diff --git a/crates/nu-utils/src/sample_config/default_env.nu b/crates/nu-utils/src/sample_config/default_env.nu
index 9935859be..4f756fb25 100644
--- a/crates/nu-utils/src/sample_config/default_env.nu
+++ b/crates/nu-utils/src/sample_config/default_env.nu
@@ -5,10 +5,21 @@
 def create_left_prompt [] {
     let home =  $nu.home-path
 
-    let dir = ([
-        ($env.PWD | str substring 0..($home | str length) | str replace $home "~"),
-        ($env.PWD | str substring ($home | str length)..)
-    ] | str join)
+    # Perform tilde substitution on dir
+    # To determine if the prefix of the path matches the home dir, we split the current path into
+    # segments, and compare those with the segments of the home dir. In cases where the current dir
+    # is a parent of the home dir (e.g. `/home`, homedir is `/home/user`), this comparison will 
+    # also evaluate to true. Inside the condition, we attempt to str replace `$home` with `~`.
+    # Inside the condition, either:
+    # 1. The home prefix will be replaced
+    # 2. The current dir is a parent of the home dir, so it will be uneffected by the str replace
+    let dir = (
+        if ($env.PWD | path split | zip ($home | path split) | all { $in.0 == $in.1 }) {
+            ($env.PWD | str replace $home "~")
+        } else {
+            $env.PWD
+        }
+    )
 
     let path_color = (if (is-admin) { ansi red_bold } else { ansi green_bold })
     let separator_color = (if (is-admin) { ansi light_red_bold } else { ansi light_green_bold })