diff --git a/public/app/core/components/NestedFolderPicker/NestedFolderList.tsx b/public/app/core/components/NestedFolderPicker/NestedFolderList.tsx
index 839c9f04231..7c8dedc630f 100644
--- a/public/app/core/components/NestedFolderPicker/NestedFolderList.tsx
+++ b/public/app/core/components/NestedFolderPicker/NestedFolderList.tsx
@@ -13,7 +13,6 @@ import { DashboardViewItem } from 'app/features/search/types';
 import { FolderUID } from './types';
 
 const ROW_HEIGHT = 40;
-const LIST_HEIGHT = ROW_HEIGHT * 6.5; // show 6 and a bit rows
 const CHEVRON_SIZE = 'md';
 
 interface NestedFolderListProps {
@@ -40,8 +39,13 @@ export function NestedFolderList({
 
   return (
     <div className={styles.table}>
-      <div className={styles.headerRow}>Name</div>
-      <List height={LIST_HEIGHT} width="100%" itemData={virtualData} itemSize={ROW_HEIGHT} itemCount={items.length}>
+      <List
+        height={ROW_HEIGHT * Math.min(6.5, items.length)}
+        width="100%"
+        itemData={virtualData}
+        itemSize={ROW_HEIGHT}
+        itemCount={items.length}
+      >
         {Row}
       </List>
     </div>
@@ -112,16 +116,15 @@ function Row({ index, style: virtualStyles, data }: RowProps) {
         onKeyDown={handleKeyDown}
       />
 
+      <Indent level={level} />
       <div className={styles.rowBody}>
-        <Indent level={level} />
-
         {foldersAreOpenable ? (
           <IconButton
             size={CHEVRON_SIZE}
             onClick={handleClick}
             // tabIndex not needed here because we handle keyboard navigation at the radio button level
             tabIndex={-1}
-            aria-label={isOpen ? 'Collapse folder' : 'Expand folder'}
+            aria-label={isOpen ? `Collapse folder ${item.title}` : `Expand folder ${item.title}`}
             name={isOpen ? 'angle-down' : 'angle-right'}
           />
         ) : (
@@ -146,12 +149,12 @@ const getStyles = (theme: GrafanaTheme2) => {
     position: 'relative',
     alignItems: 'center',
     flexGrow: 1,
+    gap: theme.spacing(0.5),
     paddingLeft: theme.spacing(1),
   });
 
   return {
     table: css({
-      border: `solid 1px ${theme.components.input.borderColor}`,
       background: theme.components.input.background,
     }),
 
@@ -172,7 +175,9 @@ const getStyles = (theme: GrafanaTheme2) => {
       display: 'flex',
       position: 'relative',
       alignItems: 'center',
-      borderTop: `solid 1px ${theme.components.input.borderColor}`,
+      [':not(:first-child)']: {
+        borderTop: `solid 1px ${theme.colors.border.weak}`,
+      },
     }),
 
