diff --git a/src/services/glob/__tests__/list-files-limit.spec.ts b/src/services/glob/__tests__/list-files-limit.spec.ts
new file mode 100644
index 000000000000..5aef71ffefd4
--- /dev/null
+++ b/src/services/glob/__tests__/list-files-limit.spec.ts
@@ -0,0 +1,274 @@
+import * as path from "path"
+import * as fs from "fs"
+import { listFiles } from "../list-files"
+
+// Mock ripgrep
+vi.mock("../../ripgrep", () => ({
+	getBinPath: vi.fn().mockResolvedValue("/mock/path/to/rg"),
+}))
+
+// Mock vscode
+vi.mock("vscode", () => ({
+	env: {
+		appRoot: "/mock/app/root",
+	},
+}))
+
+// Mock child_process
+vi.mock("child_process", () => ({
+	spawn: vi.fn(),
+}))
+
+vi.mock("../../../utils/path", () => ({
+	arePathsEqual: vi.fn().mockReturnValue(false),
+}))
+
+import * as childProcess from "child_process"
+
+describe("listFiles limit handling for large projects", () => {
+	beforeEach(() => {
+		vi.clearAllMocks()
+	})
+
+	it("should prevent stack overflow when scanning large projects", async () => {
+		// This test verifies that the fix prevents the "Maximum call stack size exceeded" error
+		// by ensuring the function completes successfully even with a very large directory structure
+
+		const createMockDirEntry = (name: string) =>
+			({
+				name,
+				isDirectory: () => true,
+				isSymbolicLink: () => false,
+				isFile: () => false,
+			}) as any
+
+		const mockReaddir = vi.fn()
+		vi.mocked(fs.promises).readdir = mockReaddir
+
+		// Simulate a project with 200k+ items (as mentioned in the issue)
+		// Create a broad directory tree that would cause stack overflow without proper limits
+		let callCount = 0
+		const maxDepth = 100 // Simulate deep nesting
+		mockReaddir.mockImplementation(async () => {
+			callCount++
+			if (callCount > maxDepth) {
+				return []
+			}
+			// Return many subdirectories at each level to simulate a large codebase
+			return Array(50)
+				.fill(null)
+				.map((_, i) => createMockDirEntry(`dir${callCount}_${i}`))
+		})
+
+		// Mock ripgrep to return many files
+		const mockSpawn = vi.mocked(childProcess.spawn)
+		const mockProcess = {
+			stdout: {
+				on: vi.fn((event, callback) => {
+					if (event === "data") {
+						// Return many files to simulate large project
+						const files =
+							Array(10000)
+								.fill(null)
+								.map((_, i) => `file${i}.ts`)
+								.join("\n") + "\n"
+						setTimeout(() => callback(files), 10)
+					}
+				}),
+			},
+			stderr: {
+				on: vi.fn(),
+			},
+			on: vi.fn((event, callback) => {
+				if (event === "close") {
+					setTimeout(() => callback(0), 20)
+				}
+			}),
+			kill: vi.fn(),
+		}
+		mockSpawn.mockReturnValue(mockProcess as any)
+
+		// Call listFiles with a limit that would be used in code indexing
+		const limit = 50_000 // MAX_LIST_FILES_LIMIT_CODE_INDEX value
+
+		// The key test: this should complete without throwing a stack overflow error
+		let error: Error | null = null
+		let results: string[] = []
+		let limitReached = false
+
+		try {
+			const startTime = Date.now()
+			const [res, didHitLimit] = await listFiles("/test/large-project", true, limit)
+			const endTime = Date.now()
+
+			results = res
+			limitReached = didHitLimit
+
+			// Should complete in reasonable time
+			expect(endTime - startTime).toBeLessThan(10000) // 10 seconds max
+		} catch (e) {
+			error = e as Error
+		}
+
+		// Main assertion: no stack overflow error should occur
+		expect(error).toBeNull()
+
+		// The function should return valid results
+		expect(results).toBeDefined()
+		expect(Array.isArray(results)).toBe(true)
+
+		// The limit should be respected
+		expect(results.length).toBeLessThanOrEqual(limit)
+
+		// Directory scanning should respect the overall limit
+		const directories = results.filter((r) => r.endsWith("/"))
+		const files = results.filter((r) => !r.endsWith("/"))
+		expect(directories.length + files.length).toBeLessThanOrEqual(limit)
+	})
+
+	it("should terminate early when directory limit is reached", async () => {
+		const createMockDirEntry = (name: string) =>
+			({
+				name,
+				isDirectory: () => true,
+				isSymbolicLink: () => false,
+				isFile: () => false,
+			}) as any
+
+		const mockReaddir = vi.fn()
+		vi.mocked(fs.promises).readdir = mockReaddir
+
+		// Mock directory structure
+		let directoriesScanned = 0
+		mockReaddir.mockImplementation(async (dirPath: string) => {
+			directoriesScanned++
+
+			// Root directory has many subdirectories
+			if (directoriesScanned === 1) {
+				return Array(100)
+					.fill(null)
+					.map((_, i) => createMockDirEntry(`subdir${i}`))
+			}
+
+			// Each subdirectory has more subdirectories
