diff --git a/apps/desktop/src/components/dnd/dnd-provider.tsx b/apps/desktop/src/components/dnd/dnd-provider.tsx
index 86d02c1e..9b4ec9c7 100644
--- a/apps/desktop/src/components/dnd/dnd-provider.tsx
+++ b/apps/desktop/src/components/dnd/dnd-provider.tsx
@@ -13,7 +13,10 @@ import { handleEditorDrop } from "./editor-drop-handler"
 import { EditorDropLine } from "./editor-drop-indicator"
 import { isPoint } from "./editor-drop-indicator.helpers"
 import { EditorDropOwnershipProvider } from "./editor-drop-ownership"
-import { ExplorerDragOverlay } from "./explorer-drag-overlay"
+import {
+	ExplorerDragOverlay,
+	getExplorerDragOverlayName,
+} from "./explorer-drag-overlay"
 import {
 	EMPTY_DRAGGED_EXPLORER_PATHS,
 	ExplorerDragPathsProvider,
@@ -61,7 +64,7 @@ function renderDragOverlay(source: DragOverlaySource) {
 	if (isFileEntryDragData(source.data) && source.data.name) {
 		return (
 			<ExplorerDragOverlay
-				name={source.data.name}
+				name={getExplorerDragOverlayName(source.data)}
 				isDirectory={Boolean(source.data.isDirectory)}
 			/>
 		)
diff --git a/apps/desktop/src/components/dnd/dnd-types.ts b/apps/desktop/src/components/dnd/dnd-types.ts
index 7b756cc9..58093a63 100644
--- a/apps/desktop/src/components/dnd/dnd-types.ts
+++ b/apps/desktop/src/components/dnd/dnd-types.ts
@@ -12,6 +12,7 @@ export type FileEntryDragData = {
 	path?: string
 	isDirectory?: boolean
 	name?: string
+	displayName?: string
 }
 
 export type EditorDragData = {
@@ -80,15 +81,15 @@ export function isFileEntryDragData(data: unknown): data is FileEntryDragData {
 	}
 
 	const hasKnownKey = "path" in data || "isDirectory" in data || "name" in data
-	if (!hasKnownKey) {
+	if (!hasKnownKey && !("displayName" in data)) {
 		return false
 	}
-
-	const { path, isDirectory, name } = data
+	const { path, isDirectory, name, displayName } = data
 	return (
 		(path === undefined || typeof path === "string") &&
 		(isDirectory === undefined || typeof isDirectory === "boolean") &&
-		(name === undefined || typeof name === "string")
+		(name === undefined || typeof name === "string") &&
+		(displayName === undefined || typeof displayName === "string")
 	)
 }
 
diff --git a/apps/desktop/src/components/dnd/explorer-drag-overlay.test.tsx b/apps/desktop/src/components/dnd/explorer-drag-overlay.test.tsx
new file mode 100644
index 00000000..6cdf6700
--- /dev/null
+++ b/apps/desktop/src/components/dnd/explorer-drag-overlay.test.tsx
@@ -0,0 +1,23 @@
+import { describe, expect, it } from "vitest"
+import { getExplorerDragOverlayName } from "./explorer-drag-overlay"
+
+describe("getExplorerDragOverlayName", () => {
+	it("prefers the display name when present", () => {
+		expect(
+			getExplorerDragOverlayName({
+				name: "note.md",
+				displayName: "note",
+				isDirectory: false,
+			}),
+		).toBe("note")
+	})
+
+	it("falls back to the source name when no display name is provided", () => {
+		expect(
+			getExplorerDragOverlayName({
+				name: "folder",
+				isDirectory: true,
+			}),
+		).toBe("folder")
+	})
+})
diff --git a/apps/desktop/src/components/dnd/explorer-drag-overlay.tsx b/apps/desktop/src/components/dnd/explorer-drag-overlay.tsx
index d4f5665d..04b52ec9 100644
--- a/apps/desktop/src/components/dnd/explorer-drag-overlay.tsx
+++ b/apps/desktop/src/components/dnd/explorer-drag-overlay.tsx
@@ -1,11 +1,16 @@
 import { cn } from "@mdit/ui/lib/utils"
 import { ChevronRight } from "lucide-react"
+import type { FileEntryDragData } from "./dnd-types"
 
 type ExplorerDragOverlayProps = {
 	name: string
 	isDirectory: boolean
 }
 
+export function getExplorerDragOverlayName(data: FileEntryDragData): string {
+	return data.displayName ?? data.name ?? ""
+}
+
 function getExplorerDragOverlayClassName(isDirectory: boolean) {
 	return cn(
 		"pointer-events-none flex min-w-0 max-w-80 items-center gap-1 rounded-sm bg-transparent px-0 py-0 text-sm text-accent-foreground/95 shadow-none ring-0 outline-none border-0",
diff --git a/apps/desktop/src/components/file-explorer/tree/file-tree-node.tsx b/apps/desktop/src/components/file-explorer/tree/file-tree-node.tsx
index 83f70a49..a32969ee 100644
--- a/apps/desktop/src/components/file-explorer/tree/file-tree-node.tsx
+++ b/apps/desktop/src/components/file-explorer/tree/file-tree-node.tsx
@@ -45,12 +45,12 @@ export function FileTreeNode({
 	}, [entry.isDirectory, entry.name])
 
 	const baseName = useMemo(() => {
-		if (entry.isDirectory || !extension) {
+		if (!extension) {
 			return entry.name
 		}
 
