diff --git a/src/commons/editor/EditorContainer.tsx b/src/commons/editor/EditorContainer.tsx
index 8938864f19..c59b8f06e0 100644
--- a/src/commons/editor/EditorContainer.tsx
+++ b/src/commons/editor/EditorContainer.tsx
@@ -13,6 +13,7 @@ import Editor, { EditorProps, EditorTabStateProps } from './Editor';
 import EditorTabContainer from './tabs/EditorTabContainer';
 
 type OwnProps = {
+  baseFilePath?: string;
   isFolderModeEnabled: boolean;
   activeEditorTabIndex: number | null;
   setActiveEditorTabIndex: (activeEditorTabIndex: number | null) => void;
@@ -60,6 +61,7 @@ const createSourcecastEditorTab =
 
 const EditorContainer: React.FC<EditorContainerProps> = (props: EditorContainerProps) => {
   const {
+    baseFilePath,
     isFolderModeEnabled,
     activeEditorTabIndex,
     setActiveEditorTabIndex,
@@ -87,6 +89,7 @@ const EditorContainer: React.FC<EditorContainerProps> = (props: EditorContainerP
     <div className="editor-container">
       {isFolderModeEnabled && (
         <EditorTabContainer
+          baseFilePath={baseFilePath ?? ''}
           activeEditorTabIndex={activeEditorTabIndex}
           filePaths={filePaths}
           setActiveEditorTabIndex={setActiveEditorTabIndex}
diff --git a/src/commons/editor/__tests__/tabs/utils.ts b/src/commons/editor/__tests__/tabs/utils.ts
new file mode 100644
index 0000000000..bc69c89fb9
--- /dev/null
+++ b/src/commons/editor/__tests__/tabs/utils.ts
@@ -0,0 +1,15 @@
+import { getShortestUniqueFilePaths } from '../../tabs/utils';
+
+describe('getShortestUniqueFilePaths', () => {
+  it('returns the shortest unique file paths', () => {
+    const filePaths = ['/dir/dir1/a.js', '/dir/dir2/a.js', '/dir/dir1/b.js'];
+    const shortenedFilePaths = getShortestUniqueFilePaths(filePaths);
+    expect(shortenedFilePaths).toEqual(['/dir1/a.js', '/dir2/a.js', '/b.js']);
+  });
+
+  it('works even when the number of path segments in a file path is less than the number of iterations', () => {
+    const filePaths = ['/a.js', '/dir/dir2/a.js'];
+    const shortenedFilePaths = getShortestUniqueFilePaths(filePaths);
+    expect(shortenedFilePaths).toEqual(['/a.js', '/dir2/a.js']);
+  });
+});
diff --git a/src/commons/editor/tabs/EditorTabContainer.tsx b/src/commons/editor/tabs/EditorTabContainer.tsx
index 52bc06cd58..b3c2fbe2f1 100644
--- a/src/commons/editor/tabs/EditorTabContainer.tsx
+++ b/src/commons/editor/tabs/EditorTabContainer.tsx
@@ -1,8 +1,10 @@
 import React from 'react';
 
 import EditorTab from './EditorTab';
+import { getShortestUniqueFilePaths } from './utils';
 
 export type EditorTabContainerProps = {
+  baseFilePath: string;
   filePaths: string[];
   activeEditorTabIndex: number;
   setActiveEditorTabIndex: (activeEditorTabIndex: number | null) => void;
@@ -10,8 +12,13 @@ export type EditorTabContainerProps = {
 };
 
 const EditorTabContainer: React.FC<EditorTabContainerProps> = (props: EditorTabContainerProps) => {
-  const { filePaths, activeEditorTabIndex, setActiveEditorTabIndex, removeEditorTabByIndex } =
-    props;
+  const {
+    baseFilePath,
+    filePaths,
+    activeEditorTabIndex,
+    setActiveEditorTabIndex,
+    removeEditorTabByIndex
+  } = props;
 
   const handleHorizontalScroll = (e: React.WheelEvent<HTMLDivElement>) => {
     e.currentTarget.scrollTo({
@@ -19,9 +26,12 @@ const EditorTabContainer: React.FC<EditorTabContainerProps> = (props: EditorTabC
     });
   };
 
