diff --git a/Sources/ContentView.swift b/Sources/ContentView.swift
index 1d86234628e7..3bfdfb34ffef 100644
--- a/Sources/ContentView.swift
+++ b/Sources/ContentView.swift
@@ -633,6 +633,8 @@ final class FileDropOverlayView: NSView {
         }
     }
 
+    /// Commits the drop: routes to the active WKWebView, a terminal under the cursor,
+    /// or the folder-drop handler when no terminal is present (e.g. sidebar area).
     override func performDragOperation(_ sender: any NSDraggingInfo) -> Bool {
         let hasLocalDraggingSource = sender.draggingSource != nil
         let types = sender.draggingPasteboard.types
@@ -657,10 +659,24 @@ final class FileDropOverlayView: NSView {
         if let webView {
             return webView.performDragOperation(sender)
         }
-        guard let terminal else { return false }
+        guard let terminal else {
+            // No terminal under the drop point — delegate to the folder drop handler.
+            // In practice the only non-terminal, non-browser area visible to this overlay
+            // is the sidebar: this overlay is anchored to contentView.topAnchor, so the
+            // title-bar strip above it is never reachable, and all other areas are filled
+            // by terminal or browser panels. No title-bar / non-sidebar guard is needed.
+            let urls = sender.draggingPasteboard.readObjects(
+                forClasses: [NSURL.self],
+                options: [.urlReadingFileURLsOnly: true]
+            ) as? [URL] ?? []
+            return onDrop?(urls) ?? false
+        }
         return terminal.performDragOperation(sender)
     }
 
+    /// Updates the drag target and returns the proposed drag operation.
+    /// Returns `.copy` only when capture is enabled and the payload contains at least one
+    /// directory URL, so plain-file drops do not show a misleading copy cursor.
     private func updateDragTarget(_ sender: any NSDraggingInfo, phase: String) -> NSDragOperation {
         let loc = sender.draggingLocation
         let hasLocalDraggingSource = sender.draggingSource != nil
@@ -694,7 +710,21 @@ final class FileDropOverlayView: NSView {
             hasTerminalTarget: hasTerminalTarget
         )
 #endif
-        guard shouldCapture, hasTerminalTarget else { return [] }
+        guard shouldCapture else { return [] }
+        // Only advertise the copy affordance when the payload contains at least one
+        // plain directory URL. Filesystem packages (.app, .xcworkspace, etc.) have
+        // hasDirectoryPath==true but isPackage==true and must be excluded to keep
+        // the cursor consistent with performDragOperation/handleSidebarFolderDrop.
+        let urls = sender.draggingPasteboard.readObjects(
+            forClasses: [NSURL.self],
+            options: [.urlReadingFileURLsOnly: true]
+        ) as? [URL] ?? []
+        let hasFolder = hasTerminalTarget || urls.contains { url in
+            guard url.hasDirectoryPath else { return false }
+            guard let values = try? url.resourceValues(forKeys: [.isPackageKey]) else { return false }
+            return values.isPackage != true
+        }
+        guard hasFolder else { return [] }
         return .copy
     }
 
@@ -1363,9 +1393,12 @@ func installFileDropOverlay(on window: NSWindow, tabManager: TabManager) {
     let overlay = FileDropOverlayView(frame: contentView.frame)
     overlay.translatesAutoresizingMaskIntoConstraints = false
     overlay.onDrop = { [weak tabManager] urls in
-        MainActor.assumeIsolated {
-            guard let tabManager, let terminal = tabManager.selectedWorkspace?.focusedTerminalPanel else { return false }
-            return terminal.hostedView.handleDroppedURLs(urls)
+        guard let tabManager else { return false }
+        // Note: sidebarSelectionState.selection == .notifications is never set in
+        // production; all notification UI uses NSPopover via toggleNotificationsPopover.
+        // No sidebar page switch is needed after a successful drop.
+        return MainActor.assumeIsolated {
+            tabManager.handleSidebarFolderDrop(urls)
         }
     }
 
diff --git a/Sources/TabManager.swift b/Sources/TabManager.swift
index 6df6abaf3ab2..b5acc25a8341 100644
--- a/Sources/TabManager.swift
+++ b/Sources/TabManager.swift
@@ -1133,6 +1133,71 @@ class TabManager: ObservableObject {
         return newWorkspace
     }
 
