diff --git a/apps/oxfmt/src/cli/walk.rs b/apps/oxfmt/src/cli/walk.rs
index 9dc91994955b6..e12a2cced823d 100644
--- a/apps/oxfmt/src/cli/walk.rs
+++ b/apps/oxfmt/src/cli/walk.rs
@@ -5,7 +5,7 @@ use std::{
 
 use ignore::gitignore::{Gitignore, GitignoreBuilder};
 
-use crate::core::FormatFileStrategy;
+use crate::core::{FormatFileStrategy, utils::normalize_relative_path};
 
 pub struct Walk {
     inner: ignore::WalkParallel,
@@ -232,6 +232,11 @@ impl Walk {
 fn is_ignored(matchers: &[Gitignore], path: &Path, is_dir: bool, check_ancestors: bool) -> bool {
     for matcher in matchers {
         let matched = if check_ancestors {
+            // `matched_path_or_any_parents()` panics if path is not under matcher's root.
+            // Skip this matcher if the path is outside its scope.
+            if !path.starts_with(matcher.path()) {
+                continue;
+            }
             matcher.matched_path_or_any_parents(path, is_dir)
         } else {
             matcher.matched(path, is_dir)
@@ -248,7 +253,7 @@ fn load_ignore_paths(cwd: &Path, ignore_paths: &[PathBuf]) -> Result<Vec<PathBuf
     if !ignore_paths.is_empty() {
         let mut result = Vec::with_capacity(ignore_paths.len());
         for path in ignore_paths {
-            let path = if path.is_absolute() { path.clone() } else { cwd.join(path) };
+            let path = normalize_relative_path(cwd, path);
             if !path.exists() {
                 return Err(format!("{}: File not found", path.display()));
             }
diff --git a/apps/oxfmt/src/core/config.rs b/apps/oxfmt/src/core/config.rs
index 9d2ab8be160f4..0ea97b3cb0066 100644
--- a/apps/oxfmt/src/core/config.rs
+++ b/apps/oxfmt/src/core/config.rs
@@ -17,11 +17,7 @@ use super::{FormatFileStrategy, utils};
 pub fn resolve_oxfmtrc_path(cwd: &Path, config_path: Option<&Path>) -> Option<PathBuf> {
     // If `--config` is explicitly specified, use that path
     if let Some(config_path) = config_path {
-        return Some(if config_path.is_absolute() {
-            config_path.to_path_buf()
-        } else {
-            cwd.join(config_path)
-        });
+        return Some(utils::normalize_relative_path(cwd, config_path));
     }
 
     // If `--config` is not specified, search the nearest config file from cwd upwards
diff --git a/apps/oxfmt/src/core/utils.rs b/apps/oxfmt/src/core/utils.rs
index 464eeb13a3afb..8fc04d0f2bcd4 100644
--- a/apps/oxfmt/src/core/utils.rs
+++ b/apps/oxfmt/src/core/utils.rs
@@ -1,4 +1,8 @@
-use std::{fs, io, io::Write, path::Path};
+use std::{
+    fs, io,
+    io::Write,
+    path::{Path, PathBuf},
+};
 
