diff --git a/packages/playwright-core/src/server/trace/viewer/traceViewer.ts b/packages/playwright-core/src/server/trace/viewer/traceViewer.ts
index b8dc3e5314..cc404c18ba 100644
--- a/packages/playwright-core/src/server/trace/viewer/traceViewer.ts
+++ b/packages/playwright-core/src/server/trace/viewer/traceViewer.ts
@@ -106,8 +106,17 @@ export async function installRootRedirect(server: HttpServer, traceUrls: string[
   const params = new URLSearchParams();
   if (path.sep !== path.posix.sep)
     params.set('pathSeparator', path.sep);
-  for (const traceUrl of traceUrls)
-    params.append('trace', traceUrl);
+  for (const traceUrl of traceUrls) {
+    if (traceUrl.startsWith('http://') || traceUrl.startsWith('https://')) {
+      params.append('trace', traceUrl);
+      continue;
+    }
+
+    // <testServerOrigin>/trace/file?path=/path/to/trace.zip
+    const url = new URL('/trace/file', server.urlPrefix('precise'));
+    url.searchParams.set('path', traceUrl);
+    params.append('trace', url.toString());
+  }
   if (server.wsGuid())
     params.append('ws', server.wsGuid()!);
   if (options?.isServer)
diff --git a/packages/trace-viewer/src/sw/traceModelBackends.ts b/packages/trace-viewer/src/sw/traceModelBackends.ts
index 19c5fc2dee..1318b298a7 100644
--- a/packages/trace-viewer/src/sw/traceModelBackends.ts
+++ b/packages/trace-viewer/src/sw/traceModelBackends.ts
@@ -30,9 +30,8 @@ export class ZipTraceModelBackend implements TraceModelBackend {
 
   constructor(traceURL: string, progress: Progress) {
     this._traceURL = traceURL;
-    zipjs.configure({ baseURL: self.location.href } as any);
     this._zipReader = new zipjs.ZipReader(
-        new zipjs.HttpReader(formatUrl(traceURL), { mode: 'cors', preventHeadRequest: true } as any),
+        new zipjs.HttpReader(traceURL, { mode: 'cors', preventHeadRequest: true } as any),
         { useWebWorkers: false });
     this._entriesPromise = this._zipReader.getEntries({ onprogress: progress }).then(entries => {
       const map = new Map<string, zip.Entry>();
@@ -87,8 +86,8 @@ export class FetchTraceModelBackend implements TraceModelBackend {
 
   constructor(traceURL: string) {
     this._traceURL = traceURL;
-    this._entriesPromise = fetch('/trace/file?path=' + encodeURIComponent(traceURL)).then(async response => {
-      const json = JSON.parse(await response.text());
+    this._entriesPromise = fetch(traceURL).then(async response => {
+      const json = await response.json();
       const entries = new Map<string, string>();
       for (const entry of json.entries)
         entries.set(entry.name, entry.path);
@@ -126,17 +125,12 @@ export class FetchTraceModelBackend implements TraceModelBackend {
 
   private async _readEntry(entryName: string): Promise<Response | undefined> {
     const entries = await this._entriesPromise;
-    const fileName = entries.get(entryName);
-    if (!fileName)
+    const filePath = entries.get(entryName);
+    if (!filePath)
       return;
-    return fetch('/trace/file?path=' + encodeURIComponent(fileName));
+
+    const url = new URL(this.traceURL());
+    url.searchParams.set('path', filePath);
+    return fetch(url);
   }
 }
-
-function formatUrl(trace: string) {
-  let url = trace.startsWith('http') || trace.startsWith('blob') ? trace : `file?path=${encodeURIComponent(trace)}`;
-  // Dropbox does not support cors.
-  if (url.startsWith('https://www.dropbox.com/'))
-    url = 'https://dl.dropboxusercontent.com/' + url.substring('https://www.dropbox.com/'.length);
-  return url;
-}
diff --git a/packages/trace-viewer/src/ui/embeddedWorkbenchLoader.tsx b/packages/trace-viewer/src/ui/embeddedWorkbenchLoader.tsx
index c8b8aa216c..23801f95da 100644
--- a/packages/trace-viewer/src/ui/embeddedWorkbenchLoader.tsx
+++ b/packages/trace-viewer/src/ui/embeddedWorkbenchLoader.tsx
@@ -21,6 +21,7 @@ import './embeddedWorkbenchLoader.css';
 import { Workbench } from './workbench';
 import { currentTheme, toggleTheme } from '@web/theme';
 import type { SourceLocation } from './modelUtil';
+import { filePathToTraceURL } from './uiModeTraceView';
 