     radio: css({
diff --git a/public/app/core/components/NestedFolderPicker/NestedFolderPicker.test.tsx b/public/app/core/components/NestedFolderPicker/NestedFolderPicker.test.tsx
new file mode 100644
index 00000000000..a9a0cba087c
--- /dev/null
+++ b/public/app/core/components/NestedFolderPicker/NestedFolderPicker.test.tsx
@@ -0,0 +1,127 @@
+import 'whatwg-fetch'; // fetch polyfill
+import { render as rtlRender, screen } from '@testing-library/react';
+import userEvent from '@testing-library/user-event';
+import { rest } from 'msw';
+import { SetupServer, setupServer } from 'msw/node';
+import React from 'react';
+import { TestProvider } from 'test/helpers/TestProvider';
+
+import { backendSrv } from 'app/core/services/backend_srv';
+
+import { wellFormedTree } from '../../../features/browse-dashboards/fixtures/dashboardsTreeItem.fixture';
+
+import { NestedFolderPicker } from './NestedFolderPicker';
+
+const [mockTree, { folderA, folderB, folderC, folderA_folderA, folderA_folderB }] = wellFormedTree();
+
+jest.mock('@grafana/runtime', () => ({
+  ...jest.requireActual('@grafana/runtime'),
+  getBackendSrv: () => backendSrv,
+}));
+
+jest.mock('app/features/browse-dashboards/api/services', () => {
+  const orig = jest.requireActual('app/features/browse-dashboards/api/services');
+
+  return {
+    ...orig,
+    listFolders(parentUID?: string) {
+      const childrenForUID = mockTree
+        .filter((v) => v.item.kind === 'folder' && v.item.parentUID === parentUID)
+        .map((v) => v.item);
+
+      return Promise.resolve(childrenForUID);
+    },
+  };
+});
+
+function render(...[ui, options]: Parameters<typeof rtlRender>) {
+  rtlRender(<TestProvider>{ui}</TestProvider>, options);
+}
+
+describe('NestedFolderPicker', () => {
+  const mockOnChange = jest.fn();
+  let server: SetupServer;
+
+  beforeAll(() => {
+    server = setupServer(
+      rest.get('/api/folders/:uid', (_, res, ctx) => {
+        return res(
+          ctx.status(200),
+          ctx.json({
+            title: folderA.item.title,
+            uid: folderA.item.uid,
+          })
+        );
+      })
+    );
+    server.listen();
+  });
+
+  afterAll(() => {
+    server.close();
+  });
+
+  afterEach(() => {
+    server.resetHandlers();
+  });
+
+  it('renders a button with the correct label when no folder is selected', async () => {
+    render(<NestedFolderPicker onChange={mockOnChange} />);
+    expect(await screen.findByRole('button', { name: 'Select folder' })).toBeInTheDocument();
+  });
+
+  it('renders a button with the folder name instead when a folder is selected', async () => {
+    render(<NestedFolderPicker onChange={mockOnChange} value="folderA" />);
+    expect(await screen.findByRole('button', { name: folderA.item.title })).toBeInTheDocument();
+    expect(screen.queryByRole('button', { name: 'Select folder' })).not.toBeInTheDocument();
+  });
+
+  it('clicking the button opens the folder picker', async () => {
+    render(<NestedFolderPicker onChange={mockOnChange} />);
+    const button = await screen.findByRole('button', { name: 'Select folder' });
+
+    await userEvent.click(button);
+
+    // Select folder button is no longer visible
+    expect(screen.queryByRole('button', { name: 'Select folder' })).not.toBeInTheDocument();
+
+    // Search input and folder tree are visible
+    expect(screen.getByPlaceholderText('Search folder')).toBeInTheDocument();
+    expect(screen.getByLabelText('Dashboards')).toBeInTheDocument();
+    expect(screen.getByLabelText(folderA.item.title)).toBeInTheDocument();
+    expect(screen.getByLabelText(folderB.item.title)).toBeInTheDocument();
+    expect(screen.getByLabelText(folderC.item.title)).toBeInTheDocument();
+  });
+
+  it('can select a folder from the picker', async () => {
+    render(<NestedFolderPicker onChange={mockOnChange} />);
+    const button = await screen.findByRole('button', { name: 'Select folder' });
+
+    await userEvent.click(button);
+
+    await userEvent.click(screen.getByLabelText(folderA.item.title));
+    expect(mockOnChange).toHaveBeenCalledWith({
+      uid: folderA.item.uid,
+      title: folderA.item.title,
+    });
+  });
+
+  it('can expand and collapse a folder to show its children', async () => {
+    render(<NestedFolderPicker onChange={mockOnChange} />);
+    const button = await screen.findByRole('button', { name: 'Select folder' });
+
+    await userEvent.click(button);
+
+    // Expand Folder A
+    await userEvent.click(screen.getByRole('button', { name: `Expand folder ${folderA.item.title}` }));
+
+    // Folder A's children are visible
+    expect(screen.getByLabelText(folderA_folderA.item.title)).toBeInTheDocument();
+    expect(screen.getByLabelText(folderA_folderB.item.title)).toBeInTheDocument();
+
+    // Collapse Folder A
+    await userEvent.click(screen.getByRole('button', { name: `Collapse folder ${folderA.item.title}` }));
+    expect(screen.queryByLabelText(folderA_folderA.item.title)).not.toBeInTheDocument();
+    expect(screen.queryByLabelText(folderA_folderB.item.title)).not.toBeInTheDocument();
+  });
+});
diff --git a/public/app/core/components/NestedFolderPicker/NestedFolderPicker.tsx b/public/app/core/components/NestedFolderPicker/NestedFolderPicker.tsx
index dcc8c217626..e468cb8ad68 100644
--- a/public/app/core/components/NestedFolderPicker/NestedFolderPicker.tsx
+++ b/public/app/core/components/NestedFolderPicker/NestedFolderPicker.tsx
@@ -1,10 +1,12 @@
 import { css } from '@emotion/css';
 import React, { useCallback, useMemo, useState } from 'react';
+import Skeleton from 'react-loading-skeleton';
+import { usePopperTooltip } from 'react-popper-tooltip';
 import { useAsync } from 'react-use';
 
 import { GrafanaTheme2 } from '@grafana/data';
-import { Stack } from '@grafana/experimental';
-import { Alert, FilterInput, LoadingBar, useStyles2 } from '@grafana/ui';
+import { Alert, Button, FilterInput, LoadingBar, useStyles2 } from '@grafana/ui';
+import { skipToken, useGetFolderQuery } from 'app/features/browse-dashboards/api/browseDashboardsAPI';
 import { listFolders, PAGE_SIZE } from 'app/features/browse-dashboards/api/services';
 import { createFlatTree } from 'app/features/browse-dashboards/state';
 import { DashboardViewItemCollection } from 'app/features/browse-dashboards/types';
@@ -20,19 +22,21 @@ async function fetchRootFolders() {
 }
 
