diff --git a/crates/file_finder/src/file_finder.rs b/crates/file_finder/src/file_finder.rs
index be3d2feb83..d222682e80 100644
--- a/crates/file_finder/src/file_finder.rs
+++ b/crates/file_finder/src/file_finder.rs
@@ -566,7 +566,7 @@ impl FileFinderDelegate {
         let path = &path_match.path;
         let path_string = path.to_string_lossy();
         let full_path = [path_match.path_prefix.as_ref(), path_string.as_ref()].join("");
-        let path_positions = path_match.positions.clone();
+        let mut path_positions = path_match.positions.clone();
 
         let file_name = path.file_name().map_or_else(
             || path_match.path_prefix.to_string(),
@@ -584,6 +584,14 @@ impl FileFinderDelegate {
             })
             .collect();
 
+        // Trim file name from the full path
+        let full_path = if full_path.len() > file_name.len() {
+            full_path[..full_path.len() - file_name.len() - 1].to_string()
+        } else {
+            "".to_string()
+        };
+        path_positions.retain(|idx| *idx < full_path.len());
+
         (file_name, file_name_positions, full_path, path_positions)
     }
 
@@ -868,9 +876,14 @@ impl PickerDelegate for FileFinderDelegate {
                 .inset(true)
                 .selected(selected)
                 .child(
-                    v_flex()
+                    h_flex()
+                        .gap_2()
                         .child(HighlightedLabel::new(file_name, file_name_positions))
-                        .child(HighlightedLabel::new(full_path, full_path_positions)),
+                        .child(
+                            HighlightedLabel::new(full_path, full_path_positions)
+                                .size(LabelSize::Small)
+                                .color(Color::Muted),
+                        ),
                 ),
         )
     }
diff --git a/crates/file_finder/src/file_finder_tests.rs b/crates/file_finder/src/file_finder_tests.rs
index 450d034614..f0e1626bd4 100644
--- a/crates/file_finder/src/file_finder_tests.rs
+++ b/crates/file_finder/src/file_finder_tests.rs
@@ -490,8 +490,8 @@ async fn test_single_file_worktrees(cx: &mut TestAppContext) {
             delegate.labels_for_path_match(&matches[0].0);
         assert_eq!(file_name, "the-file");
         assert_eq!(file_name_positions, &[0, 1, 4]);
-        assert_eq!(full_path, "the-file");
-        assert_eq!(full_path_positions, &[0, 1, 4]);
+        assert_eq!(full_path, "");
+        assert_eq!(full_path_positions, &[0; 0]);
     });
 
     // Since the worktree root is a file, searching for its name followed by a slash does
diff --git a/crates/ui/src/components/label/highlighted_label.rs b/crates/ui/src/components/label/highlighted_label.rs
index d70c2d1b51..41866bd10a 100644
--- a/crates/ui/src/components/label/highlighted_label.rs
+++ b/crates/ui/src/components/label/highlighted_label.rs
@@ -79,6 +79,8 @@ impl RenderOnce for HighlightedLabel {
         let mut text_style = cx.text_style().clone();
         text_style.color = self.base.color.color(cx);
 
-        LabelLike::new().child(StyledText::new(self.label).with_highlights(&text_style, highlights))
+        LabelLike::new()
+            .size(self.base.size)
+            .child(StyledText::new(self.label).with_highlights(&text_style, highlights))
     }
 }
diff --git a/crates/ui/src/components/label/label_like.rs b/crates/ui/src/components/label/label_like.rs
index cddd849b89..f08ff1bf83 100644
--- a/crates/ui/src/components/label/label_like.rs
+++ b/crates/ui/src/components/label/label_like.rs
@@ -36,7 +36,7 @@ pub trait LabelCommon {
 
 #[derive(IntoElement)]
 pub struct LabelLike {
-    size: LabelSize,
+    pub(crate) size: LabelSize,
     line_height_style: LineHeightStyle,
     pub(crate) color: Color,
     strikethrough: bool,