 function openPage(url: string, target?: string) {
   if (url)
@@ -40,7 +41,15 @@ export const EmbeddedWorkbenchLoader: React.FunctionComponent = () => {
   React.useEffect(() => {
     window.addEventListener('message', async ({ data: { method, params } }) => {
       if (method === 'loadTraceRequested') {
-        setTraceURLs(params.traceUrl ? [params.traceUrl] : []);
+        if (params.traceUrl) {
+          // the param is called URL, but VS Code sends a path
+          const url = params.traceUrl.startsWith('http')
+            ? params.traceUrl
+            : filePathToTraceURL(params.traceUrl).toString();
+          setTraceURLs([url]);
+        } else {
+          setTraceURLs([]);
+        }
         setProcessingErrorMessage(null);
       } else if (method === 'applyTheme') {
         if (currentTheme() !== params.theme)
diff --git a/packages/trace-viewer/src/ui/uiModeTraceView.tsx b/packages/trace-viewer/src/ui/uiModeTraceView.tsx
index cf35d89007..8e98a8ccd7 100644
--- a/packages/trace-viewer/src/ui/uiModeTraceView.tsx
+++ b/packages/trace-viewer/src/ui/uiModeTraceView.tsx
@@ -54,7 +54,7 @@ export const TraceView: React.FC<{
     // Test finished.
     const attachment = result && result.duration >= 0 && result.attachments.find(a => a.name === 'trace');
     if (attachment && attachment.path) {
-      loadSingleTraceFile(attachment.path).then(model => setModel({ model, isLive: false }));
+      loadSingleTraceFile(filePathToTraceURL(attachment.path)).then(model => setModel({ model, isLive: false }));
       return;
     }
 
@@ -72,7 +72,7 @@ export const TraceView: React.FC<{
     // Start polling running test.
     pollTimer.current = setTimeout(async () => {
       try {
-        const model = await loadSingleTraceFile(traceLocation);
+        const model = await loadSingleTraceFile(filePathToTraceURL(traceLocation));
         setModel({ model, isLive: true });
       } catch {
         setModel(undefined);
@@ -108,11 +108,25 @@ const outputDirForTestCase = (testCase: reporterTypes.TestCase): string | undefi
   return undefined;
 };
 
-async function loadSingleTraceFile(url: string): Promise<MultiTraceModel> {
+async function loadSingleTraceFile(traceURL: URL): Promise<MultiTraceModel> {
   const params = new URLSearchParams();
-  params.set('trace', url);
+  params.set('trace', formatUrl(traceURL).toString());
   params.set('limit', '1');
   const response = await fetch(`contexts?${params.toString()}`);
   const contextEntries = await response.json() as ContextEntry[];
   return new MultiTraceModel(contextEntries);
 }
+
+function formatUrl(traceURL: URL) {
+  // Dropbox does not support cors.
+  if (traceURL.hostname === 'dropbox.com')
+    traceURL.hostname = 'dl.dropboxusercontent.com';
+
+  return traceURL;
+}
+
+export function filePathToTraceURL(path: string) {
+  const url = new URL('file', location.href);
+  url.searchParams.set('path', path);
+  return url;
+}