diff --git a/extensions/ql-vscode/test/factories/databases/databases.ts b/extensions/ql-vscode/test/factories/databases/databases.ts
index 60a533b32..6db032dbe 100644
--- a/extensions/ql-vscode/test/factories/databases/databases.ts
+++ b/extensions/ql-vscode/test/factories/databases/databases.ts
@@ -19,7 +19,7 @@ export function mockDbOptions(): FullDatabaseOptions {
 }
 
 export function createMockDB(
-  dir: DirResult,
+  dir: DirResult | string,
   dbOptions = mockDbOptions(),
   // source archive location must be a real(-ish) location since
   // tests will add this to the workspace location
@@ -39,10 +39,18 @@ export function createMockDB(
   );
 }
 
-export function sourceLocationUri(dir: DirResult) {
+export function sourceLocationUri(dir: DirResult | string) {
+  if (typeof dir === "string") {
+    return Uri.file(join(dir, "src.zip"));
+  }
+
   return Uri.file(join(dir.name, "src.zip"));
 }
 
-export function dbLocationUri(dir: DirResult) {
+export function dbLocationUri(dir: DirResult | string) {
+  if (typeof dir === "string") {
+    return Uri.file(join(dir, "db"));
+  }
+
   return Uri.file(join(dir.name, "db"));
 }
diff --git a/extensions/ql-vscode/test/vscode-tests/minimal-workspace/local-queries/local-databases.test.ts b/extensions/ql-vscode/test/vscode-tests/minimal-workspace/local-queries/local-databases.test.ts
index d0c6fda51..25c560e80 100644
--- a/extensions/ql-vscode/test/vscode-tests/minimal-workspace/local-queries/local-databases.test.ts
+++ b/extensions/ql-vscode/test/vscode-tests/minimal-workspace/local-queries/local-databases.test.ts
@@ -242,6 +242,37 @@ describe("local databases", () => {
       await expect(pathExists(mockDbItem.databaseUri.fsPath)).resolves.toBe(
         false,
       );
+      await expect(pathExists(dir.name)).resolves.toBe(true);
+    });
+
+    it("should remove a database item with an extension managed location", async () => {
+      const dbLocation = join(dir.name, "org-repo-12");
+      await ensureDir(dbLocation);
+
+      const mockDbItem = createMockDB(dbLocation, {
+        ...mockDbOptions(),
+        extensionManagedLocation: dbLocation,
+      });
+      await ensureDir(mockDbItem.databaseUri.fsPath);
+
+      // pretend that this item is the first workspace folder in the list
+      jest
+        .spyOn(mockDbItem, "belongsToSourceArchiveExplorerUri")
+        .mockReturnValue(true);
+
+      await (databaseManager as any).addDatabaseItem(mockDbItem);
+
+      updateSpy.mockClear();
+
+      await databaseManager.removeDatabaseItem(mockDbItem);
+
+      expect(databaseManager.databaseItems).toEqual([]);
+      expect(updateSpy).toHaveBeenCalledWith("databaseList", []);
+      // should remove the folder
+      expect(workspace.updateWorkspaceFolders).toHaveBeenCalledWith(0, 1);
+
+      // should delete the complete extension managed location
+      await expect(pathExists(dbLocation)).resolves.toBe(false);
     });
 
     it("should remove a database item outside of the extension controlled area", async () => {