-		return entry.name.slice(0, entry.name.length - extension.length)
-	}, [entry.isDirectory, entry.name, extension])
+		return entry.name.slice(0, -extension.length)
+	}, [entry.name, extension])
 
 	const isMarkdown = useMemo(
 		() => !entry.isDirectory && extension.toLowerCase() === ".md",
diff --git a/apps/desktop/src/components/file-explorer/tree/use-tree-node-interactions.test.ts b/apps/desktop/src/components/file-explorer/tree/use-tree-node-interactions.test.ts
new file mode 100644
index 00000000..ab4e64a8
--- /dev/null
+++ b/apps/desktop/src/components/file-explorer/tree/use-tree-node-interactions.test.ts
@@ -0,0 +1,19 @@
+import { describe, expect, it } from "vitest"
+import { getExplorerDragData } from "./use-tree-node-interactions"
+
+describe("getExplorerDragData", () => {
+	it("includes an overlay display name without the file extension", () => {
+		expect(
+			getExplorerDragData({
+				path: "/notes/archive.tar.gz",
+				name: "archive.tar.gz",
+				isDirectory: false,
+			}),
+		).toEqual({
+			path: "/notes/archive.tar.gz",
+			name: "archive.tar.gz",
+			isDirectory: false,
+			displayName: "archive.tar",
+		})
+	})
+})
diff --git a/apps/desktop/src/components/file-explorer/tree/use-tree-node-interactions.ts b/apps/desktop/src/components/file-explorer/tree/use-tree-node-interactions.ts
index 61183455..c339fa58 100644
--- a/apps/desktop/src/components/file-explorer/tree/use-tree-node-interactions.ts
+++ b/apps/desktop/src/components/file-explorer/tree/use-tree-node-interactions.ts
@@ -1,8 +1,10 @@
 import { useDraggable } from "@dnd-kit/react"
 import type { FileTreeRenderNode } from "@mdit/file-tree"
 import { useCallback } from "react"
+import type { FileEntryDragData } from "@/components/dnd/dnd-types"
 import { useDraggedExplorerPaths } from "@/components/dnd/explorer-drag-state"
 import type { WorkspaceEntry } from "@/store"
+import { getExplorerEntryDisplayName } from "../utils/display-name"
 
 type UseTreeNodeInteractionsParams = {
 	node: FileTreeRenderNode<WorkspaceEntry>
@@ -13,6 +15,15 @@ type UseTreeNodeInteractionsParams = {
 	onEntryContextMenu: (entry: WorkspaceEntry) => void | Promise<void>
 }
 
+export function getExplorerDragData(entry: WorkspaceEntry): FileEntryDragData {
+	return {
+		path: entry.path,
+		isDirectory: entry.isDirectory,
+		name: entry.name,
+		displayName: getExplorerEntryDisplayName(entry.name, entry.isDirectory),
+	}
+}
+
 export function useTreeNodeInteractions({
 	node,
 	onEntryPrimaryAction,
@@ -27,11 +38,7 @@ export function useTreeNodeInteractions({
 
 	const { ref: draggableRef, isDragging: isSourceDragging } = useDraggable({
 		id: entry.path,
-		data: {
-			path: entry.path,
-			isDirectory: entry.isDirectory,
-			name: entry.name,
-		},
+		data: getExplorerDragData(entry),
 		disabled: isBusy,
 	})
 	const isDragging = isSourceDragging || draggedExplorerPaths.has(entry.path)
diff --git a/apps/desktop/src/components/file-explorer/utils/display-name.test.ts b/apps/desktop/src/components/file-explorer/utils/display-name.test.ts
new file mode 100644
index 00000000..1981c104
--- /dev/null
+++ b/apps/desktop/src/components/file-explorer/utils/display-name.test.ts
@@ -0,0 +1,21 @@
+import { describe, expect, it } from "vitest"
+import { getExplorerEntryDisplayName } from "./display-name"
+
+describe("getExplorerEntryDisplayName", () => {
+	it("strips the last file extension for files", () => {
+		expect(getExplorerEntryDisplayName("note.md", false)).toBe("note")
+		expect(getExplorerEntryDisplayName("archive.tar.gz", false)).toBe(
+			"archive.tar",
+		)
+	})
+
+	it("preserves dotfiles", () => {
+		expect(getExplorerEntryDisplayName(".env", false)).toBe(".env")
+	})
+
+	it("preserves directory names", () => {
+		expect(getExplorerEntryDisplayName("folder.with.dot", true)).toBe(
+			"folder.with.dot",
+		)
+	})
+})
diff --git a/apps/desktop/src/components/file-explorer/utils/display-name.ts b/apps/desktop/src/components/file-explorer/utils/display-name.ts
new file mode 100644
index 00000000..0c0fd1af
--- /dev/null
+++ b/apps/desktop/src/components/file-explorer/utils/display-name.ts
@@ -0,0 +1,12 @@
+import { getFileNameWithoutExtension } from "@mdit/utils/path-utils"
+
+export function getExplorerEntryDisplayName(
+	name: string,
+	isDirectory: boolean,
+): string {
+	if (isDirectory) {
+		return name
+	}
+
+	return getFileNameWithoutExtension(name)
+}