diff --git a/highlighters/main/main-highlighter.zsh b/highlighters/main/main-highlighter.zsh
index c44b1c3..b7c1bf0 100644
--- a/highlighters/main/main-highlighter.zsh
+++ b/highlighters/main/main-highlighter.zsh
@@ -1006,7 +1006,7 @@ _zsh_highlight_main_highlighter_highlight_list()
                           fi
                           _zsh_highlight_main__stack_pop 'R' reserved-word
                         else
-                          if _zsh_highlight_main_highlighter_check_path $arg; then
+                          if _zsh_highlight_main_highlighter_check_path $arg 1; then
                             style=$REPLY
                           else
                             style=unknown-token
@@ -1115,12 +1115,19 @@ _zsh_highlight_main_highlighter_highlight_path_separators()
 # Check if $1 is a path.
 # If yes, return 0 and in $REPLY the style to use.
 # Else, return non-zero (and the contents of $REPLY is undefined).
+#
+# $2 should be non-zero iff we're in command position.
 _zsh_highlight_main_highlighter_check_path()
 {
   _zsh_highlight_main_highlighter_expand_path "$1"
   local expanded_path="$REPLY" tmp_path
+  integer in_command_position=$2
 
-  REPLY=path
+  if (( in_command_position )); then
+    REPLY=arg0
+  else
+    REPLY=path
+  fi
 
   if [[ ${1[1]} == '=' && $1 == ??* && ${1[2]} != $'\x28' && $zsyh_user_options[equals] == 'on' && $expanded_path[1] != '/' ]]; then
     REPLY=unknown-token # will error out if executed
@@ -1142,15 +1149,23 @@ _zsh_highlight_main_highlighter_check_path()
     tmp_path=$tmp_path:h
   done
 
-  [[ -L $expanded_path ]] && return 0
-  [[ -e $expanded_path ]] && return 0
+  if (( in_command_position )); then
+    if [[ -x $expanded_path ]] && [[ $zsyh_user_options[autocd] == on || ! -d $expanded_path ]]; then
+      return 0
+    fi
+  else
+    if [[ -L $expanded_path || -e $expanded_path ]]; then
+      return 0
+    fi
+  fi
 
   # Search the path in CDPATH
-  if [[ $expanded_path != /* ]]; then
-    local cdpath_dir
+  if [[ $expanded_path != /* ]] &&
+     { (( ! in_command_position )) || [[ $zsyh_user_options[autocd] == on ]] }; then
     # TODO: When we've dropped support for pre-5.0.6 zsh, use the *(Y1) glob qualifier here.
+    local cdpath_dir
     for cdpath_dir in $cdpath ; do
-      [[ -e "$cdpath_dir/$expanded_path" ]] && return 0
+      [[ -d "$cdpath_dir/$expanded_path" && -x "$cdpath_dir/$expanded_path" ]] && return 0
     done
   fi
 
@@ -1162,7 +1177,14 @@ _zsh_highlight_main_highlighter_check_path()
      [[ $WIDGET != zle-line-finish ]]; then
     # TODO: When we've dropped support for pre-5.0.6 zsh, use the *(Y1) glob qualifier here.
     local -a tmp
-    tmp=( ${expanded_path}*(N) )
+    if (( in_command_position )); then
+      # We include directories even when autocd is enabled, because those
+      # directories might contain executable files: e.g., BUFFER="/bi" en route
+      # to typing "/bin/sh".
+      tmp=( ${expanded_path}*(N-*,N-/) )
+    else
+      tmp=( ${expanded_path}*(N) )
+    fi
     (( ${+tmp[1]} )) && REPLY=path_prefix && return 0
   fi
 
@@ -1173,6 +1195,8 @@ _zsh_highlight_main_highlighter_check_path()
 # Highlight an argument and possibly special chars in quotes starting at $1 in $arg
 # This command will at least highlight $1 to end_pos with the default style
 # If $2 is set to 0, the argument cannot be highlighted as an option.
+#
+# This function currently assumes it's never called for the command word.
 _zsh_highlight_main_highlighter_highlight_argument()
 {
   local base_style=default i=$1 option_eligible=${2:-1} path_eligible=1 ret start style
@@ -1307,7 +1331,8 @@ _zsh_highlight_main_highlighter_highlight_argument()
       else
         base_style=numeric-fd
       fi
-    elif _zsh_highlight_main_highlighter_check_path $arg[$1,-1]; then
+    # This function is currently never called for the command word, so $2 is hard-coded as 0.
+    elif _zsh_highlight_main_highlighter_check_path $arg[$1,-1] 0; then
       base_style=$REPLY
       _zsh_highlight_main_highlighter_highlight_path_separators $base_style
       highlights+=($reply)
diff --git a/highlighters/main/test-data/abspath-in-command-position1.zsh b/highlighters/main/test-data/abspath-in-command-position1.zsh
index 75140d2..cfc12a5 100644
--- a/highlighters/main/test-data/abspath-in-command-position1.zsh
+++ b/highlighters/main/test-data/abspath-in-command-position1.zsh
@@ -31,5 +31,5 @@
 BUFFER=$'/'
 