+			return Array(50)
+				.fill(null)
+				.map((_, i) => createMockDirEntry(`nested${directoriesScanned}_${i}`))
+		})
+
+		// Mock ripgrep to return no files (focus on directory scanning)
+		const mockSpawn = vi.mocked(childProcess.spawn)
+		const mockProcess = {
+			stdout: {
+				on: vi.fn((event, callback) => {
+					if (event === "data") {
+						setTimeout(() => callback(""), 10)
+					}
+				}),
+			},
+			stderr: {
+				on: vi.fn(),
+			},
+			on: vi.fn((event, callback) => {
+				if (event === "close") {
+					setTimeout(() => callback(0), 20)
+				}
+			}),
+			kill: vi.fn(),
+		}
+		mockSpawn.mockReturnValue(mockProcess as any)
+
+		// Call listFiles with a small limit
+		const limit = 10
+		const [results, limitReached] = await listFiles("/test/project", true, limit)
+
+		// Verify results respect the limit
+		expect(results.length).toBeLessThanOrEqual(limit)
+		expect(limitReached).toBe(true)
+
+		// Verify that directory scanning terminated early
+		// Without the fix, this would scan thousands of directories
+		// With the fix, it should stop after reaching the limit
+		const directories = results.filter((r) => r.endsWith("/"))
+		expect(directories.length).toBeLessThanOrEqual(limit)
+
+		// The number of readdir calls should be proportional to the limit, not unbounded
+		// This ensures we're not scanning the entire tree before applying the limit
+		expect(directoriesScanned).toBeLessThan(limit * 10) // Allow some overhead but not excessive
+	})
+
+	it("should handle zero limit gracefully", async () => {
+		// This test is already in the original spec but let's ensure it works with our changes
+		const [results, limitReached] = await listFiles("/test/path", true, 0)
+
+		expect(results).toEqual([])
+		expect(limitReached).toBe(false)
+
+		// No filesystem operations should occur with zero limit
+		expect(fs.promises.readdir).not.toHaveBeenCalled()
+		expect(childProcess.spawn).not.toHaveBeenCalled()
+	})
+
+	it("should correctly distribute limit between files and directories", async () => {
+		const createMockDirEntry = (name: string) =>
+			({
+				name,
+				isDirectory: () => true,
+				isSymbolicLink: () => false,
+				isFile: () => false,
+			}) as any
+
+		const mockReaddir = vi.fn()
+		vi.mocked(fs.promises).readdir = mockReaddir
+
+		// Mock directory with some subdirectories
+		mockReaddir
+			.mockResolvedValueOnce([createMockDirEntry("dir1"), createMockDirEntry("dir2"), createMockDirEntry("dir3")])
+			.mockResolvedValue([]) // Empty subdirectories
+
+		// Mock ripgrep to return files
+		const mockSpawn = vi.mocked(childProcess.spawn)
+		const mockProcess = {
+			stdout: {
+				on: vi.fn((event, callback) => {
+					if (event === "data") {
+						// Return 8 files
+						const files =
+							Array(8)
+								.fill(null)
+								.map((_, i) => `file${i}.ts`)
+								.join("\n") + "\n"
+						setTimeout(() => callback(files), 10)
+					}
+				}),
+			},
+			stderr: {
+				on: vi.fn(),
+			},
+			on: vi.fn((event, callback) => {
+				if (event === "close") {
+					setTimeout(() => callback(0), 20)
+				}
+			}),
+			kill: vi.fn(),
+		}
+		mockSpawn.mockReturnValue(mockProcess as any)
+
+		// Call with limit of 10
+		const [results, limitReached] = await listFiles("/test/project", true, 10)
+
+		// Should include both files and directories up to the limit
+		expect(results.length).toBe(10)
+		expect(limitReached).toBe(true)
+
+		const files = results.filter((r) => !r.endsWith("/"))
+		const directories = results.filter((r) => r.endsWith("/"))
+
+		// Should have both files and directories
+		expect(files.length).toBeGreaterThan(0)
+		expect(directories.length).toBeGreaterThan(0)
+
+		// Total should equal the limit
+		expect(files.length + directories.length).toBe(10)
+	})
+})
diff --git a/src/services/glob/list-files.ts b/src/services/glob/list-files.ts
index 7347515784cb..5366bbb84b46 100644
--- a/src/services/glob/list-files.ts
+++ b/src/services/glob/list-files.ts
@@ -50,16 +50,20 @@ export async function listFiles(dirPath: string, recursive: boolean, limit: numb
 		// For non-recursive, use the existing approach
 		const files = await listFilesWithRipgrep(rgPath, dirPath, false, limit)
 		const ignoreInstance = await createIgnoreInstance(dirPath)
-		const directories = await listFilteredDirectories(dirPath, false, ignoreInstance)
+		// Calculate remaining limit for directories
+		const remainingLimit = Math.max(0, limit - files.length)
+		const directories = await listFilteredDirectories(dirPath, false, ignoreInstance, remainingLimit)
 		return formatAndCombineResults(files, directories, limit)
 	}
 
