diff --git a/crates/project_panel/src/project_panel.rs b/crates/project_panel/src/project_panel.rs
index cb62a7f04b..62d5da762a 100644
--- a/crates/project_panel/src/project_panel.rs
+++ b/crates/project_panel/src/project_panel.rs
@@ -497,6 +497,7 @@ impl ProjectPanel {
 
         if let Some((worktree, entry)) = self.selected_sub_entry(cx) {
             let auto_fold_dirs = ProjectPanelSettings::get_global(cx).auto_fold_dirs;
+            let worktree = worktree.read(cx);
             let is_root = Some(entry) == worktree.root_entry();
             let is_dir = entry.is_dir();
             let is_foldable = auto_fold_dirs && self.is_foldable(entry, worktree);
@@ -976,6 +977,7 @@ impl ProjectPanel {
         }) = self.selection
         {
             let directory_id;
+            let new_entry_id = self.resolve_entry(entry_id);
             if let Some((worktree, expanded_dir_ids)) = self
                 .project
                 .read(cx)
@@ -983,7 +985,7 @@ impl ProjectPanel {
                 .zip(self.expanded_dir_ids.get_mut(&worktree_id))
             {
                 let worktree = worktree.read(cx);
-                if let Some(mut entry) = worktree.entry_for_id(entry_id) {
+                if let Some(mut entry) = worktree.entry_for_id(new_entry_id) {
                     loop {
                         if entry.is_dir() {
                             if let Err(ix) = expanded_dir_ids.binary_search(&entry.id) {
@@ -1273,6 +1275,7 @@ impl ProjectPanel {
     fn select_parent(&mut self, _: &SelectParent, cx: &mut ViewContext<Self>) {
         if let Some((worktree, entry)) = self.selected_sub_entry(cx) {
             if let Some(parent) = entry.path.parent() {
+                let worktree = worktree.read(cx);
                 if let Some(parent_entry) = worktree.entry_for_path(parent) {
                     self.selection = Some(SelectedEntry {
                         worktree_id: worktree.id(),
@@ -1406,7 +1409,6 @@ impl ProjectPanel {
                 .clipboard
                 .as_ref()
                 .filter(|clipboard| !clipboard.items().is_empty())?;
-
             enum PasteTask {
                 Rename(Task<Result<CreatedEntry>>),
                 Copy(Task<Result<Option<Entry>>>),
@@ -1416,7 +1418,7 @@ impl ProjectPanel {
             let clip_is_cut = clipboard_entries.is_cut();
             for clipboard_entry in clipboard_entries.items() {
                 let new_path =
-                    self.create_paste_path(clipboard_entry, self.selected_entry_handle(cx)?, cx)?;
+                    self.create_paste_path(clipboard_entry, self.selected_sub_entry(cx)?, cx)?;
                 let clip_entry_id = clipboard_entry.entry_id;
                 let is_same_worktree = clipboard_entry.worktree_id == worktree_id;
                 let relative_worktree_source_path = if !is_same_worktree {
@@ -1558,7 +1560,7 @@ impl ProjectPanel {
 
     fn reveal_in_finder(&mut self, _: &RevealInFileManager, cx: &mut ViewContext<Self>) {
         if let Some((worktree, entry)) = self.selected_sub_entry(cx) {
-            cx.reveal_path(&worktree.abs_path().join(&entry.path));
+            cx.reveal_path(&worktree.read(cx).abs_path().join(&entry.path));
         }
     }
 
@@ -1573,7 +1575,7 @@ impl ProjectPanel {
         if let Some((worktree, entry)) = self.selected_sub_entry(cx) {
             let abs_path = match &entry.canonical_path {
                 Some(canonical_path) => Some(canonical_path.to_path_buf()),
-                None => worktree.absolutize(&entry.path).ok(),
+                None => worktree.read(cx).absolutize(&entry.path).ok(),
             };
 
             let working_directory = if entry.is_dir() {
@@ -1596,7 +1598,7 @@ impl ProjectPanel {
             if entry.is_dir() {
                 let include_root = self.project.read(cx).visible_worktrees(cx).count() > 1;
                 let dir_path = if include_root {
-                    let mut full_path = PathBuf::from(worktree.root_name());
+                    let mut full_path = PathBuf::from(worktree.read(cx).root_name());
                     full_path.push(&entry.path);
                     Arc::from(full_path)
                 } else {
@@ -1730,6 +1732,8 @@ impl ProjectPanel {
         }
     }
 
+    /// Finds the currently selected subentry for a given leaf entry id. If a given entry
+    /// has no ancestors, the project entry ID that's passed in is returned as-is.
     fn resolve_entry(&self, id: ProjectEntryId) -> ProjectEntryId {
         self.ancestors
             .get(&id)
@@ -1756,12 +1760,12 @@ impl ProjectPanel {
     fn selected_sub_entry<'a>(
         &self,
         cx: &'a AppContext,
-    ) -> Option<(&'a Worktree, &'a project::Entry)> {
+    ) -> Option<(Model<Worktree>, &'a project::Entry)> {
         let (worktree, mut entry) = self.selected_entry_handle(cx)?;
 
-        let worktree = worktree.read(cx);
         let resolved_id = self.resolve_entry(entry.id);
         if resolved_id != entry.id {
+            let worktree = worktree.read(cx);
             entry = worktree.entry_for_id(resolved_id)?;
         }
         Some((worktree, entry))
@@ -1885,7 +1889,19 @@ impl ProjectPanel {
                 }
                 auto_folded_ancestors.clear();
                 visible_worktree_entries.push(entry.clone());
-                if Some(entry.id) == new_entry_parent_id {
+                let precedes_new_entry = if let Some(new_entry_id) = new_entry_parent_id {
+                    entry.id == new_entry_id || {
+                        self.ancestors.get(&entry.id).map_or(false, |entries| {
+                            entries
+                                .ancestors
+                                .iter()
+                                .any(|entry_id| *entry_id == new_entry_id)
+                        })
+                    }
+                } else {
+                    false
+                };
+                if precedes_new_entry {
                     visible_worktree_entries.push(Entry {
                         id: NEW_ENTRY_ID,
                         kind: new_entry_kind,
@@ -2546,9 +2562,7 @@ impl ProjectPanel {
                             h_flex().h_6().w_full().child(editor.clone())
                         } else {
                             h_flex().h_6().map(|mut this| {
-                                if let Some(folded_ancestors) =
-                                    is_active.then(|| self.ancestors.get(&entry_id)).flatten()
-                                {
+                                if let Some(folded_ancestors) = self.ancestors.get(&entry_id) {
                                     let components = Path::new(&file_name)
                                         .components()
                                         .map(|comp| {
@@ -2592,9 +2606,10 @@ impl ProjectPanel {
                                                 Label::new(component)
                                                     .single_line()
                                                     .color(filename_text_color)
-                                                    .when(index == active_index, |this| {
-                                                        this.underline(true)
-                                                    }),
+                                                    .when(
+                                                        is_active && index == active_index,
+                                                        |this| this.underline(true),
+                                                    ),
                                             );
 
                                         this = this.child(label);