diff --git a/doc/aerc-config.5.scd b/doc/aerc-config.5.scd
index 6f5c50a..314aa57 100644
--- a/doc/aerc-config.5.scd
+++ b/doc/aerc-config.5.scd
@@ -187,6 +187,8 @@ These options are configured in the *[ui]* section of aerc.conf.
 :  literal %
 |  %n
 :  directory name
+|  %N
+:  compacted directory name
 |  %r
 :  recent/unseen/total message count
 |  %>X
diff --git a/lib/format/format.go b/lib/format/format.go
index 59b5c47..ca90ac4 100644
--- a/lib/format/format.go
+++ b/lib/format/format.go
@@ -39,6 +39,33 @@ func FormatAddresses(l []*mail.Address) string {
 	return strings.Join(formatted, ", ")
 }
 
+// CompactPath reduces a directory path into a compact form.  The directory
+// name will be split with the provided separator and each part will be reduced
+// to the first letter in its name: INBOX/01_WORK/PROJECT  will become
+// I/W/PROJECT.
+func CompactPath(name string, sep rune) (compact string) {
+	parts := strings.Split(name, string(sep))
+	for i, part := range parts {
+		if i == len(parts)-1 {
+			compact += part
+		} else {
+			if len(part) != 0 {
+				r := part[0]
+				for i := 0; i < len(part)-1; i++ {
+					if unicode.IsLetter(rune(part[i])) {
+						r = part[i]
+						break
+					}
+				}
+				compact += fmt.Sprintf("%c%c", r, sep)
+			} else {
+				compact += fmt.Sprintf("%c", sep)
+			}
+		}
+	}
+	return
+}
+
 type Ctx struct {
 	FromAddress string
 	AccountName string
diff --git a/widgets/dirlist.go b/widgets/dirlist.go
index 5ddb136..412ed06 100644
--- a/widgets/dirlist.go
+++ b/widgets/dirlist.go
@@ -15,6 +15,7 @@ import (
 
 	"git.sr.ht/~rjarry/aerc/config"
 	"git.sr.ht/~rjarry/aerc/lib"
+	"git.sr.ht/~rjarry/aerc/lib/format"
 	libsort "git.sr.ht/~rjarry/aerc/lib/sort"
 	"git.sr.ht/~rjarry/aerc/lib/ui"
 	"git.sr.ht/~rjarry/aerc/logging"
@@ -206,6 +207,9 @@ func (dirlist *DirectoryList) getDirString(name string, width int, recentUnseen
 			if percent {
 				rightJustify = true
 			}
+		case 'N':
+			name = format.CompactPath(name, os.PathSeparator)
+			fallthrough
 		case 'n':
 			if percent {
 				if rightJustify {