 	// For recursive mode, use the original approach but ensure first-level directories are included
 	const files = await listFilesWithRipgrep(rgPath, dirPath, true, limit)
 	const ignoreInstance = await createIgnoreInstance(dirPath)
-	const directories = await listFilteredDirectories(dirPath, true, ignoreInstance)
+	// Calculate remaining limit for directories
+	const remainingLimit = Math.max(0, limit - files.length)
+	const directories = await listFilteredDirectories(dirPath, true, ignoreInstance, remainingLimit)
 
-	// Combine and check if we hit the limit
+	// Combine and check if we hit the limits
 	const [results, limitReached] = formatAndCombineResults(files, directories, limit)
 
 	// If we hit the limit, ensure all first-level directories are included
@@ -384,9 +388,12 @@ async function listFilteredDirectories(
 	dirPath: string,
 	recursive: boolean,
 	ignoreInstance: ReturnType<typeof ignore>,
+	limit?: number,
 ): Promise<string[]> {
 	const absolutePath = path.resolve(dirPath)
 	const directories: string[] = []
+	let dirCount = 0
+	const effectiveLimit = limit ?? Number.MAX_SAFE_INTEGER
 
 	// For environment details generation, we don't want to treat the root as a "target"
 	// if we're doing a general recursive scan, as this would include hidden directories
@@ -401,13 +408,23 @@ async function listFilteredDirectories(
 		ignoreInstance,
 	}
 
-	async function scanDirectory(currentPath: string, context: ScanContext): Promise<void> {
+	async function scanDirectory(currentPath: string, context: ScanContext): Promise<boolean> {
+		// Check if we've reached the limit
+		if (dirCount >= effectiveLimit) {
+			return true // Signal that limit was reached
+		}
+
 		try {
 			// List all entries in the current directory
 			const entries = await fs.promises.readdir(currentPath, { withFileTypes: true })
 
 			// Filter for directories only, excluding symbolic links to prevent circular traversal
 			for (const entry of entries) {
+				// Check limit before processing each directory
+				if (dirCount >= effectiveLimit) {
+					return true
+				}
+
 				if (entry.isDirectory() && !entry.isSymbolicLink()) {
 					const dirName = entry.name
 					const fullDirPath = path.join(currentPath, dirName)
@@ -425,6 +442,12 @@ async function listFilteredDirectories(
 						// fullDirPath is already absolute since it's built with path.join from absolutePath
 						const formattedPath = fullDirPath.endsWith("/") ? fullDirPath : `${fullDirPath}/`
 						directories.push(formattedPath)
+						dirCount++
+
+						// Check if we've reached the limit after adding
+						if (dirCount >= effectiveLimit) {
+							return true
+						}
 					}
 
 					// If recursive mode and not a ignored directory, scan subdirectories
@@ -461,7 +484,10 @@ async function listFilteredDirectories(
 							isTargetDir: false,
 							insideExplicitHiddenTarget: newInsideExplicitHiddenTarget,
 						}
-						await scanDirectory(fullDirPath, newContext)
+						const limitReached = await scanDirectory(fullDirPath, newContext)
+						if (limitReached) {
+							return true
+						}
 					}
 				}
 			}
@@ -469,6 +495,8 @@ async function listFilteredDirectories(
 			// Continue if we can't read a directory
 			console.warn(`Could not read directory ${currentPath}: ${err}`)
 		}
+
+		return false // Limit not reached
 	}
 
 	// Start scanning from the root directory