diff --git a/packages/ui/src/components/prompt-input/usePromptKeyDown.ts b/packages/ui/src/components/prompt-input/usePromptKeyDown.ts
index 18d1746e..ab979216 100644
--- a/packages/ui/src/components/prompt-input/usePromptKeyDown.ts
+++ b/packages/ui/src/components/prompt-input/usePromptKeyDown.ts
@@ -183,9 +183,25 @@ export function usePromptKeyDown(options: UsePromptKeyDownOptions) {
 
         if (isDeletingFromEnd || isDeletingFromStart || isSelected) {
           const currentAttachments = options.getAttachments()
-          const attachment = currentAttachments.find(
-            (a) => (a.source.type === "file" || a.source.type === "agent") && a.filename === name,
-          )
+          const attachment = currentAttachments.find((a) => {
+            if (a.source.type === "agent") {
+              return a.filename === name
+            }
+            if (a.source.type === "file") {
+              // Match either by filename (basename) or by path (for full paths like @docs/file.txt)
+              return (
+                a.filename === name ||
+                a.source.path === name ||
+                a.source.path.endsWith("/" + name) ||
+                a.source.path === name.replace(/\/$/, "")
+              )
+            }
+            if (a.source.type === "text") {
+              // For text attachments (path-only mentions), match by value
+              return a.source.value === name || a.source.value.endsWith("/" + name)
+            }
+            return false
+          })
 
           if (attachment) {
             e.preventDefault()
@@ -205,6 +221,14 @@ export function usePromptKeyDown(options: UsePromptKeyDownOptions) {
               textarea.setSelectionRange(mentionStart, mentionStart)
             }, 0)
 
+            // Check if there are any @ remaining in the text - if not, close the picker
+            if (!newText.includes("@") && options.isPickerOpen()) {
+              options.closePicker()
+              // Clear ignoredAtPositions since we deleted the entire @mention
+              // This ensures typing @ again will open the picker
+              options.setIgnoredAtPositions(new Set())
+            }
+
             return
           }
         }
diff --git a/packages/ui/src/components/prompt-input/usePromptPicker.ts b/packages/ui/src/components/prompt-input/usePromptPicker.ts
index 98e53bc6..6bd9957d 100644
--- a/packages/ui/src/components/prompt-input/usePromptPicker.ts
+++ b/packages/ui/src/components/prompt-input/usePromptPicker.ts
@@ -236,8 +236,7 @@ export function usePromptPicker(options: PromptPickerOptions): PromptPickerContr
         const mentionText = `@${folderMention}`
 
         if (action === "shiftEnter") {
-          // SHIFT+ENTER on directory: attach path as text only.
-          addPathOnlyAttachment(folderMention)
+          // SHIFT+ENTER on directory: keep @path in prompt (BACKSPACE works), remove @ when sending
           replaceMentionToken(mentionText, { trailingSpace: true })
         } else {
           // ENTER/click on directory: attach as a file part pointing at a file:// directory URL.
@@ -274,8 +273,7 @@ export function usePromptPicker(options: PromptPickerOptions): PromptPickerContr
         }
 
         if (action === "shiftEnter") {
-          // SHIFT+ENTER on file: attach path as text only.
-          addPathOnlyAttachment(normalizedPath)
+          // SHIFT+ENTER on file: keep @path in prompt (BACKSPACE works), remove @ when sending
           replaceMentionToken(`@${normalizedPath}`, { trailingSpace: true })
         } else {
           // ENTER/click on file: attach file (existing behavior).
@@ -316,6 +314,25 @@ export function usePromptPicker(options: PromptPickerOptions): PromptPickerContr
     const pos = atPosition()
     if (pickerMode() === "mention" && pos !== null) {
       setIgnoredAtPositions((prev) => new Set(prev).add(pos))
+
+      // Remove the partial @mention text from the textarea when ESC is pressed
+      const textarea = options.getTextarea()
+      if (textarea) {
+        const currentPrompt = options.prompt()
+        const cursorPos = textarea.selectionStart
+        // Remove text from @ position to cursor position
+        const before = currentPrompt.substring(0, pos)
+        const after = currentPrompt.substring(cursorPos)
+        options.setPrompt(before + after)
+
+        // Restore cursor position to where @ was
+        setTimeout(() => {
+          const nextTextarea = options.getTextarea()
+          if (nextTextarea) {
+            nextTextarea.setSelectionRange(pos, pos)
+          }
+        }, 0)
+      }
     }
     setShowPicker(false)
     setAtPosition(null)
diff --git a/packages/ui/src/components/unified-picker.tsx b/packages/ui/src/components/unified-picker.tsx
index 7284d145..8799dffa 100644
--- a/packages/ui/src/components/unified-picker.tsx
+++ b/packages/ui/src/components/unified-picker.tsx
@@ -268,6 +268,13 @@ const UnifiedPicker: Component<UnifiedPickerProps> = (props) => {
     const workspaceChanged = lastWorkspaceId !== props.workspaceId
     const queryChanged = lastQuery !== props.searchQuery
 
+    if (queryChanged) {
+      // Reset selectedIndex to 0 when query changes to avoid ghost state
+      // This ensures proper highlighting when navigating back to root or changing queries
+      setSelectedIndex(0)
+      resetScrollPosition()
+    }
+
     if (!isInitialized() || workspaceChanged || queryChanged) {
       setIsInitialized(true)
       lastWorkspaceId = props.workspaceId
diff --git a/packages/ui/src/lib/prompt-placeholders.ts b/packages/ui/src/lib/prompt-placeholders.ts
index 1d8ee1eb..594c6b4a 100644
--- a/packages/ui/src/lib/prompt-placeholders.ts
+++ b/packages/ui/src/lib/prompt-placeholders.ts
@@ -1,12 +1,34 @@
 import type { Attachment } from "../types/attachment"
 
 export function resolvePastedPlaceholders(prompt: string, attachments: Attachment[] = []): string {
-  if (!prompt || !prompt.includes("[pasted #")) {
+  if (!prompt) {
     return prompt
   }
 
+  // First, strip @ from file/directory paths that don't have file attachments
+  // This handles SHIFT+ENTER case where @path should become path
+  const fileAttachments = new Set(
+    attachments
+      .filter((a) => a.source.type === "file" && "path" in a.source)
+      .map((a) => (a.source as { path: string }).path),
+  )
+
+  let result = prompt.replace(/@([^\s@]+)/g, (match, path) => {
+    // If this path has a file attachment, keep the @ (attachment is sent separately)
+    if (fileAttachments.has(path) || fileAttachments.has(path.replace(/\/$/, ""))) {
+      return match
+    }
+    // Otherwise (SHIFT+ENTER case), strip the @
+    return path
+  })
+
+  // Then, resolve [pasted #N] placeholders
+  if (!result.includes("[pasted #")) {
+    return result
+  }
+
   if (!attachments || attachments.length === 0) {
-    return prompt
+    return result
   }
 
   const lookup = new Map<string, string>()
@@ -26,10 +48,10 @@ export function resolvePastedPlaceholders(prompt: string, attachments: Attachmen
   }
 
   if (lookup.size === 0) {
-    return prompt
+    return result
   }
 
-  return prompt.replace(/\[pasted #(\d+)\]/g, (fullMatch) => {
+  return result.replace(/\[pasted #(\d+)\]/g, (fullMatch) => {
     const replacement = lookup.get(fullMatch)
     return typeof replacement === "string" ? replacement : fullMatch
   })