diff --git a/crates/fs/src/fs.rs b/crates/fs/src/fs.rs
index be9f3f4e0f..2cf633c021 100644
--- a/crates/fs/src/fs.rs
+++ b/crates/fs/src/fs.rs
@@ -720,7 +720,16 @@ impl Fs for RealFs {
         }
 
         // Check if path is a symlink and follow the target parent
-        if let Some(target) = self.read_link(&path).await.ok() {
+        if let Some(mut target) = self.read_link(&path).await.ok() {
+            // Check if symlink target is relative path, if so make it absolute
+            if target.is_relative() {
+                if let Some(parent) = path.parent() {
+                    target = parent.join(target);
+                    if let Ok(canonical) = self.canonicalize(&target).await {
+                        target = canonical;
+                    }
+                }
+            }
             watcher.add(&target).ok();
             if let Some(parent) = target.parent() {
                 watcher.add(parent).log_err();