diff --git a/src/data-index/index.ts b/src/data-index/index.ts
index fb1d04681..1aa081123 100644
--- a/src/data-index/index.ts
+++ b/src/data-index/index.ts
@@ -276,15 +276,41 @@ export class PrefixIndex extends Component {
 
     /**
      * Use the in-memory prefix index to convert a relative path to an absolute one.
+     * - Absolute paths start with "/" and are resolved from the vault root (the leading "/" is stripped).
+     * - Relative paths starting with "./" or "../" are resolved relative to the origin file's parent folder.
+     * - Other paths are treated as absolute (from vault root) for backward compatibility.
      */
     public resolveRelative(path: string, origin?: string): string {
         if (!origin) return path;
         else if (path.startsWith("/")) return path.substring(1);
 
+        // Only resolve as relative if the path explicitly starts with "./" or "../".
+        // This preserves backward compatibility for absolute paths like "projects/folder".
+
         let relativePath = getParentFolder(origin) + "/" + path;
+        if (path.startsWith("./") || path.startsWith("../")) {
+            // Normalize the path by resolving ".." and "." segments.
+            relativePath = this.normalizePath(relativePath);
+        }
+
         if (this.pathExists(relativePath)) return relativePath;
         else return path;
     }
+
+    /** Normalize a path by resolving ".." and "." segments. */
+    private normalizePath(path: string): string {
+        let parts = path.split("/").filter(p => p.length > 0);
+        let stack: string[] = [];
+        for (let part of parts) {
+            if (part === ".") continue;
+            else if (part === "..") {
+                if (stack.length > 0) stack.pop();
+            } else {
+                stack.push(part);
+            }
+        }
+        return stack.join("/");
+    }
 }
 
 /** Simple path filters which filter file types. */
diff --git a/src/data-index/resolver.ts b/src/data-index/resolver.ts
index 5a4070990..3e25eb172 100644
--- a/src/data-index/resolver.ts
+++ b/src/data-index/resolver.ts
@@ -22,14 +22,18 @@ export function matchingSourcePaths(
         case "csv":
             return Result.success(new Set<string>([index.prefix.resolveRelative(source.path, originFile)]));
         case "folder":
+            // Resolve relative/absolute paths: paths starting with "/" are absolute (from vault root),
+            // paths containing ".." or starting with "./" are relative to the origin file.
+            let resolvedFolder = index.prefix.resolveRelative(source.folder, originFile);
+
             // Prefer loading from the folder at the given path.
-            if (index.prefix.nodeExists(source.folder))
-                return Result.success(index.prefix.get(source.folder, PathFilters.markdown));
+            if (index.prefix.nodeExists(resolvedFolder))
+                return Result.success(index.prefix.get(resolvedFolder, PathFilters.markdown));
 
             // But allow for loading individual files if they exist.
-            if (index.prefix.pathExists(source.folder)) return Result.success(new Set([source.folder]));
-            else if (index.prefix.pathExists(source.folder + ".md"))
-                return Result.success(new Set([source.folder + ".md"]));
+            if (index.prefix.pathExists(resolvedFolder)) return Result.success(new Set([resolvedFolder]));
+            else if (index.prefix.pathExists(resolvedFolder + ".md"))
+                return Result.success(new Set([resolvedFolder + ".md"]));
 
             // For backwards-compat, return an empty result even if the folder does not exist.
             return Result.success(new Set());