diff --git a/crates/project_panel/src/project_panel.rs b/crates/project_panel/src/project_panel.rs
index 0c3e39fa5c5aa29720e64a0fa65ec2b5ca1d87c9..406aff23c7e6fa554bcd32f071412472143db3ae 100644
--- a/crates/project_panel/src/project_panel.rs
+++ b/crates/project_panel/src/project_panel.rs
@@ -761,10 +761,7 @@ impl ProjectPanel {
                                     task.detach_and_notify_err(window, cx);
                                 }
                                 None => {
-                                    project_panel.state.edit_state = None;
-                                    project_panel
-                                        .update_visible_entries(None, false, false, window, cx);
-                                    cx.notify();
+                                    project_panel.discard_edit_state(window, cx);
                                 }
                             }
                         }
@@ -1935,26 +1932,32 @@ impl ProjectPanel {
         }))
     }
 
+    fn discard_edit_state(&mut self, window: &mut Window, cx: &mut Context<Self>) {
+        let previously_focused = self
+            .state
+            .edit_state
+            .take()
+            .and_then(|edit_state| edit_state.previously_focused)
+            .map(|entry| (entry.worktree_id, entry.entry_id));
+        self.marked_entries.clear();
+        cx.notify();
+        window.focus(&self.focus_handle, cx);
+        self.update_visible_entries(
+            previously_focused,
+            false,
+            previously_focused.is_some(),
+            window,
+            cx,
+        );
+    }
+
     fn cancel(&mut self, _: &menu::Cancel, window: &mut Window, cx: &mut Context<Self>) {
         if cx.stop_active_drag(window) {
             self.drag_target_entry.take();
             self.hover_expand_task.take();
             return;
         }
-
-        let previous_edit_state = self.state.edit_state.take();
-        self.update_visible_entries(None, false, false, window, cx);
-        self.marked_entries.clear();
-
-        if let Some(previously_focused) =
-            previous_edit_state.and_then(|edit_state| edit_state.previously_focused)
-        {
-            self.state.selection = Some(previously_focused);
-            self.autoscroll(cx);
-        }
-
-        window.focus(&self.focus_handle, cx);
-        cx.notify();
+        self.discard_edit_state(window, cx);
     }
 
     fn open_entry(
diff --git a/crates/project_panel/src/project_panel_tests.rs b/crates/project_panel/src/project_panel_tests.rs
index 5cc4d0b6a16ff9426888a3dbe494a919d4197e65..3501f952413aca096abeefbbc81bf14648f430de 100644
--- a/crates/project_panel/src/project_panel_tests.rs
+++ b/crates/project_panel/src/project_panel_tests.rs
@@ -875,7 +875,6 @@ async fn test_editing_files(cx: &mut gpui::TestAppContext) {
         });
         assert!(panel.confirm_edit(true, window, cx).is_none());
         panel.cancel(&menu::Cancel, window, cx);
-        panel.update_visible_entries(None, false, false, window, cx);
     });
     cx.run_until_parked();
     assert_eq!(
@@ -2325,7 +2324,6 @@ async fn test_create_duplicate_items(cx: &mut gpui::TestAppContext) {
             "Edit state should not be None after conflicting new directory name"
         );
         panel.cancel(&menu::Cancel, window, cx);
-        panel.update_visible_entries(None, false, false, window, cx);
     });
     cx.run_until_parked();
     assert_eq!(
@@ -2381,7 +2379,6 @@ async fn test_create_duplicate_items(cx: &mut gpui::TestAppContext) {
             "Edit state should not be None after conflicting new file name"
         );
         panel.cancel(&menu::Cancel, window, cx);
-        panel.update_visible_entries(None, false, false, window, cx);
     });
     cx.run_until_parked();
     assert_eq!(
@@ -2441,6 +2438,7 @@ async fn test_create_duplicate_items(cx: &mut gpui::TestAppContext) {
         );
         panel.cancel(&menu::Cancel, window, cx);
     });
+    cx.executor().run_until_parked();
     assert_eq!(
         visible_entries_as_strings(&panel, 0..10, cx),
         &[
@@ -2531,7 +2529,6 @@ async fn test_create_duplicate_items_and_check_history(cx: &mut gpui::TestAppCon
             "Edit state should not be None after conflicting new directory name"
         );
         panel.cancel(&menu::Cancel, window, cx);
-        panel.update_visible_entries(None, false, false, window, cx);
     });
     cx.run_until_parked();
     assert_eq!(
@@ -2587,7 +2584,6 @@ async fn test_create_duplicate_items_and_check_history(cx: &mut gpui::TestAppCon
             "Edit state should not be None after conflicting new file name"
         );
         panel.cancel(&menu::Cancel, window, cx);
-        panel.update_visible_entries(None, false, false, window, cx);
     });
     cx.run_until_parked();
     assert_eq!(
@@ -2647,6 +2643,7 @@ async fn test_create_duplicate_items_and_check_history(cx: &mut gpui::TestAppCon
         );
         panel.cancel(&menu::Cancel, window, cx);
     });
+    cx.executor().run_until_parked();
     assert_eq!(
         visible_entries_as_strings(&panel, 0..10, cx),
         &[
@@ -4005,6 +4002,7 @@ async fn test_multiple_marked_entries(cx: &mut gpui::TestAppContext) {
             this.cancel(&menu::Cancel, window, cx);
         })
     });
+    cx.executor().run_until_parked();
     assert_eq!(
         visible_entries_as_strings(&panel, 0..10, cx),
         &[
@@ -5326,7 +5324,6 @@ async fn test_selection_restored_when_creation_cancelled(cx: &mut gpui::TestAppC
 
     panel.update_in(cx, |panel, window, cx| {
         panel.cancel(&menu::Cancel, window, cx);
-        panel.update_visible_entries(None, false, false, window, cx);
     });
     cx.executor().run_until_parked();
     assert_eq!(
@@ -5337,6 +5334,33 @@ async fn test_selection_restored_when_creation_cancelled(cx: &mut gpui::TestAppC
             "    > test"
         ]
     );
+
+    panel.update_in(cx, |panel, window, cx| {
+        panel.new_directory(&NewDirectory, window, cx)
+    });
+    cx.executor().run_until_parked();
+    panel.update_in(cx, |panel, window, cx| {
+        assert!(panel.filename_editor.read(cx).is_focused(window));
+    });
+    assert_eq!(
+        visible_entries_as_strings(&panel, 0..10, cx),
+        &[
+            //
+            "v src",
+            "    > [EDITOR: '']  <== selected",
+            "    > test"
+        ]
+    );
+    workspace.update(cx, |_, window, _| window.blur()).unwrap();
+    cx.executor().run_until_parked();
+    assert_eq!(
+        visible_entries_as_strings(&panel, 0..10, cx),
+        &[
+            //
+            "v src  <== selected",
+            "    > test"
+        ]
+    );
 }
 
 #[gpui::test]