 /// To debug `oxc_formatter`:
 /// `OXC_LOG=oxc_formatter oxfmt`
@@ -52,3 +56,13 @@ pub fn print_and_flush(writer: &mut dyn Write, message: &str) {
     writer.write_all(message.as_bytes()).or_else(check_for_writer_error).unwrap();
     writer.flush().unwrap();
 }
+
+/// Normalize a relative path by stripping `./` prefix and joining with `cwd`.
+/// This ensures consistent path format and avoids issues with relative paths.
+pub fn normalize_relative_path(cwd: &Path, path: &Path) -> PathBuf {
+    if path.is_absolute() {
+        return path.to_path_buf();
+    }
+
+    if let Ok(stripped) = path.strip_prefix("./") { cwd.join(stripped) } else { cwd.join(path) }
+}
diff --git a/apps/oxfmt/test/cli/config_in_subdirectory/__snapshots__/config_in_subdirectory.test.ts.snap b/apps/oxfmt/test/cli/config_in_subdirectory/__snapshots__/config_in_subdirectory.test.ts.snap
new file mode 100644
index 0000000000000..ade7d57e8e860
--- /dev/null
+++ b/apps/oxfmt/test/cli/config_in_subdirectory/__snapshots__/config_in_subdirectory.test.ts.snap
@@ -0,0 +1,31 @@
+// Vitest Snapshot v1, https://vitest.dev/guide/snapshot.html
+
+exports[`config_in_subdirectory > should not panic when config with \`ignorePatterns\` is in subdirectory 1`] = `
+"--------------------
+arguments: --check -c ./subdir/.oxfmtrc.json ./subdir
+working directory: config_in_subdirectory/fixtures
+exit code: 0
+--- STDOUT ---------
+Checking formatting...
+
+All matched files use the correct format.
+Finished in <variable>ms on 1 files using 1 threads.
+--- STDERR ---------
+
+--------------------"
+`;
+
+exports[`config_in_subdirectory > should not panic when target path is absolute and outside matcher root 1`] = `
+"--------------------
+arguments: --check -c ./subdir/.oxfmtrc.json <cwd>/outside/file.js
+working directory: config_in_subdirectory/fixtures
+exit code: 0
+--- STDOUT ---------
+Checking formatting...
+
+All matched files use the correct format.
+Finished in <variable>ms on 1 files using 1 threads.
+--- STDERR ---------
+
+--------------------"
+`;
diff --git a/apps/oxfmt/test/cli/config_in_subdirectory/config_in_subdirectory.test.ts b/apps/oxfmt/test/cli/config_in_subdirectory/config_in_subdirectory.test.ts
new file mode 100644
index 0000000000000..9ed18b467e3da
--- /dev/null
+++ b/apps/oxfmt/test/cli/config_in_subdirectory/config_in_subdirectory.test.ts
@@ -0,0 +1,30 @@
+import { describe, expect, it } from "vitest";
+import { join } from "node:path";
+import { runAndSnapshot } from "../utils";
+
+const fixturesDir = join(import.meta.dirname, "fixtures");
+
+describe("config_in_subdirectory", () => {
+  it("should not panic when config with `ignorePatterns` is in subdirectory", async () => {
+    // Simulates running from project root:
+    // ```
+    // oxfmt -c ./subdir/.oxfmtrc.json ./subdir
+    // ```
+    // Where the config has `ignorePatterns`, causing matcher root to be `./subdir/`
+    const snapshot = await runAndSnapshot(fixturesDir, [
+      ["--check", "-c", "./subdir/.oxfmtrc.json", "./subdir"],
+    ]);
+    expect(snapshot).toMatchSnapshot();
+  });
+
+  it("should not panic when target path is absolute and outside matcher root", async () => {
+    // fixtures/
+    //   subdir/           <- matcher root (has `.oxfmtrc.json` with `ignorePatterns`)
+    //   outside/file.js   <- target path (outside of matcher root)
+    const snapshot = await runAndSnapshot(fixturesDir, [
+      // Target path is outside of matcher root - should not panic
+      ["--check", "-c", "./subdir/.oxfmtrc.json", join(fixturesDir, "outside", "file.js")],
+    ]);
+    expect(snapshot).toMatchSnapshot();
+  });
+});
diff --git a/apps/oxfmt/test/cli/config_in_subdirectory/fixtures/outside/file.js b/apps/oxfmt/test/cli/config_in_subdirectory/fixtures/outside/file.js
new file mode 100644
index 0000000000000..943c458c79e20
--- /dev/null
+++ b/apps/oxfmt/test/cli/config_in_subdirectory/fixtures/outside/file.js
@@ -0,0 +1 @@
+const x = 1;
diff --git a/apps/oxfmt/test/cli/config_in_subdirectory/fixtures/subdir/.oxfmtrc.json b/apps/oxfmt/test/cli/config_in_subdirectory/fixtures/subdir/.oxfmtrc.json
new file mode 100644
index 0000000000000..875cb792f3ef7
--- /dev/null
+++ b/apps/oxfmt/test/cli/config_in_subdirectory/fixtures/subdir/.oxfmtrc.json
@@ -0,0 +1,3 @@
+{
+  "ignorePatterns": ["ignored/"]
+}
diff --git a/apps/oxfmt/test/cli/config_in_subdirectory/fixtures/subdir/ignored/broken.js b/apps/oxfmt/test/cli/config_in_subdirectory/fixtures/subdir/ignored/broken.js
new file mode 100644
index 0000000000000..9071bf5852ca1
--- /dev/null
+++ b/apps/oxfmt/test/cli/config_in_subdirectory/fixtures/subdir/ignored/broken.js
@@ -0,0 +1 @@
+class X {