diff --git a/packages/playwright/src/reporters/html.ts b/packages/playwright/src/reporters/html.ts
index 8cad4e0eb21b9..2879d4ddf5d4f 100644
--- a/packages/playwright/src/reporters/html.ts
+++ b/packages/playwright/src/reporters/html.ts
@@ -87,7 +87,7 @@ class HtmlReporter extends EmptyReporter {
     this._attachmentsBaseURL = attachmentsBaseURL;
     const reportedWarnings = new Set<string>();
     for (const project of this.config.projects) {
-      if (outputFolder.startsWith(project.outputDir) || project.outputDir.startsWith(outputFolder)) {
+      if (this._isSubdirectory(outputFolder, project.outputDir) || this._isSubdirectory(project.outputDir, outputFolder)) {
         const key = outputFolder + '|' + project.outputDir;
         if (reportedWarnings.has(key))
           continue;
@@ -113,6 +113,11 @@ class HtmlReporter extends EmptyReporter {
     };
   }
 
+  _isSubdirectory(parentDir: string, dir: string): boolean {
+    const relativePath = path.relative(parentDir, dir);
+    return !!relativePath && !relativePath.startsWith('..') && !path.isAbsolute(relativePath);
+  }
+
   override onError(error: TestError): void {
     this._topLevelErrors.push(error);
   }
diff --git a/tests/playwright-test/reporter-html.spec.ts b/tests/playwright-test/reporter-html.spec.ts
index 0f8505889e39a..beee86eebf79a 100644
--- a/tests/playwright-test/reporter-html.spec.ts
+++ b/tests/playwright-test/reporter-html.spec.ts
@@ -1094,6 +1094,26 @@ for (const useIntermediateMergeReport of [false] as const) {
       expect(output).toContain('html-report');
     });
 
+    test('it should only identify exact matches as clashing folders', async ({ runInlineTest, useIntermediateMergeReport }) => {
+      test.skip(useIntermediateMergeReport);
+      const result = await runInlineTest({
+        'playwright.config.ts': `
+          module.exports = {
+            reporter: [['html', { outputFolder: 'test-results-html' }]]
+          }
+        `,
+        'a.test.js': `
+          import { test, expect } from '@playwright/test';
+          test('passes', async ({}) => {
+          });
+        `,
+      });
+      expect(result.exitCode).toBe(0);
+      const output = result.output;
+      expect(output).not.toContain('Configuration Error');
+      expect(output).toContain('test-results-html');
+    });
+
     test.describe('report location', () => {
       test('with config should create report relative to config', async ({ runInlineTest, useIntermediateMergeReport }, testInfo) => {
         test.skip(useIntermediateMergeReport);