diff --git a/internal/digest/ingest.go b/internal/digest/ingest.go
index 138fa9d..b05e572 100644
--- a/internal/digest/ingest.go
+++ b/internal/digest/ingest.go
@@ -343,10 +343,21 @@ func isPathMatchWithInfo(relativePath string, isDir bool, patterns []string) boo
 				pathToCheckPrefix = parentDir + "/"
 			}
 
+			// Check if path starts with the pattern (e.g. ".git/HEAD" matches ".git/")
 			if strings.HasPrefix(pathToCheckPrefix, cleanPattern+"/") {
 				return true
 			}
 
+			// Check if the pattern matches any segment of the path.
+			// This handles nested directories like "vendor/.git/" matching ".git/".
+			if !strings.Contains(cleanPattern, "/") {
+				// Simple dir name pattern (e.g. ".git/", "node_modules/")
+				// Check if any path segment matches
+				if strings.Contains("/"+pathToCheckPrefix, "/"+cleanPattern+"/") {
+					return true
+				}
+			}
+
 			if isDir && strings.HasPrefix(cleanPattern+"/", pathToCheckPrefix) {
 				return true
 			}
diff --git a/internal/digest/ingest_test.go b/internal/digest/ingest_test.go
index ed490c2..91fde36 100644
--- a/internal/digest/ingest_test.go
+++ b/internal/digest/ingest_test.go
@@ -43,6 +43,14 @@ func TestIsPathMatchWithInfo(t *testing.T) {
 		{"Pattern of dir vs file with same name", "data", false, []string{"data/"}, false},
 		{"Pattern of file vs dir with same name", "data/", true, []string{"data"}, true},
 
+		// Nested directory exclusion patterns
+		{"Nested .git dir", "vendor/lib/.git", true, []string{".git/"}, true},
+		{"Nested .git file", "vendor/lib/.git/HEAD", false, []string{".git/"}, true},
+		{"Nested .git deep", "a/b/c/.git/objects/pack", false, []string{".git/"}, true},
+		{"Nested node_modules", "packages/app/node_modules", true, []string{"node_modules/"}, true},
+		{"Nested node_modules file", "packages/app/node_modules/pkg/index.js", false, []string{"node_modules/"}, true},
+		{"Nested .next dir", "apps/web/.next", true, []string{".next/"}, true},
+		{"Nested build dir", "packages/lib/build", true, []string{"build/"}, true},
 		{"No patterns", "file.txt", false, []string{}, false},
 		{"Empty path, no patterns", "", false, []string{}, false},
 		{"Empty path, with pattern", "", false, []string{"*.txt"}, false},
diff --git a/internal/fsutil/fs.go b/internal/fsutil/fs.go
index 1c9f43d..0ebf7aa 100644
--- a/internal/fsutil/fs.go
+++ b/internal/fsutil/fs.go
@@ -55,7 +55,13 @@ func GetRelativePath(basePath, targetPath string) (string, error) {
 		return "", err
 	}
 
-	if !strings.HasPrefix(absTargetPath, absBasePath) {
+	// Ensure we check at a path segment boundary to avoid
+	// false matches like "/tmp" matching "/tmp2"
+	baseWithSep := absBasePath
+	if !strings.HasSuffix(baseWithSep, string(filepath.Separator)) {
+		baseWithSep += string(filepath.Separator)
+	}
+	if absTargetPath != absBasePath && !strings.HasPrefix(absTargetPath, baseWithSep) {
 		return filepath.Base(absTargetPath), nil
 	}
 
diff --git a/internal/fsutil/fs_test.go b/internal/fsutil/fs_test.go
new file mode 100644
index 0000000..5fd9652
--- /dev/null
+++ b/internal/fsutil/fs_test.go
@@ -0,0 +1,66 @@
+package fsutil
+
+import (
+	"os"
+	"path/filepath"
+	"testing"
+)
+
+func TestGetRelativePath(t *testing.T) {
+	// Create temp dirs for realistic path testing
+	tmpDir := t.TempDir()
+	baseDir := filepath.Join(tmpDir, "project")
+	nestedDir := filepath.Join(baseDir, "src", "lib")
+	similarDir := filepath.Join(tmpDir, "project2", "file.txt")
+
+	if err := os.MkdirAll(nestedDir, 0755); err != nil {
+		t.Fatalf("failed to create nested test directory %q: %v", nestedDir, err)
+	}
+	if err := os.MkdirAll(filepath.Dir(similarDir), 0755); err != nil {
+		t.Fatalf("failed to create similar test directory %q: %v", filepath.Dir(similarDir), err)
+	}
+	if err := os.WriteFile(filepath.Join(nestedDir, "main.go"), []byte("package main"), 0644); err != nil {
+		t.Fatalf("failed to create nested test file %q: %v", filepath.Join(nestedDir, "main.go"), err)
+	}
+	if err := os.WriteFile(similarDir, []byte("hello"), 0644); err != nil {
+		t.Fatalf("failed to create similar test file %q: %v", similarDir, err)
+	}
+
+	tests := []struct {
+		name     string
+		base     string
+		target   string
+		expected string
+	}{
+		{
+			name:     "nested file",
+			base:     baseDir,
+			target:   filepath.Join(nestedDir, "main.go"),
+			expected: filepath.Join("src", "lib", "main.go"),
+		},
+		{
+			name:     "same directory",
+			base:     baseDir,
+			target:   baseDir,
+			expected: ".",
+		},
+		{
+			name:     "similar prefix should not match",
+			base:     baseDir,
+			target:   similarDir,
+			expected: "file.txt", // Should fall back to basename, not "2/file.txt"
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			got, err := GetRelativePath(tt.base, tt.target)
+			if err != nil {
+				t.Fatalf("GetRelativePath(%q, %q) returned error: %v", tt.base, tt.target, err)
+			}
+			if got != tt.expected {
+				t.Errorf("GetRelativePath(%q, %q) = %q, want %q", tt.base, tt.target, got, tt.expected)
+			}
+		})
+	}
+}