrp");
+    test_flag_no_setpgrp (r);
     diag ("flag_fork_exec");
     test_flag_fork_exec (r);
     diag ("kill");
diff --git a/src/shell/task.c b/src/shell/task.c
index 42cd6f5cd5ce..6624972f749f 100644
--- a/src/shell/task.c
+++ b/src/shell/task.c
@@ -222,7 +222,7 @@ int shell_task_start (struct flux_shell *shell,
                       shell_task_completion_f cb,
                       void *arg)
 {
-    int flags = FLUX_SUBPROCESS_FLAGS_SETPGRP;
+    int flags = 0;
     flux_reactor_t *r = shell->r;
     flux_subprocess_hooks_t hooks = {
         .pre_exec = subproc_preexec_hook,
@@ -230,7 +230,7 @@ int shell_task_start (struct flux_shell *shell,
     };
 
     if (shell->nosetpgrp)
-        flags &= ~FLUX_SUBPROCESS_FLAGS_SETPGRP;
+        flags |= FLUX_SUBPROCESS_FLAGS_NO_SETPGRP;
 
     task->proc = flux_local_exec_ex (r,
                                      flags,