diff --git a/src/dolphinmainwindow.cpp b/src/dolphinmainwindow.cpp
--- a/src/dolphinmainwindow.cpp
+++ b/src/dolphinmainwindow.cpp
@@ -1220,6 +1220,8 @@
             this, &DolphinMainWindow::openNewTab);
     connect(foldersPanel, &FoldersPanel::errorMessage,
             this, &DolphinMainWindow::showErrorMessage);
+    connect(this, &DolphinMainWindow::settingsChanged,
+	        foldersPanel, &FoldersPanel::refreshFoldersPanel);
 
     // Setup "Terminal"
 #ifndef Q_OS_WIN
diff --git a/src/panels/folders/folderspanel.h b/src/panels/folders/folderspanel.h
--- a/src/panels/folders/folderspanel.h
+++ b/src/panels/folders/folderspanel.h
@@ -81,6 +81,9 @@
      */
     void startFadeInAnimation();
 
+public slots:
+    void refreshFoldersPanel();
+
 private:
     /**
      * Initializes the base URL of the tree and expands all
diff --git a/src/panels/folders/folderspanel.cpp b/src/panels/folders/folderspanel.cpp
--- a/src/panels/folders/folderspanel.cpp
+++ b/src/panels/folders/folderspanel.cpp
@@ -122,6 +122,14 @@
     return true;
 }
 
+void FoldersPanel::refreshFoldersPanel()
+{
+    if (m_controller) {
+        loadTree(url());
+    }
+}
+
+
 void FoldersPanel::showEvent(QShowEvent* event)
 {
     if (event->spontaneous()) {
@@ -172,7 +180,7 @@
         layout->addWidget(container);
     }
 
-    loadTree(url());
+    if (url().isValid()) loadTree(url());
     Panel::showEvent(event);
 }
 
@@ -304,8 +312,13 @@
 
     QUrl baseUrl;
     if (url.isLocalFile()) {
-        // Use the root directory as base for local URLs (#150941)
-        baseUrl = QUrl::fromLocalFile(QDir::rootPath());
+        const QUrl homeUrl(QUrl::fromLocalFile(GeneralSettings::homeUrl()));
+        if (GeneralSettings::limitFolderPanelToHome() && (homeUrl.isParentOf(url) || homeUrl == url)) {
+            baseUrl = homeUrl;
+        } else {
+            // Use the root directory as base for local URLs (#150941)
+            baseUrl = QUrl::fromLocalFile(QDir::rootPath());
+        }
     } else {
         // Clear the path for non-local URLs and use it as base
         baseUrl = url;
@@ -331,8 +344,8 @@
 void FoldersPanel::updateCurrentItem(int index)
 {
     KItemListSelectionManager* selectionManager = m_controller->selectionManager();
-    selectionManager->setCurrentItem(index);
     selectionManager->clearSelection();
+    selectionManager->setCurrentItem(index);
     selectionManager->setSelected(index);
 
     m_controller->view()->scrollToItem(index);
diff --git a/src/settings/dolphin_generalsettings.kcfg b/src/settings/dolphin_generalsettings.kcfg
--- a/src/settings/dolphin_generalsettings.kcfg
+++ b/src/settings/dolphin_generalsettings.kcfg
@@ -62,6 +62,10 @@
             <label>Rename inline</label>
             <default>true</default>
         </entry>
+        <entry name="LimitFolderPanelToHome" type="Bool">
+            <label>Limit folder panel to home directory if inside home</label>
+            <default>false</default>
+        </entry>
         <entry name="ShowSelectionToggle" type="Bool">
             <label>Show selection toggle</label>
             <default>true</default>
diff --git a/src/settings/general/behaviorsettingspage.h b/src/settings/general/behaviorsettingspage.h
--- a/src/settings/general/behaviorsettingspage.h
+++ b/src/settings/general/behaviorsettingspage.h
@@ -66,6 +66,7 @@
 
     QCheckBox* m_renameInline;
     QCheckBox* m_useTabForSplitViewSwitch;
+    QCheckBox* m_limitFolderPanelToHome;
 };
 
 #endif
diff --git a/src/settings/general/behaviorsettingspage.cpp b/src/settings/general/behaviorsettingspage.cpp
--- a/src/settings/general/behaviorsettingspage.cpp
+++ b/src/settings/general/behaviorsettingspage.cpp
@@ -42,7 +42,8 @@
     m_caseSensitiveSorting(0),
     m_caseInsensitiveSorting(0),
     m_renameInline(0),
-    m_useTabForSplitViewSwitch(0)
+    m_useTabForSplitViewSwitch(0),
+    m_limitFolderPanelToHome(0)
 {
     QVBoxLayout* topLayout = new QVBoxLayout(this);
 
@@ -82,12 +83,16 @@
     // 'Use tab for switching between right and left split'
     m_useTabForSplitViewSwitch = new QCheckBox(i18nc("option:check", "Use tab for switching between right and left split view"), this);
 
+    // 'Limit folder panel to home directory if inside home'
+    m_limitFolderPanelToHome = new QCheckBox(i18nc("option:check", "Limit folder panel to home directory if inside home"), this);
+
     topLayout->addWidget(viewPropsBox);
     topLayout->addWidget(sortingPropsBox);
     topLayout->addWidget(m_showToolTips);
     topLayout->addWidget(m_showSelectionToggle);
     topLayout->addWidget(m_renameInline);
     topLayout->addWidget(m_useTabForSplitViewSwitch);
+    topLayout->addWidget(m_limitFolderPanelToHome);
     topLayout->addStretch();
 
     loadSettings();
@@ -101,6 +106,7 @@
     connect(m_caseSensitiveSorting, &QRadioButton::toggled, this, &BehaviorSettingsPage::changed);
     connect(m_renameInline, &QCheckBox::toggled, this, &BehaviorSettingsPage::changed);
     connect(m_useTabForSplitViewSwitch, &QCheckBox::toggled, this, &BehaviorSettingsPage::changed);
+    connect(m_limitFolderPanelToHome, &QCheckBox::toggled, this, &BehaviorSettingsPage::changed);
 }
 
 BehaviorSettingsPage::~BehaviorSettingsPage()
@@ -119,6 +125,7 @@
     setSortingChoiceValue(settings);
     settings->setRenameInline(m_renameInline->isChecked());
     settings->setUseTabForSwitchingSplitView(m_useTabForSplitViewSwitch->isChecked());
+    settings->setLimitFolderPanelToHome(m_limitFolderPanelToHome->isChecked());
     settings->save();
 
     if (useGlobalViewProps) {
@@ -149,6 +156,7 @@
     m_showSelectionToggle->setChecked(GeneralSettings::showSelectionToggle());
     m_renameInline->setChecked(GeneralSettings::renameInline());
     m_useTabForSplitViewSwitch->setChecked(GeneralSettings::useTabForSwitchingSplitView());
+    m_limitFolderPanelToHome->setChecked(GeneralSettings::limitFolderPanelToHome());
 
     loadSortingChoiceSettings();
 }