Index: lib/rubygems/installer.rb
===================================================================
--- lib/rubygems/installer.rb	(revision 1195)
+++ lib/rubygems/installer.rb	(working copy)
@@ -7,6 +7,8 @@ require 'rubygems/dependency_list'
 
 module Gem
 
+  class InstallError < Gem::Exception; end
+
   class DependencyRemovalException < Gem::Exception; end
 
   ##
@@ -321,14 +323,20 @@ TEXT
     #
     def extract_files(directory, format)
       require 'fileutils'
-      wd = Dir.getwd
-      Dir.chdir directory do
-        format.file_entries.each do |entry, file_data|
-          path = entry['path']
-          FileUtils.mkdir_p File.dirname(path)
-          File.open(path, "wb") do |out|
-            out.write file_data
-          end
+      format.file_entries.each do |entry, file_data|
+        path = entry['path']
+        if path =~ /\A\// then # for extra sanity
+          raise Gem::InstallError,
+                "attempt to install file into #{entry['path'].inspect}"
+        end
+        path = File.expand_path File.join(directory, path)
+        if path !~ /\A#{Regexp.escape directory}/ then
+          raise Gem::InstallError,
+                "attempt to install file into #{entry['path'].inspect}"
+        end
+        FileUtils.mkdir_p File.dirname(path)
+        File.open(path, "wb") do |out|
+          out.write file_data
         end
       end
     end