diff --git a/src/filewidgets/kurlnavigator.h b/src/filewidgets/kurlnavigator.h
--- a/src/filewidgets/kurlnavigator.h
+++ b/src/filewidgets/kurlnavigator.h
@@ -289,6 +289,13 @@
      */
     QWidget *dropWidget() const;
 
+    /**
+     * @return Returns true if the given path is within an archive like a TAR
+     * or ZIP file.
+     * @since 5.54
+     */
+    bool isInsideCompressedPath(const QUrl &path) const;
+
 #if !defined(KIOFILEWIDGETS_NO_DEPRECATED) && !defined(DOXYGEN_SHOULD_SKIP_THIS)
     /**
      * @return     The current URL of the location.
diff --git a/src/filewidgets/kurlnavigator.cpp b/src/filewidgets/kurlnavigator.cpp
--- a/src/filewidgets/kurlnavigator.cpp
+++ b/src/filewidgets/kurlnavigator.cpp
@@ -1041,20 +1041,7 @@
         // The URL represents a tar- or zip-file. Check whether
         // the URL is really part of the tar- or zip-file, otherwise
         // replace it by the local path again.
-        bool insideCompressedPath = d->isCompressedPath(url);
-        if (!insideCompressedPath) {
-            QUrl prevUrl = url;
-            QUrl parentUrl = KIO::upUrl(url);
-            while (parentUrl != prevUrl) {
-                if (d->isCompressedPath(parentUrl)) {
-                    insideCompressedPath = true;
-                    break;
-                }
-                prevUrl = parentUrl;
-                parentUrl = KIO::upUrl(parentUrl);
-            }
-        }
-        if (!insideCompressedPath) {
+        if (!isInsideCompressedPath(url)) {
             // drop the tar: or zip: protocol since we are not
             // inside the compressed path
             url.setScheme(QStringLiteral("file"));
@@ -1257,6 +1244,24 @@
     return d->m_dropWidget;
 }
 
+bool KUrlNavigator::isInsideCompressedPath(const QUrl& path) const
+{
+    bool insideCompressedPath = d->isCompressedPath(path);
+    if (!insideCompressedPath) {
+        QUrl prevUrl = path;
+        QUrl parentUrl = KIO::upUrl(path);
+        while (parentUrl != prevUrl) {
+            if (d->isCompressedPath(parentUrl)) {
+                insideCompressedPath = true;
+                break;
+            }
+            prevUrl = parentUrl;
+            parentUrl = KIO::upUrl(parentUrl);
+        }
+    }
+    return insideCompressedPath;
+}
+
 #ifndef KIOFILEWIDGETS_NO_DEPRECATED
 const QUrl &KUrlNavigator::url() const
 {
diff --git a/src/filewidgets/kurlnavigatorbutton.cpp b/src/filewidgets/kurlnavigatorbutton.cpp
--- a/src/filewidgets/kurlnavigatorbutton.cpp
+++ b/src/filewidgets/kurlnavigatorbutton.cpp
@@ -29,6 +29,7 @@
 #include <klocalizedstring.h>
 #include <kstringhandler.h>
 
+#include <QDir>
 #include <QTimer>
 #include <QPainter>
 #include <QKeyEvent>
@@ -407,7 +408,20 @@
         return;
     }
 
-    const QUrl url = m_replaceButton ? KIO::upUrl(m_url) : m_url;
+    QUrl url = m_url;
+    if (m_replaceButton) {
+        url = KIO::upUrl(m_url);
+    } else {
+        auto kurlnavigator = qobject_cast<KUrlNavigator*>(parent());
+        if (kurlnavigator->isInsideCompressedPath(kurlnavigator->locationUrl())) {
+            // We are in an archive, check whether the subdir we have to list is part of the archive
+            // or is a parent directory.
+            QDir testDir(url.path());
+            if (testDir.exists()) {
+                url.setScheme(QStringLiteral("file"));
+            }
+        }
+    }
     m_subDirsJob = KIO::listDir(url, KIO::HideProgressInfo, false /*no hidden files*/);
     m_subDirs.clear(); // just to be ++safe