diff --git a/src/vs/workbench/services/label/common/labelService.ts b/src/vs/workbench/services/label/common/labelService.ts
index 78fb342c331..cb7100587c8 100644
--- a/src/vs/workbench/services/label/common/labelService.ts
+++ b/src/vs/workbench/services/label/common/labelService.ts
@@ -10,9 +10,9 @@ import * as paths from 'vs/base/common/path';
 import { Emitter } from 'vs/base/common/event';
 import { Extensions as WorkbenchExtensions, IWorkbenchContributionsRegistry, IWorkbenchContribution } from 'vs/workbench/common/contributions';
 import { Registry } from 'vs/platform/registry/common/platform';
-import { IEnvironmentService } from 'vs/platform/environment/common/environment';
+import { IWorkbenchEnvironmentService } from 'vs/workbench/services/environment/common/environmentService';
 import { IWorkspaceContextService, IWorkspace, isWorkspace, ISingleFolderWorkspaceIdentifier, isSingleFolderWorkspaceIdentifier, isWorkspaceIdentifier, IWorkspaceIdentifier, toWorkspaceIdentifier, WORKSPACE_EXTENSION, isUntitledWorkspace, isTemporaryWorkspace } from 'vs/platform/workspace/common/workspace';
-import { basenameOrAuthority, basename, joinPath, dirname } from 'vs/base/common/resources';
+import { basenameOrAuthority, basename, joinPath, dirname, toLocalResource } from 'vs/base/common/resources';
 import { tildify, getPathLabel } from 'vs/base/common/labels';
 import { ILabelService, ResourceLabelFormatter, ResourceLabelFormatting, IFormatterChangeEvent } from 'vs/platform/label/common/label';
 import { ExtensionsRegistry } from 'vs/workbench/services/extensions/common/extensionsRegistry';
@@ -107,7 +107,7 @@ export class LabelService extends Disposable implements ILabelService {
 	readonly onDidChangeFormatters = this._onDidChangeFormatters.event;
 
 	constructor(
-		@IEnvironmentService private readonly environmentService: IEnvironmentService,
+		@IWorkbenchEnvironmentService private readonly environmentService: IWorkbenchEnvironmentService,
 		@IWorkspaceContextService private readonly contextService: IWorkspaceContextService,
 		@IPathService private readonly pathService: IPathService
 	) {
@@ -156,7 +156,16 @@ export class LabelService extends Disposable implements ILabelService {
 
 	private doGetUriLabel(resource: URI, formatting?: ResourceLabelFormatting, options: { relative?: boolean; noPrefix?: boolean; endWithSeparator?: boolean } = {}): string {
 		if (!formatting) {
-			return getPathLabel(resource, { userHome: this.pathService.resolvedUserHome }, options.relative ? this.contextService : undefined);
+
+			// Without a formatter we have to fallback to figuring out what the
+			// label could be given the environment. For that we convert the
+			// given resource to the default scheme and remote authority that
+			// is present in an attempt to e.g. resolve a proper relative path
+			// if that is needed.
+
+			const defaultResource = toLocalResource(resource, this.environmentService.remoteAuthority, this.pathService.defaultUriScheme);
+
+			return getPathLabel(defaultResource, { userHome: this.pathService.resolvedUserHome }, options.relative ? this.contextService : undefined);
 		}
 
 		let label: string | undefined;
diff --git a/src/vs/workbench/services/label/test/browser/label.test.ts b/src/vs/workbench/services/label/test/browser/label.test.ts
index fd625cd763c..ea4f1bdead0 100644
--- a/src/vs/workbench/services/label/test/browser/label.test.ts
+++ b/src/vs/workbench/services/label/test/browser/label.test.ts
@@ -260,7 +260,7 @@ suite('multi-root workspace', () => {
 				new Workspace('test-workspace', [
 					new WorkspaceFolder({ uri: rootFolder, index: 0, name: 'FSProotFolder' }),
 				])),
-			new TestPathService());
+			new TestPathService(undefined, rootFolder.scheme));
 
 		const generated = labelService.getUriLabel(URI.parse('myscheme://myauthority/some/folder/test.txt'), { relative: true });
 		if (isWindows) {
diff --git a/src/vs/workbench/services/workingCopy/test/browser/fileWorkingCopyManager.test.ts b/src/vs/workbench/services/workingCopy/test/browser/fileWorkingCopyManager.test.ts
index 157a36e5cdd..307ed8eb379 100644
--- a/src/vs/workbench/services/workingCopy/test/browser/fileWorkingCopyManager.test.ts
+++ b/src/vs/workbench/services/workingCopy/test/browser/fileWorkingCopyManager.test.ts
@@ -247,7 +247,7 @@ suite('FileWorkingCopyManager', () => {
 		const workingCopy = await manager.resolve({ associatedResource: { path: '/some/associated.txt' } });
 		workingCopy.model?.updateContents('Simple Save As with associated resource');
 
-		const target = URI.from({ scheme: Schemas.vscodeRemote, path: '/some/associated.txt' });
+		const target = URI.from({ scheme: Schemas.file, path: '/some/associated.txt' });
 
 		accessor.fileService.notExistsSet.set(target, true);
 
diff --git a/src/vs/workbench/services/workingCopy/test/browser/untitledFileWorkingCopyManager.test.ts b/src/vs/workbench/services/workingCopy/test/browser/untitledFileWorkingCopyManager.test.ts
index e37181dafe7..69f8c133efc 100644
--- a/src/vs/workbench/services/workingCopy/test/browser/untitledFileWorkingCopyManager.test.ts
+++ b/src/vs/workbench/services/workingCopy/test/browser/untitledFileWorkingCopyManager.test.ts
@@ -226,7 +226,7 @@ suite('UntitledFileWorkingCopyManager', () => {
 		const workingCopy = await manager.untitled.resolve({ associatedResource: { path: '/some/associated.txt' } });
 		workingCopy.model?.updateContents('Simple Save with associated resource');
 
-		accessor.fileService.notExistsSet.set(URI.from({ scheme: Schemas.vscodeRemote, path: '/some/associated.txt' }), true);
+		accessor.fileService.notExistsSet.set(URI.from({ scheme: Schemas.file, path: '/some/associated.txt' }), true);
 
 		const result = await workingCopy.save();
 		assert.ok(result);
diff --git a/src/vs/workbench/test/browser/workbenchTestServices.ts b/src/vs/workbench/test/browser/workbenchTestServices.ts
index b4690df3ec9..e006fbc7187 100644
--- a/src/vs/workbench/test/browser/workbenchTestServices.ts
+++ b/src/vs/workbench/test/browser/workbenchTestServices.ts
@@ -1677,7 +1677,7 @@ export class TestPathService implements IPathService {
 
 	declare readonly _serviceBrand: undefined;
 
-	constructor(private readonly fallbackUserHome: URI = URI.from({ scheme: Schemas.vscodeRemote, path: '/' }), public defaultUriScheme = Schemas.vscodeRemote) { }
+	constructor(private readonly fallbackUserHome: URI = URI.from({ scheme: Schemas.file, path: '/' }), public defaultUriScheme = Schemas.file) { }
 
 	hasValidBasename(resource: URI, basename?: string): Promise<boolean>;
 	hasValidBasename(resource: URI, os: OperatingSystem, basename?: string): boolean;