diff --git a/assets/settings/default.json b/assets/settings/default.json
index b2a7fce83af3145c22b1e71e4c830a4b8ec94596..a5c42bba38d6b6e2f5e995c6afee0c8fd561538c 100644
--- a/assets/settings/default.json
+++ b/assets/settings/default.json
@@ -372,6 +372,8 @@
     "default_width": 240,
     // Where to dock the project panel. Can be 'left' or 'right'.
     "dock": "left",
+    // Spacing between worktree entries in the project panel. Can be 'comfortable' or 'standard'.
+    "entry_spacing": "comfortable",
     // Whether to show file icons in the project panel.
     "file_icons": true,
     // Whether to show folder icons or chevrons for directories in the project panel.
diff --git a/crates/project_panel/src/project_panel.rs b/crates/project_panel/src/project_panel.rs
index 886ac953794b4fcfe2e004c107a46c784f563db7..1eccfc9e1b409e00118bc6efc3701e8957164bcb 100644
--- a/crates/project_panel/src/project_panel.rs
+++ b/crates/project_panel/src/project_panel.rs
@@ -54,8 +54,8 @@ use std::{
 use theme::ThemeSettings;
 use ui::{
     prelude::*, v_flex, ContextMenu, DecoratedIcon, Icon, IconDecoration, IconDecorationKind,
-    IndentGuideColors, IndentGuideLayout, KeyBinding, Label, ListItem, Scrollbar, ScrollbarState,
-    Tooltip,
+    IndentGuideColors, IndentGuideLayout, KeyBinding, Label, ListItem, ListItemSpacing, Scrollbar,
+    ScrollbarState, Tooltip,
 };
 use util::{maybe, paths::compare_paths, ResultExt, TakeUntilExt, TryFutureExt};
 use workspace::{
@@ -3447,6 +3447,12 @@ impl ProjectPanel {
                 ListItem::new(entry_id.to_proto() as usize)
                     .indent_level(depth)
                     .indent_step_size(px(settings.indent_size))
+                    .spacing(match settings.entry_spacing {
+                        project_panel_settings::EntrySpacing::Comfortable => ListItemSpacing::Dense,
+                        project_panel_settings::EntrySpacing::Standard => {
+                            ListItemSpacing::ExtraDense
+                        }
+                    })
                     .selectable(false)
                     .when_some(canonical_path, |this, path| {
                         this.end_slot::<AnyElement>(
diff --git a/crates/project_panel/src/project_panel_settings.rs b/crates/project_panel/src/project_panel_settings.rs
index 92ea7cea2d52edf311d7a987002e37c4f1065999..bf16a9688fe5729af8e4b42507fcf385cb91f08b 100644
--- a/crates/project_panel/src/project_panel_settings.rs
+++ b/crates/project_panel/src/project_panel_settings.rs
@@ -18,11 +18,22 @@ pub enum ShowIndentGuides {
     Never,
 }
 
+#[derive(Copy, Clone, Debug, Default, Serialize, Deserialize, JsonSchema, PartialEq, Eq)]
+#[serde(rename_all = "snake_case")]
+pub enum EntrySpacing {
+    /// Comfortable spacing of entries.
+    #[default]
+    Comfortable,
+    /// The standard spacing of entries.
+    Standard,
+}
+
 #[derive(Deserialize, Debug, Clone, Copy, PartialEq)]
 pub struct ProjectPanelSettings {
     pub button: bool,
     pub default_width: Pixels,
     pub dock: ProjectPanelDockPosition,
+    pub entry_spacing: EntrySpacing,
     pub file_icons: bool,
     pub folder_icons: bool,
     pub git_status: bool,
@@ -90,6 +101,10 @@ pub struct ProjectPanelSettingsContent {
     ///
     /// Default: left
     pub dock: Option<ProjectPanelDockPosition>,
+    /// Spacing between worktree entries in the project panel.
+    ///
+    /// Default: comfortable
+    pub entry_spacing: Option<EntrySpacing>,
     /// Whether to show file icons in the project panel.
     ///
     /// Default: true
diff --git a/crates/ui/src/components/list/list_item.rs b/crates/ui/src/components/list/list_item.rs
index a33916380f0c3f53b521c2c7613f0ce050dc961c..e9fb9f9243289a581a33d4c79e344b443a06c359 100644
--- a/crates/ui/src/components/list/list_item.rs
+++ b/crates/ui/src/components/list/list_item.rs
@@ -11,6 +11,7 @@ use crate::{prelude::*, Disclosure};
 pub enum ListItemSpacing {
     #[default]
     Dense,
+    ExtraDense,
     Sparse,
 }
 
@@ -219,6 +220,7 @@ impl RenderOnce for ListItem {
                     .px(DynamicSpacing::Base06.rems(cx))
                     .map(|this| match self.spacing {
                         ListItemSpacing::Dense => this,
+                        ListItemSpacing::ExtraDense => this.py_neg_px(),
                         ListItemSpacing::Sparse => this.py_1(),
                     })
                     .when(self.inset && !self.disabled, |this| {
diff --git a/docs/src/configuring-zed.md b/docs/src/configuring-zed.md
index 25f0823fbd9ad54ee3deb5377274f6ebb23368dd..ede2717cb9545ae954492cf52f47d05df245e27d 100644
--- a/docs/src/configuring-zed.md
+++ b/docs/src/configuring-zed.md
@@ -2262,6 +2262,7 @@ Run the `theme selector: toggle` action in the command palette to see a current
     "button": true,
     "default_width": 240,
     "dock": "left",
+    "entry_spacing": "comfortable",
     "file_icons": true,
     "folder_icons": true,
     "git_status": true,
@@ -2303,6 +2304,30 @@ Run the `theme selector: toggle` action in the command palette to see a current
 }
 ```
 
+### Entry Spacing
+
+- Description: Spacing between worktree entries
+- Setting: `entry_spacing`
+- Default: `comfortable`
+
+**Options**
+
+1. Comfortable entry spacing
+
+```json
+{
+  "entry_spacing": "comfortable"
+}
+```
+
+2. Standard entry spacing
+
+```json
+{
+  "entry_spacing": "standard"
+}
+```
+
 ### Git Status
 
 - Description: Indicates newly created and updated files