diff --git a/src/core/webview/ClineProvider.ts b/src/core/webview/ClineProvider.ts
index ec1781d79fa7..7375b319aaf3 100644
--- a/src/core/webview/ClineProvider.ts
+++ b/src/core/webview/ClineProvider.ts
@@ -1614,6 +1614,15 @@ export class ClineProvider
 		await this.postStateToWebview()
 	}
 
+	async handleWorkspaceFoldersChanged() {
+		// Update the current workspace path when folders change
+		this.currentWorkspacePath = getWorkspacePath()
+		// Notify the webview about the state change
+		await this.postStateToWebview()
+		// Log the workspace change for debugging
+		this.log("Workspace folders changed - updated workspace path and notified webview")
+	}
+
 	async postStateToWebview() {
 		const state = await this.getStateToPostToWebview()
 		this.postMessageToWebview({ type: "state", state })
diff --git a/src/extension.ts b/src/extension.ts
index 6281f5d447ea..1f1452dc54fa 100644
--- a/src/extension.ts
+++ b/src/extension.ts
@@ -101,27 +101,68 @@ export async function activate(context: vscode.ExtensionContext) {
 	const contextProxy = await ContextProxy.getInstance(context)
 
 	// Initialize code index managers for all workspace folders.
-	const codeIndexManagers: CodeIndexManager[] = []
+	const codeIndexManagers: Map<string, CodeIndexManager> = new Map()
 
+	// Helper function to initialize a CodeIndexManager for a folder
+	async function initializeCodeIndexManagerForFolder(folder: vscode.WorkspaceFolder): Promise<void> {
+		const manager = CodeIndexManager.getInstance(context, folder.uri.fsPath)
+
+		if (manager) {
+			codeIndexManagers.set(folder.uri.fsPath, manager)
+
+			try {
+				await manager.initialize(contextProxy)
+			} catch (error) {
+				outputChannel.appendLine(
+					`[CodeIndexManager] Error during background CodeIndexManager configuration/indexing for ${folder.uri.fsPath}: ${error.message || error}`,
+				)
+			}
+
+			context.subscriptions.push(manager)
+		}
+	}
+
+	// Initialize managers for existing workspace folders
 	if (vscode.workspace.workspaceFolders) {
 		for (const folder of vscode.workspace.workspaceFolders) {
-			const manager = CodeIndexManager.getInstance(context, folder.uri.fsPath)
-
-			if (manager) {
-				codeIndexManagers.push(manager)
+			await initializeCodeIndexManagerForFolder(folder)
+		}
+	}
 
-				try {
-					await manager.initialize(contextProxy)
-				} catch (error) {
+	// Listen for workspace folder changes
+	context.subscriptions.push(
+		vscode.workspace.onDidChangeWorkspaceFolders(async (event) => {
+			// Handle removed folders
+			for (const removedFolder of event.removed) {
+				const manager = codeIndexManagers.get(removedFolder.uri.fsPath)
+				if (manager) {
 					outputChannel.appendLine(
-						`[CodeIndexManager] Error during background CodeIndexManager configuration/indexing for ${folder.uri.fsPath}: ${error.message || error}`,
+						`[CodeIndexManager] Removing CodeIndexManager for removed folder: ${removedFolder.uri.fsPath}`,
 					)
+					// Dispose the manager
+					manager.dispose()
+					// Remove from our map
+					codeIndexManagers.delete(removedFolder.uri.fsPath)
+					// Remove from context subscriptions
+					const index = context.subscriptions.indexOf(manager)
+					if (index > -1) {
+						context.subscriptions.splice(index, 1)
+					}
 				}
+			}
 
-				context.subscriptions.push(manager)
+			// Handle added folders
+			for (const addedFolder of event.added) {
+				outputChannel.appendLine(
+					`[CodeIndexManager] Adding CodeIndexManager for new folder: ${addedFolder.uri.fsPath}`,
+				)
+				await initializeCodeIndexManagerForFolder(addedFolder)
 			}
-		}
-	}
+
+			// Notify the provider about workspace changes
+			provider.handleWorkspaceFoldersChanged()
+		}),
+	)
 
 	// Initialize the provider *before* the Roo Code Cloud service.
 	const provider = new ClineProvider(context, outputChannel, "sidebar", contextProxy, mdmService)