diff --git a/electrum/gui/qt/main_window.py b/electrum/gui/qt/main_window.py
index e169e1b66..8fe4d0a3f 100644
--- a/electrum/gui/qt/main_window.py
+++ b/electrum/gui/qt/main_window.py
@@ -677,7 +677,7 @@ class ElectrumWindow(QMainWindow, MessageBoxMixin, Logger, QtEventListener):
         self.recently_visited_menu.setEnabled(bool(len(recent)))
 
     def get_wallet_folder(self):
-        return os.path.dirname(os.path.abspath(self.wallet.storage.path))
+        return os.path.abspath(self.config.get_datadir_wallet_path())
 
     def new_wallet(self):
         try:
diff --git a/electrum/gui/qt/wizard/wallet.py b/electrum/gui/qt/wizard/wallet.py
index 145d3e339..84e34f6b9 100644
--- a/electrum/gui/qt/wizard/wallet.py
+++ b/electrum/gui/qt/wizard/wallet.py
@@ -298,12 +298,23 @@ class WCWalletName(WizardComponent, Logger):
         self.layout().addStretch(1)
 
         temp_storage = None  # type: Optional[WalletStorage]
-        wallet_folder = os.path.dirname(path)
+        datadir_wallet_folder = self.wizard.config.get_datadir_wallet_path()
+
+        def relative_path(path):
+            new_path = path
+            try:
+                commonpath = os.path.commonpath([path, datadir_wallet_folder])
+                if commonpath == datadir_wallet_folder:
+                    # below datadir_wallet_path, make relative
+                    new_path = os.path.relpath(path, commonpath)
+            except ValueError:
+                pass
+            return new_path
 
         def on_choose():
-            _path, __ = QFileDialog.getOpenFileName(self, "Select your wallet file", wallet_folder)
+            _path, __ = QFileDialog.getOpenFileName(self, "Select your wallet file", datadir_wallet_folder)
             if _path:
-                self.name_e.setText(_path)
+                self.name_e.setText(relative_path(_path))
 
         def on_filename(filename):
             # FIXME? "filename" might contain ".." (etc) and hence sketchy path traversals are possible
@@ -314,7 +325,7 @@ class WCWalletName(WizardComponent, Logger):
             self.wallet_is_open = False
             self.wallet_needs_hw_unlock = False
             if filename:
-                _path = os.path.join(wallet_folder, filename)
+                _path = os.path.join(datadir_wallet_folder, filename)
                 wallet_from_memory = self.wizard._daemon.get_wallet(_path)
                 try:
                     if wallet_from_memory:
@@ -352,6 +363,8 @@ class WCWalletName(WizardComponent, Logger):
                           + _("Press 'Finish' to create/focus window.")
             if msg is None:
                 msg = _('Cannot read file')
+            if filename and os.path.isabs(relative_path(_path)):
+                msg += '\n\n' + _('Note: this wallet file is outside the default wallets folder.')
             msg_label.setText(msg)
             widget_create_new.setVisible(bool(temp_storage and temp_storage.file_exists()))
             if user_needs_to_enter_password:
@@ -366,15 +379,14 @@ class WCWalletName(WizardComponent, Logger):
 
         button.clicked.connect(on_choose)
         button_create_new.clicked.connect(
-            lambda: self.name_e.setText(get_new_wallet_name(wallet_folder)))  # FIXME get_new_wallet_name might raise
+            lambda: self.name_e.setText(get_new_wallet_name(datadir_wallet_folder)))  # FIXME get_new_wallet_name might raise
         self.name_e.textChanged.connect(on_filename)
-        self.name_e.setText(os.path.basename(path))
+        self.name_e.setText(relative_path(path))
 
     def apply(self):
         if self.wallet_exists:
             # use full path
-            path = self.wizard._path
-            wallet_folder = os.path.dirname(path)
+            wallet_folder = self.wizard.config.get_datadir_wallet_path()
             self.wizard_data['wallet_name'] = os.path.join(wallet_folder, self.name_e.text())
         else:
             self.wizard_data['wallet_name'] = self.name_e.text()
diff --git a/electrum/simple_config.py b/electrum/simple_config.py
index 5f9d462bd..c803f0de2 100644
--- a/electrum/simple_config.py
+++ b/electrum/simple_config.py
@@ -445,6 +445,7 @@ class SimpleConfig(Logger):
 
         new_path = self.get_fallback_wallet_path()
 
+        # TODO: this can be removed by now
         # default path in pre 1.9 versions
         old_path = os.path.join(self.path, "electrum.dat")
         if os.path.exists(old_path) and not os.path.exists(new_path):
@@ -452,12 +453,14 @@ class SimpleConfig(Logger):
 
         return new_path
 
-    def get_fallback_wallet_path(self):
+    def get_datadir_wallet_path(self):
         util.assert_datadir_available(self.path)
         dirpath = os.path.join(self.path, "wallets")
         make_dir(dirpath, allow_symlink=False)
-        path = os.path.join(self.path, "wallets", "default_wallet")
-        return path
+        return dirpath
+
+    def get_fallback_wallet_path(self):
+        return os.path.join(self.get_datadir_wallet_path(), "default_wallet")
 
     def remove_from_recently_open(self, filename):
         recent = self.RECENTLY_OPEN_WALLET_FILES or []