diff --git a/services/web/frontend/js/features/source-editor/extensions/doc-folder.ts b/services/web/frontend/js/features/source-editor/extensions/doc-folder.ts
new file mode 100644
index 0000000000..77bb0817c2
--- /dev/null
+++ b/services/web/frontend/js/features/source-editor/extensions/doc-folder.ts
@@ -0,0 +1,23 @@
+import {
+  Compartment,
+  Extension,
+  Facet,
+  TransactionSpec,
+} from '@codemirror/state'
+
+const docFolderConf = new Compartment()
+
+/**
+ * Folder of the open document (null at the project root), for resolving
+ * document-relative file paths.
+ */
+export const docFolderFacet = Facet.define<string | null, string | null>({
+  combine: values => values[0] ?? null,
+})
+
+export const docFolder = (docFolder: string | null): Extension =>
+  docFolderConf.of(docFolderFacet.of(docFolder))
+
+export const setDocFolder = (docFolder: string | null): TransactionSpec => ({
+  effects: docFolderConf.reconfigure(docFolderFacet.of(docFolder)),
+})
diff --git a/services/web/frontend/js/features/source-editor/extensions/index.ts b/services/web/frontend/js/features/source-editor/extensions/index.ts
index 47905f2a5c..ca583acf90 100644
--- a/services/web/frontend/js/features/source-editor/extensions/index.ts
+++ b/services/web/frontend/js/features/source-editor/extensions/index.ts
@@ -49,6 +49,7 @@ import { breadcrumbPanel } from './breadcrumbs-panel'
 import { geometryChangeEvent } from './geometry-change-event'
 import { docName } from './doc-name'
 import { filePreview } from './file-preview'
+import { docFolder } from './doc-folder'
 import { fileTreeItemDrop } from './file-tree-item-drop'
 import { mathPreview } from './math-preview'
 import { ranges } from './ranges'
@@ -135,6 +136,7 @@ export const createExtensions = (options: Record<string, any>): Extension[] => [
 
   docName(options.docName),
   filePreview(options.previewByPath),
+  docFolder(options.currentDocFolder),
 
   // NOTE: `annotations` needs to be before `language`
   annotations(),
diff --git a/services/web/frontend/js/features/source-editor/hooks/use-codemirror-scope.ts b/services/web/frontend/js/features/source-editor/hooks/use-codemirror-scope.ts
index 89d15b07d8..fee5edc806 100644
--- a/services/web/frontend/js/features/source-editor/hooks/use-codemirror-scope.ts
+++ b/services/web/frontend/js/features/source-editor/hooks/use-codemirror-scope.ts
@@ -33,6 +33,7 @@ import { EditorView } from '@codemirror/view'
 import { useErrorBoundary } from 'react-error-boundary'
 import { isVisual, setVisual } from '../extensions/visual/visual'
 import { setFilePreview } from '../extensions/file-preview'
+import { setDocFolder } from '../extensions/doc-folder'
 import { useFileTreePathContext } from '@/features/file-tree/contexts/file-tree-path'
 import { useUserSettingsContext } from '@/shared/context/user-settings-context'
 import { setDocName } from '@/features/source-editor/extensions/doc-name'
@@ -287,7 +288,7 @@ function useCodeMirrorScope(view: EditorView) {
 
   const editableRef = useRef(permissions.write || permissions.trackedWrite)
 
-  const { previewByPath } = useFileTreePathContext()
+  const { previewByPath, dirname } = useFileTreePathContext()
 
   const showVisual =
     visual && !!openDocName && isCmVisualEditorAvailable(openDocName)
@@ -296,6 +297,14 @@ function useCodeMirrorScope(view: EditorView) {
 
   const previewByPathRef = useRef(previewByPath)
 
+  const dirnameRef = useRef(dirname)
+
+  // Kept fresh here, above the state-creation effect, so that effect sees the
+  // new file tree on a simultaneous tree-change + doc-switch.
+  useEffect(() => {
+    dirnameRef.current = dirname
+  }, [dirname])
+
   // Persist the search query in this hook when the document changes by keeping
   // a reference to the search query in sync with the editor state
   const searchQueryRef = useRef<SearchQuery | null>(null)
@@ -355,6 +364,7 @@ function useCodeMirrorScope(view: EditorView) {
           spelling: spellingRef.current,
           showVisual: showVisualRef.current,
           previewByPath: previewByPathRef.current,
+          currentDocFolder: dirnameRef.current(currentDocument.doc_id),
           projectFeatures: projectFeaturesRef.current,
           initialSearchQuery: searchQueryRef.current,
           showBoundary,
@@ -423,9 +433,12 @@ function useCodeMirrorScope(view: EditorView) {
   useEffect(() => {
     previewByPathRef.current = previewByPath
     window.setTimeout(() => {
-      view.dispatch(setFilePreview(previewByPath))
+      view.dispatch(
+        setFilePreview(previewByPath),
+        setDocFolder(currentDocument ? dirname(currentDocument.doc_id) : null)
+      )
     })
-  }, [view, previewByPath])
+  }, [view, previewByPath, dirname, currentDocument])
 
   useEffect(() => {
     editableRef.current = permissions.write || permissions.trackedWrite