+    /// Handles a folder drag-and-drop onto the sidebar or non-terminal window area.
+    ///
+    /// - If an existing workspace has the same working directory, selects it and adds a new
+    ///   terminal split. If the workspace contains only non-terminal panels (e.g. browser-only),
+    ///   the terminal split is anchored beside the existing panel rather than creating a new workspace.
+    /// - Otherwise, creates a new workspace rooted at the dropped folder.
+    ///
+    /// Only the first plain-directory URL is acted upon. Non-directory URLs and filesystem
+    /// packages (.app, .xcworkspace, .playground, etc.) are silently ignored.
+    @discardableResult
+    func handleSidebarFolderDrop(_ urls: [URL]) -> Bool {
+        let folderURLs = urls.filter { url in
+            // Accept only plain directories; exclude filesystem packages (.app, .xcworkspace,
+            // .playground, etc.) which report isDirectory=true but should be ignored like files.
+            guard let values = try? url.resourceValues(forKeys: [.isDirectoryKey, .isPackageKey])
+            else { return false }
+            return values.isDirectory == true && values.isPackage != true
+        }
+        let directories = FinderServicePathResolver.orderedUniqueDirectories(
+            from: folderURLs.filter { $0.isFileURL }
+        )
+        guard let path = directories.first else { return false }
+
+#if DEBUG
+        dlog("sidebar.folderDrop path=\(path) tabCount=\(tabs.count)")
+#endif
+
+        // Note: resolvingSymlinksInPath is intentionally not applied here.
+        // orderedUniqueDirectories already uses standardizedFileURL which resolves /tmp → /private/tmp
+        // on macOS. Adding resolvingSymlinksInPath to both sides would be equivalent but adds
+        // unnecessary cost; /tmp symlink matching already passes without it.
+        let existing = tabs.first { workspace in
+            var cd = workspace.currentDirectory.trimmingCharacters(in: .whitespacesAndNewlines)
+            while cd.count > 1 && cd.hasSuffix("/") { cd.removeLast() }
+            return cd == path
+        }
+
+        if let existing {
+            selectedTabId = existing.id
+            // Prefer a focused or existing TerminalPanel as the split source.
+            // If the workspace has only non-terminal panels (e.g. browser-only), use any panel
+            // so a new terminal appears as a split beside it rather than creating a new workspace.
+            let panelId = existing.focusedPanelId
+                ?? existing.panels.values.compactMap { $0 as? TerminalPanel }.first?.id
+                ?? existing.panels.values.first?.id
+            if let panelId {
+                let newPanel = existing.newTerminalSplit(from: panelId, orientation: .horizontal)
+#if DEBUG
+                if newPanel == nil {
+                    dlog("sidebar.folderDrop.splitFailed panelId=\(panelId.uuidString.prefix(5))")
+                }
+#endif
+            }
+#if DEBUG
+            dlog("sidebar.folderDrop.existing workspaceId=\(existing.id.uuidString.prefix(5))")
+#endif
+        } else {
+            addWorkspace(workingDirectory: path, select: true)
+#if DEBUG
+            dlog("sidebar.folderDrop.new path=\(path)")
+#endif
+        }
+        return true
+    }
+
     @MainActor
     private func sendWelcomeWhenReady(to workspace: Workspace) {
         if let terminalPanel = workspace.focusedTerminalPanel,
diff --git a/Sources/Workspace.swift b/Sources/Workspace.swift
index 4557f122e537..b0aa31c1fa08 100644
--- a/Sources/Workspace.swift
+++ b/Sources/Workspace.swift
@@ -6610,11 +6610,26 @@ final class Workspace: Identifiable, ObservableObject {
         // Suppress the old view's becomeFirstResponder side-effects during SwiftUI reparenting.
         // Without this, reparenting triggers onFocus + ghostty_surface_set_focus on the old view,
         // stealing focus from the new panel and creating model/surface divergence.
+        let browserSourcePanel = panels[panelId] as? BrowserPanel
         if focus {
             previousHostedView?.suppressReparentFocus()
-            focusPanel(newPanel.id, previousHostedView: previousHostedView)
-            DispatchQueue.main.asyncAfter(deadline: .now() + 0.05) {
-                previousHostedView?.clearSuppressReparentFocus()
+            if let browserSourcePanel {
+                // When the source is a BrowserPanel, the WKWebView portal still covers the full
+                // workspace rect until SwiftUI layout shrinks it. Focusing the terminal directly
+                // causes the first click to be swallowed by the stale portal geometry.
+                // Focusing the browser first lets the portal settle, then we hand off to the
+                // terminal on the next runloop — mirroring the user clicking browser → terminal.
+                focusPanel(browserSourcePanel.id, previousHostedView: previousHostedView)
+                DispatchQueue.main.async { [weak self] in
+                    guard let self else { return }
+                    self.focusPanel(newPanel.id, previousHostedView: nil)
+                    previousHostedView?.clearSuppressReparentFocus()
+                }
+            } else {
+                focusPanel(newPanel.id, previousHostedView: previousHostedView)
+                DispatchQueue.main.asyncAfter(deadline: .now() + 0.05) {
+                    previousHostedView?.clearSuppressReparentFocus()
+                }
             }
         } else {
             preserveFocusAfterNonFocusSplit(