diff --git a/platform/platform-impl/src/com/intellij/openapi/vfs/newvfs/impl/VirtualDirectoryImpl.java b/platform/platform-impl/src/com/intellij/openapi/vfs/newvfs/impl/VirtualDirectoryImpl.java
index be9c80200e63..31df42e40c30 100644
--- a/platform/platform-impl/src/com/intellij/openapi/vfs/newvfs/impl/VirtualDirectoryImpl.java
+++ b/platform/platform-impl/src/com/intellij/openapi/vfs/newvfs/impl/VirtualDirectoryImpl.java
@@ -1,4 +1,4 @@
-// Copyright 2000-2024 JetBrains s.r.o. and contributors. Use of this source code is governed by the Apache 2.0 license.
+// Copyright 2000-2025 JetBrains s.r.o. and contributors. Use of this source code is governed by the Apache 2.0 license.
 package com.intellij.openapi.vfs.newvfs.impl;
 
 import com.intellij.openapi.application.ApplicationManager;
@@ -349,10 +349,11 @@ public class VirtualDirectoryImpl extends VirtualFileSystemEntry {
   private void updateCaseSensitivityIfUnknown(@NotNull String childName) {
     VFilePropertyChangeEvent caseSensitivityEvent = generateCaseSensitivityChangedEventForUnknownCase(this, childName);
     if (caseSensitivityEvent != null) {
-
-      changeCaseSensitivity(this, (FileAttributes.CaseSensitivity)caseSensitivityEvent.getNewValue());
+      //TODO RC: inside generateCaseSensitivityChangedEventForUnknownCase() we update case-sensitivity if it is == FS.default,
+      //         and here we update case-sensitivity if it is !=FS.default -- why such a separation?
+      owningPersistentFS().executeChangeCaseSensitivity(this, (FileAttributes.CaseSensitivity)caseSensitivityEvent.getNewValue());
       // fire event asynchronously to avoid deadlocks with possibly currently held VFP/Refresh queue locks
-      RefreshQueue.getInstance().processEvents(true, List.of(caseSensitivityEvent));
+      RefreshQueue.getInstance().processEvents(/*async: */true, List.of(caseSensitivityEvent));
       // when the case-sensitivity changes, the "children must be sorted by name" invariant must be restored
       resortChildren();
     }
@@ -968,25 +969,21 @@ public class VirtualDirectoryImpl extends VirtualFileSystemEntry {
   @ApiStatus.Internal
   public static VFilePropertyChangeEvent generateCaseSensitivityChangedEvent(@NotNull VirtualFile dir,
                                                                              @NotNull FileAttributes.CaseSensitivity actualCaseSensitivity) {
-    if (actualCaseSensitivity != FileAttributes.CaseSensitivity.UNKNOWN) {
-      if (dir.getFileSystem().isCaseSensitive() != (actualCaseSensitivity == FileAttributes.CaseSensitivity.SENSITIVE)) {
-        // fire only when the new case sensitivity is different from the default FS sensitivity,
-        // because only in that case the file.isCaseSensitive() value could change
-        return new VFilePropertyChangeEvent(REFRESH_REQUESTOR, dir, VirtualFile.PROP_CHILDREN_CASE_SENSITIVITY,
-                                            FileAttributes.CaseSensitivity.UNKNOWN, actualCaseSensitivity);
-      }
-      else {
-        changeCaseSensitivity(dir, actualCaseSensitivity);
-      }
+    if (actualCaseSensitivity == FileAttributes.CaseSensitivity.UNKNOWN) {
+      return null;
     }
+
+    if (dir.getFileSystem().isCaseSensitive() != (actualCaseSensitivity == FileAttributes.CaseSensitivity.SENSITIVE)) {
+      // fire only when the new case sensitivity is different from the default FS sensitivity,
+      // because only in that case the file.isCaseSensitive() value could change
+      return new VFilePropertyChangeEvent(REFRESH_REQUESTOR, dir, VirtualFile.PROP_CHILDREN_CASE_SENSITIVITY,
+                                          FileAttributes.CaseSensitivity.UNKNOWN, actualCaseSensitivity);
+    }
+
+    //TODO RC: why we update the case-sensitivity only if it is == FS.default?
+    //TODO RC: why we update case-sensitivity in method that should be just generating an event?
+    PersistentFSImpl persistentFS = (PersistentFSImpl)PersistentFS.getInstance();
+    persistentFS.executeChangeCaseSensitivity((VirtualDirectoryImpl)dir, actualCaseSensitivity);
     return null;
   }
-
-  private static void changeCaseSensitivity(@NotNull VirtualFile vFile,
-                                            @NotNull FileAttributes.CaseSensitivity newValue) {
-    ((PersistentFSImpl)PersistentFS.getInstance()).executeChangeCaseSensitivity(
-      vFile,
-      newValue
-    );
-  }
 }
diff --git a/platform/platform-impl/src/com/intellij/openapi/vfs/newvfs/persistent/PersistentFSImpl.java b/platform/platform-impl/src/com/intellij/openapi/vfs/newvfs/persistent/PersistentFSImpl.java
index 763fcf6d14c6..feb8f07841d4 100644
--- a/platform/platform-impl/src/com/intellij/openapi/vfs/newvfs/persistent/PersistentFSImpl.java
+++ b/platform/platform-impl/src/com/intellij/openapi/vfs/newvfs/persistent/PersistentFSImpl.java
@@ -253,14 +253,14 @@ public final class PersistentFSImpl extends PersistentFS implements Disposable {
 