+  const relativeFilePaths = filePaths.map(filePath => filePath.replace(baseFilePath, ''));
+  const shortenedFilePaths = getShortestUniqueFilePaths(relativeFilePaths);
+
   return (
     <div className="editor-tab-container" onWheel={handleHorizontalScroll}>
-      {filePaths.map((filePath, index) => (
+      {shortenedFilePaths.map((filePath, index) => (
         <EditorTab
           key={index}
           filePath={filePath}
diff --git a/src/commons/editor/tabs/utils.ts b/src/commons/editor/tabs/utils.ts
new file mode 100644
index 0000000000..5be6aa6669
--- /dev/null
+++ b/src/commons/editor/tabs/utils.ts
@@ -0,0 +1,78 @@
+/**
+ * Returns the shortest file paths that is uniquely identifiable among
+ * all open editor tabs. This is similar to how most code editors available
+ * handle the displaying of file names.
+ *
+ * For example, if there are 3 open editor tabs where the file names are
+ * exactly the same, we would need to display more of the file path to be
+ * able to distinguish which editor tab corresponds to which file. Given
+ * the following absolute file paths:
+ * - /a.js
+ * - /dir1/a.js
+ * - /dir1/dir2/a.js
+ * The shortest unique file paths will be:
+ * - /a.js
+ * - /dir1/a.js
+ * - /dir2/a.js
+ *
+ * @param originalFilePaths The file paths to be shortened.
+ */
+export const getShortestUniqueFilePaths = (originalFilePaths: string[]): string[] => {
+  // Store the unique shortened file paths as a mapping from the original file paths
+  // to the shortened file paths. This is necessary because the output of this function
+  // must preserve the original ordering of file paths.
+  const originalToUniqueShortenedFilePaths: Record<string, string> = {};
+  // Split each original file path into path segments and store the mapping from file
+  // path to path segments for O(1) lookup. Since we only deal with the BrowserFS file
+  // system, the path separator will always be '/'.
+  const filePathSegments: Record<string, string[]> = originalFilePaths.reduce(
+    (segments, filePath) => ({
+      ...segments,
+      // It is necessary to remove empty segments to deal with the very first '/' in
+      // file paths.
+      [filePath]: filePath.split('/').filter(segment => segment !== '')
+    }),
+    {}
+  );
+
+  for (
+    let numOfPathSegments = 1;
+    // Keep looping while some original file paths have yet to be shortened.
+    Object.keys(originalToUniqueShortenedFilePaths).length < originalFilePaths.length;
+    numOfPathSegments++
+  ) {
+    // Based on the number of path segments for the iteration, we construct the
+    // shortened file path. We then store the mapping from the shortened file path
+    // to any original file path which transforms into it.
+    const shortenedToOriginalFilePaths: Record<string, string[]> = Object.entries(
+      filePathSegments
+    ).reduce((filePaths, [originalFilePath, filePathSegments]) => {
+      // Note that if there are fewer path segments than the number being sliced,
+      // all of the path segments will be returned without error.
+      const shortenedFilePath = '/' + filePathSegments.slice(-numOfPathSegments).join('/');
+      return {
+        ...filePaths,
+        [shortenedFilePath]: (filePaths[shortenedFilePath] ?? []).concat(originalFilePath)
+      };
+    }, {});
+    // Each shortened file path that only has a single corresponding original file
+    // path is added to the unique shortened file paths record and their entry in
+    // the file path segments record is removed to prevent further processing.
+    Object.entries(shortenedToOriginalFilePaths).forEach(
+      ([shortenedFilePath, originalFilePaths]) => {
+        if (originalFilePaths.length > 1) {
+          return;
+        }
+
+        const originalFilePath = originalFilePaths[0];
+        originalToUniqueShortenedFilePaths[originalFilePath] = shortenedFilePath;
+        // Remove the file path's segments from the next iteration.
+        delete filePathSegments[originalFilePath];
+      }
+    );
+  }
+
+  // Finally, we retrieve the unique shortened file paths while preserving the ordering
+  // of file paths.
+  return originalFilePaths.map(filePath => originalToUniqueShortenedFilePaths[filePath]);
+};
diff --git a/src/pages/fileSystem/createInBrowserFileSystem.ts b/src/pages/fileSystem/createInBrowserFileSystem.ts
index 8ad27ee8a2..7d61360c99 100644
--- a/src/pages/fileSystem/createInBrowserFileSystem.ts
+++ b/src/pages/fileSystem/createInBrowserFileSystem.ts
@@ -3,13 +3,14 @@ import { ApiError } from 'browserfs/dist/node/core/api_error';
 import { Store } from 'redux';
 
 import { setInBrowserFileSystem } from '../../commons/fileSystem/FileSystemActions';
+import { BASE_PLAYGROUND_FILE_PATH } from '../playground/Playground';
 
 export const createInBrowserFileSystem = (store: Store) => {
   configure(
     {
       fs: 'MountableFileSystem',
       options: {
-        '/playground': {
+        [BASE_PLAYGROUND_FILE_PATH]: {
           fs: 'IndexedDB',
           options: {
             storeName: 'playground'
diff --git a/src/pages/playground/Playground.tsx b/src/pages/playground/Playground.tsx
index df6f6372f5..f142d3aac8 100644
--- a/src/pages/playground/Playground.tsx
+++ b/src/pages/playground/Playground.tsx
@@ -207,6 +207,8 @@ export async function handleHash(hash: string, props: PlaygroundProps) {
   }
 }
 
+export const BASE_PLAYGROUND_FILE_PATH = '/playground';
+
 const Playground: React.FC<PlaygroundProps> = ({ workspaceLocation = 'playground', ...props }) => {
   const { isSicpEditor } = props;
   const { isMobileBreakpoint } = useResponsive();
@@ -817,6 +819,7 @@ const Playground: React.FC<PlaygroundProps> = ({ workspaceLocation = 'playground
   const editorContainerProps: NormalEditorContainerProps = {
     ..._.pick(props, 'editorSessionId', 'isEditorAutorun'),
     editorVariant: 'normal',
+    baseFilePath: BASE_PLAYGROUND_FILE_PATH,
     isFolderModeEnabled,
     activeEditorTabIndex,
     setActiveEditorTabIndex,
@@ -888,7 +891,12 @@ const Playground: React.FC<PlaygroundProps> = ({ workspaceLocation = 'playground
           ? [
               {
                 label: 'Folder',
-                body: <FileSystemView workspaceLocation="playground" basePath="/playground" />,
+                body: (
+                  <FileSystemView
+                    workspaceLocation="playground"
+                    basePath={BASE_PLAYGROUND_FILE_PATH}
+                  />
+                ),
                 iconName: IconNames.FOLDER_CLOSE,
                 id: SideContentType.folder
               }