diff --git a/packages/app/e2e/file-explorer-collapse.spec.ts b/packages/app/e2e/file-explorer-collapse.spec.ts
new file mode 100644
index 000000000..97fcd9e30
--- /dev/null
+++ b/packages/app/e2e/file-explorer-collapse.spec.ts
@@ -0,0 +1,61 @@
+import { test } from "./fixtures";
+import {
+  collapseFolder,
+  expandFolder,
+  expectExplorerEntryHidden,
+  expectExplorerEntryVisible,
+  expectFileTabOpen,
+  openFileExplorer,
+  openFileFromExplorer,
+} from "./helpers/file-explorer";
+import { gotoWorkspace } from "./helpers/launcher";
+import { createTempGitRepo } from "./helpers/workspace";
+import {
+  connectWorkspaceSetupClient,
+  type WorkspaceSetupDaemonClient,
+} from "./helpers/workspace-setup";
+
+let tempRepo: { path: string; cleanup: () => Promise<void> };
+let workspaceId: string;
+let seedClient: WorkspaceSetupDaemonClient;
+
+test.beforeAll(async () => {
+  tempRepo = await createTempGitRepo("file-explorer-collapse-", {
+    files: [
+      { path: "assets/logo.png", content: "image bytes for explorer e2e\n" },
+      { path: "docs/guide.md", content: "# Guide\n" },
+    ],
+  });
+  seedClient = await connectWorkspaceSetupClient();
+  const result = await seedClient.openProject(tempRepo.path);
+  if (!result.workspace) {
+    throw new Error(result.error ?? "Failed to seed workspace");
+  }
+  workspaceId = String(result.workspace.id);
+});
+
+test.afterAll(async () => {
+  await seedClient?.close();
+  await tempRepo?.cleanup();
+});
+
+test.describe("File explorer collapse", () => {
+  test("collapses an opened image file parent folder and still expands other folders", async ({
+    page,
+  }) => {
+    await gotoWorkspace(page, workspaceId);
+    await openFileExplorer(page);
+
+    await expandFolder(page, "assets");
+    await expectExplorerEntryVisible(page, "logo.png");
+
+    await openFileFromExplorer(page, "logo.png");
+    await expectFileTabOpen(page, "assets/logo.png");
+
+    await collapseFolder(page, "assets");
+    await expectExplorerEntryHidden(page, "logo.png");
+
+    await expandFolder(page, "docs");
+    await expectExplorerEntryVisible(page, "guide.md");
+  });
+});
diff --git a/packages/app/e2e/helpers/file-explorer.ts b/packages/app/e2e/helpers/file-explorer.ts
new file mode 100644
index 000000000..0d63f34ba
--- /dev/null
+++ b/packages/app/e2e/helpers/file-explorer.ts
@@ -0,0 +1,41 @@
+import { expect, type Page } from "@playwright/test";
+
+function fileExplorerTree(page: Page) {
+  return page.getByTestId("file-explorer-tree-scroll");
+}
+
+function fileExplorerEntry(page: Page, name: string) {
+  return fileExplorerTree(page).getByText(name, { exact: true }).first();
+}
+
+export async function openFileExplorer(page: Page): Promise<void> {
+  await page.getByRole("button", { name: "Open explorer" }).first().click();
+  await page.getByTestId("explorer-tab-files").click();
+  await expect(fileExplorerTree(page)).toBeVisible({ timeout: 30_000 });
+}
+
+export async function expandFolder(page: Page, folderName: string): Promise<void> {
+  await fileExplorerEntry(page, folderName).click();
+}
+
+export async function collapseFolder(page: Page, folderName: string): Promise<void> {
+  await fileExplorerEntry(page, folderName).click();
+}
+
+export async function openFileFromExplorer(page: Page, fileName: string): Promise<void> {
+  await fileExplorerEntry(page, fileName).click();
+}
+
+export async function expectExplorerEntryVisible(page: Page, name: string): Promise<void> {
+  await expect(fileExplorerEntry(page, name)).toBeVisible({ timeout: 30_000 });
+}
+
+export async function expectExplorerEntryHidden(page: Page, name: string): Promise<void> {
+  await expect(fileExplorerEntry(page, name)).toBeHidden({ timeout: 30_000 });
+}
+
+export async function expectFileTabOpen(page: Page, filePath: string): Promise<void> {
+  await expect(page.getByTestId(`workspace-tab-file_${filePath}`).first()).toBeVisible({
+    timeout: 30_000,
+  });
+}
diff --git a/packages/app/src/components/file-explorer-pane.tsx b/packages/app/src/components/file-explorer-pane.tsx
index 9575eb891..7b09137ca 100644
--- a/packages/app/src/components/file-explorer-pane.tsx
+++ b/packages/app/src/components/file-explorer-pane.tsx
@@ -195,35 +195,6 @@ export function FileExplorerPane({
     });
   }, [hasWorkspaceScope, requestDirectoryListing, workspaceStateKey]);
 
-  // Expand ancestor directories when a file is selected (e.g., from an inline path click)
-  useEffect(() => {
-    if (!selectedEntryPath || !workspaceStateKey) {
-      return;
-    }
-    const parentDir = getParentDirectory(selectedEntryPath);
-    const ancestors = getAncestorDirectories(parentDir);
-    const newPaths = ancestors.filter((path) => !expandedPaths.has(path));
-    if (newPaths.length === 0) {
-      return;
-    }
-    setExpandedPathsForWorkspace(workspaceStateKey, [...Array.from(expandedPaths), ...newPaths]);
-    newPaths.forEach((path) => {
-      if (!directories.has(path)) {
-        void requestDirectoryListing(path, {
-          recordHistory: false,
-          setCurrentPath: false,
-        });
-      }
-    });
-  }, [
-    directories,
-    workspaceStateKey,
-    expandedPaths,
-    requestDirectoryListing,
-    selectedEntryPath,
-    setExpandedPathsForWorkspace,
-  ]);
-
   const handleToggleDirectory = useCallback(
     (entry: ExplorerEntry) => {
       if (!workspaceStateKey) {
@@ -682,35 +653,6 @@ function buildTreeRows({
   return rows;
 }
 
-function getParentDirectory(path: string): string {
-  const normalized = path.replace(/\/+$/, "");
-  if (!normalized || normalized === ".") {
-    return ".";
-  }
-  const lastSlash = normalized.lastIndexOf("/");
-  if (lastSlash === -1) {
-    return ".";
-  }
-  const dir = normalized.slice(0, lastSlash);
-  return dir.length > 0 ? dir : ".";
-}
-
-function getAncestorDirectories(directory: string): string[] {
-  const trimmed = directory.replace(/^\.\/+/, "").replace(/\/+$/, "");
-  if (!trimmed || trimmed === ".") {
-    return ["."];
-  }
-
-  const parts = trimmed.split("/").filter(Boolean);
-  const ancestors: string[] = ["."];
-  let acc = "";
-  for (const part of parts) {
-    acc = acc ? `${acc}/${part}` : part;
-    ancestors.push(acc);
-  }
-  return ancestors;
-}
-
 function getErrorRecoveryPath(state: AgentFileExplorerState | undefined): string {
   if (!state) {
     return ".";