 interface NestedFolderPickerProps {
-  value?: FolderUID | undefined;
+  value?: FolderUID;
   // TODO: think properly (and pragmatically) about how to communicate moving to general folder,
   // vs removing selection (if possible?)
-  onChange?: (folderUID: FolderChange) => void;
+  onChange?: (folder: FolderChange) => void;
 }
 
 export function NestedFolderPicker({ value, onChange }: NestedFolderPickerProps) {
   const styles = useStyles2(getStyles);
 
   const [search, setSearch] = useState('');
+  const [overlayOpen, setOverlayOpen] = useState(false);
   const [folderOpenState, setFolderOpenState] = useState<Record<string, boolean>>({});
   const [childrenForUID, setChildrenForUID] = useState<Record<string, DashboardViewItem[]>>({});
   const rootFoldersState = useAsync(fetchRootFolders);
+  const selectedFolder = useGetFolderQuery(value || skipToken);
 
   const searchState = useAsync(async () => {
     if (!search) {
@@ -120,68 +124,125 @@ export function NestedFolderPicker({ value, onChange }: NestedFolderPickerProps)
   const handleSelectionChange = useCallback(
     (event: React.FormEvent<HTMLInputElement>, item: DashboardViewItem) => {
       if (onChange) {
-        onChange({ title: item.title, uid: item.uid });
+        onChange({
+          uid: item.uid,
+          title: item.title,
+        });
       }
+      setOverlayOpen(false);
     },
     [onChange]
   );
 
+  const { getTooltipProps, setTooltipRef, setTriggerRef, visible, triggerRef } = usePopperTooltip({
+    visible: overlayOpen,
+    placement: 'bottom',
+    interactive: true,
+    offset: [0, 0],
+    trigger: 'click',
+    onVisibleChange: (value: boolean) => {
+      // Clear search state when closing the overlay
+      if (!value) {
+        setSearch('');
+      }
+      setOverlayOpen(value);
+    },
+  });
+
   const isLoading = rootFoldersState.loading || searchState.loading;
   const error = rootFoldersState.error || searchState.error;
 
   const tree = flatTree;
 
-  return (
-    <fieldset>
-      <Stack direction="column" gap={1}>
-        <FilterInput
-          placeholder="Search folder"
-          value={search}
-          escapeRegex={false}
-          onChange={(val) => setSearch(val)}
-        />
+  let label = selectedFolder.data?.title;
+  if (value === '') {
+    label = 'Dashboards';
+  }
 
-        {error && (
-          <Alert severity="warning" title="Error loading folders">
+  if (!visible) {
+    return (
+      <Button
+        className={styles.button}
+        variant="secondary"
+        icon={value !== undefined ? 'folder' : undefined}
+        ref={setTriggerRef}
+      >
+        {selectedFolder.isLoading ? <Skeleton width={100} /> : label ?? 'Select folder'}
+      </Button>
+    );
+  }
+
+  return (
+    <>
+      <FilterInput
+        ref={setTriggerRef}
+        autoFocus
+        placeholder={label ?? 'Search folder'}
+        value={search}
+        escapeRegex={false}
+        className={styles.search}
+        onChange={(val) => setSearch(val)}
+      />
+      <fieldset
+        ref={setTooltipRef}
+        {...getTooltipProps({
+          className: styles.tableWrapper,
+          style: {
+            width: triggerRef?.clientWidth,
+          },
+        })}
+      >
+        {error ? (
+          <Alert className={styles.error} severity="warning" title="Error loading folders">
             {error.message || error.toString?.() || 'Unknown error'}
           </Alert>
+        ) : (
+          <div>
+            {isLoading && (
+              <div className={styles.loader}>
+                <LoadingBar width={600} />
+              </div>
+            )}
+
+            <NestedFolderList
+              items={tree}
+              selectedFolder={value}
+              onFolderClick={handleFolderClick}
+              onSelectionChange={handleSelectionChange}
+              foldersAreOpenable={!(search && searchState.value)}
+            />
+          </div>
         )}
-
-        <div className={styles.tableWrapper}>
-          {isLoading && (
-            <div className={styles.loader}>
-              <LoadingBar width={600} />
-            </div>
-          )}
-
-          <NestedFolderList
-            items={tree}
-            selectedFolder={value}
-            onFolderClick={handleFolderClick}
-            onSelectionChange={handleSelectionChange}
-            foldersAreOpenable={!(search && searchState.value)}
-          />
-        </div>
-      </Stack>
-    </fieldset>
+      </fieldset>
+    </>
   );
 }
 