   @Override
   public void dispose() {
+    //noinspection IncorrectCancellationExceptionHandling
     try {
       disconnect();
     }
     catch (ProcessCanceledException e) {
       // Application may be closed before `LocalFileSystem` gets initialized()
       //noinspection IncorrectCancellationExceptionHandling
-      LOG.warn("Detected cancellation during dispose of PersistentFS. Application was likely closed before VFS got completely initialized",
-               e);
+      LOG.warn("Detected cancellation during dispose of PersistentFS. Application was likely closed before VFS got completely initialized", e);
     }
   }
 
@@ -2138,7 +2138,7 @@ public final class PersistentFSImpl extends PersistentFS implements Disposable {
           }
           case VirtualFile.PROP_HIDDEN -> executeSetHidden(file, ((Boolean)newValue).booleanValue());
           case VirtualFile.PROP_SYMLINK_TARGET -> executeSetTarget(file, (String)newValue);
-          case VirtualFile.PROP_CHILDREN_CASE_SENSITIVITY -> executeChangeCaseSensitivity(file, (FileAttributes.CaseSensitivity)newValue);
+          case VirtualFile.PROP_CHILDREN_CASE_SENSITIVITY -> executeChangeCaseSensitivity((VirtualDirectoryImpl)file, (FileAttributes.CaseSensitivity)newValue);
         }
       }
     }
@@ -2150,10 +2150,14 @@ public final class PersistentFSImpl extends PersistentFS implements Disposable {
     }
   }
 
+  /**
+   * Update case-sensitivity of the directory, both in persistent VFS structure, and in in-memory cache.
+   * Change doesn't produce a modification event
+   */
   @ApiStatus.Internal
-  public void executeChangeCaseSensitivity(@NotNull VirtualFile file, @NotNull FileAttributes.CaseSensitivity newCaseSensitivity) {
-    VirtualDirectoryImpl directory = (VirtualDirectoryImpl)file;
-    int fileId = fileId(file);
+  public void executeChangeCaseSensitivity(@NotNull VirtualDirectoryImpl directory,
+                                           @NotNull FileAttributes.CaseSensitivity newCaseSensitivity) {
+    int fileId = fileId(directory);
     vfsPeer.updateRecordFields(fileId, record -> {
       boolean sensitivityChanged = (newCaseSensitivity == FileAttributes.CaseSensitivity.SENSITIVE)
                                    ? record.addFlags(Flags.CHILDREN_CASE_SENSITIVE)