diff --git a/src/web/chat/utils/tool-utils.ts b/src/web/chat/utils/tool-utils.ts
index 4cbb324a..4f0640d4 100644
--- a/src/web/chat/utils/tool-utils.ts
+++ b/src/web/chat/utils/tool-utils.ts
@@ -6,18 +6,21 @@
  * Convert absolute path to relative path if it's a subpath of working directory
  */
 export function formatFilePath(path: string, workingDirectory?: string): string {
-  
   if (!path) {
     return path;
   }
-  
-  // If we have a working directory and the path starts with it, make it relative
-  if (workingDirectory && path.startsWith(workingDirectory)) {
-    const relativePath = path.slice(workingDirectory.length);
-    // Remove leading slash if present
-    const cleaned = relativePath.startsWith('/') ? relativePath.slice(1) : relativePath;
-    const result = cleaned ? `./${cleaned}` : './';
-    return result;
+
+  if (workingDirectory) {
+    const normalizedWorkingDir = workingDirectory.replace(/[\\/]+$/, '');
+    const comparisonPath = path.replace(/[\\/]+$/, '');
+
+    const isSamePath = comparisonPath === normalizedWorkingDir;
+    const isSubPath = comparisonPath.startsWith(`${normalizedWorkingDir}/`) || comparisonPath.startsWith(`${normalizedWorkingDir}\\`);
+
+    if (isSamePath || isSubPath) {
+      const relativePath = path.slice(normalizedWorkingDir.length).replace(/^[\\/]+/, '');
+      return relativePath ? `./${relativePath}` : './';
+    }
   }
   
   // If it starts with user home directory, show as ~
@@ -126,4 +129,4 @@ export function extractDomain(url: string): string {
   } catch (e) {
     return url;
   }
-}
\ No newline at end of file
+}
diff --git a/tests/unit/web/utils/tool-utils.test.ts b/tests/unit/web/utils/tool-utils.test.ts
new file mode 100644
index 00000000..d56da8bf
--- /dev/null
+++ b/tests/unit/web/utils/tool-utils.test.ts
@@ -0,0 +1,20 @@
+import { formatFilePath } from '@/web/chat/utils/tool-utils';
+
+describe('formatFilePath', () => {
+  it('returns relative path when inside working directory', () => {
+    expect(formatFilePath('/home/user/project/src/index.ts', '/home/user/project'))
+      .toBe('./src/index.ts');
+  });
+
+  it('does not collapse sibling directories that only share a prefix', () => {
+    expect(formatFilePath('/home/user/project-other/file.ts', '/home/user/project'))
+      .toBe('~/user/project-other/file.ts');
+  });
+
+  it('handles windows-style paths with trailing slashes', () => {
+    expect(formatFilePath('C:/workspace/app/src/main.ts', 'C:/workspace/app/'))
+      .toBe('./src/main.ts');
+    expect(formatFilePath('C:/workspace/app-logs/output.log', 'C:/workspace/app/'))
+      .toBe('C:/workspace/app-logs/output.log');
+  });
+});