 const getStyles = (theme: GrafanaTheme2) => {
   return {
+    button: css({
+      maxWidth: '100%',
+    }),
+    error: css({
+      marginBottom: 0,
+    }),
     tableWrapper: css({
+      boxShadow: theme.shadows.z3,
       position: 'relative',
-      zIndex: 1,
-      background: 'palegoldenrod',
+      zIndex: theme.zIndex.portal,
     }),
-
     loader: css({
       position: 'absolute',
       top: 0,
       left: 0,
       right: 0,
-      zIndex: 2,
+      zIndex: theme.zIndex.portal + 1,
       overflow: 'hidden', // loading bar overflows its container, so we need to clip it
     }),
+    search: css({
+      input: {
+        cursor: 'default',
+      },
+    }),
   };
 };
diff --git a/public/app/core/components/NestedFolderPicker/types.ts b/public/app/core/components/NestedFolderPicker/types.ts
index 5eb76761b8e..78e48ce7a1c 100644
--- a/public/app/core/components/NestedFolderPicker/types.ts
+++ b/public/app/core/components/NestedFolderPicker/types.ts
@@ -1,4 +1,2 @@
-export const ROOT_FOLDER: unique symbol = Symbol('Root folder');
-
-export type FolderUID = string | typeof ROOT_FOLDER;
+export type FolderUID = string;
 export type FolderChange = { title: string; uid: FolderUID };
diff --git a/public/app/features/browse-dashboards/components/BrowseActions/MoveModal.tsx b/public/app/features/browse-dashboards/components/BrowseActions/MoveModal.tsx
index cf6674bd49c..f1d5cbbbcfd 100644
--- a/public/app/features/browse-dashboards/components/BrowseActions/MoveModal.tsx
+++ b/public/app/features/browse-dashboards/components/BrowseActions/MoveModal.tsx
@@ -5,7 +5,7 @@ import { config } from '@grafana/runtime';
 import { Alert, Button, Field, Modal } from '@grafana/ui';
 import { P } from '@grafana/ui/src/unstable';
 import { NestedFolderPicker } from 'app/core/components/NestedFolderPicker/NestedFolderPicker';
-import { FolderChange, ROOT_FOLDER } from 'app/core/components/NestedFolderPicker/types';
+import { FolderChange } from 'app/core/components/NestedFolderPicker/types';
 import { FolderPicker } from 'app/core/components/Select/FolderPicker';
 import { t, Trans } from 'app/core/internationalization';
 
@@ -26,7 +26,7 @@ export const MoveModal = ({ onConfirm, onDismiss, selectedItems, ...props }: Pro
   const selectedFolders = Object.keys(selectedItems.folder).filter((uid) => selectedItems.folder[uid]);
 
   const handleFolderChange = (newFolder: FolderChange) => {
-    setMoveTarget(newFolder.uid === ROOT_FOLDER ? '' : newFolder.uid);
+    setMoveTarget(newFolder.uid);
   };
 
   const onMove = async () => {
diff --git a/public/app/features/dashboard/components/DashboardSettings/GeneralSettings.tsx b/public/app/features/dashboard/components/DashboardSettings/GeneralSettings.tsx
index d5396248772..c5a6a46bc82 100644
--- a/public/app/features/dashboard/components/DashboardSettings/GeneralSettings.tsx
+++ b/public/app/features/dashboard/components/DashboardSettings/GeneralSettings.tsx
@@ -5,7 +5,7 @@ import { TimeZone } from '@grafana/data';
 import { config } from '@grafana/runtime';
 import { CollapsableSection, Field, Input, RadioButtonGroup, TagsInput } from '@grafana/ui';
 import { NestedFolderPicker } from 'app/core/components/NestedFolderPicker/NestedFolderPicker';
-import { FolderChange, ROOT_FOLDER } from 'app/core/components/NestedFolderPicker/types';
+import { FolderChange } from 'app/core/components/NestedFolderPicker/types';
 import { Page } from 'app/core/components/Page/Page';
 import { FolderPicker } from 'app/core/components/Select/FolderPicker';
 import { updateTimeZoneDashboard, updateWeekStartDashboard } from 'app/features/dashboard/state/actions';
@@ -32,7 +32,7 @@ export function GeneralSettingsUnconnected({
   const [renderCounter, setRenderCounter] = useState(0);
 
   const onFolderChange = (newFolder: FolderChange) => {
-    dashboard.meta.folderUid = newFolder.uid === ROOT_FOLDER ? '' : newFolder.uid;
+    dashboard.meta.folderUid = newFolder.uid;
     dashboard.meta.folderTitle = newFolder.title;
     dashboard.meta.hasUnsavedFolderChange = true;
     setRenderCounter(renderCounter + 1);