 expected_region_highlight=(
-  '1 1 path' # /
+  '1 1 path_prefix' # /
 )
diff --git a/highlighters/main/test-data/abspath-in-command-position1b.zsh b/highlighters/main/test-data/abspath-in-command-position1b.zsh
new file mode 100644
index 0000000..82292ed
--- /dev/null
+++ b/highlighters/main/test-data/abspath-in-command-position1b.zsh
@@ -0,0 +1,36 @@
+#!/usr/bin/env zsh
+# -------------------------------------------------------------------------------------------------
+# Copyright (c) 2020 zsh-syntax-highlighting contributors
+# All rights reserved.
+#
+# Redistribution and use in source and binary forms, with or without modification, are permitted
+# provided that the following conditions are met:
+#
+#  * Redistributions of source code must retain the above copyright notice, this list of conditions
+#    and the following disclaimer.
+#  * Redistributions in binary form must reproduce the above copyright notice, this list of
+#    conditions and the following disclaimer in the documentation and/or other materials provided
+#    with the distribution.
+#  * Neither the name of the zsh-syntax-highlighting contributors nor the names of its contributors
+#    may be used to endorse or promote products derived from this software without specific prior
+#    written permission.
+#
+# THIS SOFTWARE IS PROVIDED BY THE COPYRIGHT HOLDERS AND CONTRIBUTORS "AS IS" AND ANY EXPRESS OR
+# IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
+# FITNESS FOR A PARTICULAR PURPOSE ARE DISCLAIMED. IN NO EVENT SHALL THE COPYRIGHT HOLDER OR
+# CONTRIBUTORS BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, OR CONSEQUENTIAL
+# DAMAGES (INCLUDING, BUT NOT LIMITED TO, PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES; LOSS OF USE,
+# DATA, OR PROFITS; OR BUSINESS INTERRUPTION) HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER
+# IN CONTRACT, STRICT LIABILITY, OR TORT (INCLUDING NEGLIGENCE OR OTHERWISE) ARISING IN ANY WAY OUT
+# OF THE USE OF THIS SOFTWARE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
+# -------------------------------------------------------------------------------------------------
+# -*- mode: zsh; sh-indentation: 2; indent-tabs-mode: nil; sh-basic-offset: 2; -*-
+# vim: ft=zsh sw=2 ts=2 et
+# -------------------------------------------------------------------------------------------------
+
+setopt autocd
+BUFFER=$'/'
+
+expected_region_highlight=(
+  '1 1 arg0' # /
+)
diff --git a/highlighters/main/test-data/abspath-in-command-position3.zsh b/highlighters/main/test-data/abspath-in-command-position3.zsh
index 6c89ddc..415e316 100644
--- a/highlighters/main/test-data/abspath-in-command-position3.zsh
+++ b/highlighters/main/test-data/abspath-in-command-position3.zsh
@@ -31,7 +31,7 @@
 BUFFER=$'/bin; /bin'
 
 expected_region_highlight=(
-  '1 4 path' # /bin (in middle)
+  '1 4 unknown-token' # /bin (in middle)
   '5 5 commandseparator' # ;
-  '7 10 path' # /bin (at end)
+  '7 10 path_prefix' # /bin (at end)
 )
diff --git a/highlighters/main/test-data/abspath-in-command-position3b.zsh b/highlighters/main/test-data/abspath-in-command-position3b.zsh
index f75ad9e..e43b7fb 100644
--- a/highlighters/main/test-data/abspath-in-command-position3b.zsh
+++ b/highlighters/main/test-data/abspath-in-command-position3b.zsh
@@ -32,7 +32,7 @@ setopt autocd
 BUFFER=$'/bin; /bin'
 
 expected_region_highlight=(
-  '1 4 path' # /bin (in middle)
+  '1 4 arg0' # /bin (in middle)
   '5 5 commandseparator' # ;
-  '7 10 path' # /bin (at end)
+  '7 10 arg0' # /bin (at end)
 )
diff --git a/highlighters/main/test-data/path-dollared-word3.zsh b/highlighters/main/test-data/path-dollared-word3.zsh
index 6921cba..ec981b1 100644
--- a/highlighters/main/test-data/path-dollared-word3.zsh
+++ b/highlighters/main/test-data/path-dollared-word3.zsh
@@ -34,7 +34,7 @@
 BUFFER='$PWD; ${PWD}'
 
 expected_region_highlight=(
-  "1 4 path" # $PWD
+  "1 4 unknown-token" # $PWD (without AUTO_CD)
   "5 5 commandseparator" # ;
-  "7 12 path" # ${PWD}
+  "7 12 path_prefix" # ${PWD}
 )
diff --git a/highlighters/main/test-data/path-dollared-word3b.zsh b/highlighters/main/test-data/path-dollared-word3b.zsh
new file mode 100644
index 0000000..7c904f3
--- /dev/null
+++ b/highlighters/main/test-data/path-dollared-word3b.zsh
@@ -0,0 +1,39 @@
+#!/usr/bin/env zsh
+# -------------------------------------------------------------------------------------------------
+# Copyright (c) 2020 zsh-syntax-highlighting contributors
+# All rights reserved.
+#
+# Redistribution and use in source and binary forms, with or without modification, are permitted
+# provided that the following conditions are met:
+#
+#  * Redistributions of source code must retain the above copyright notice, this list of conditions
+#    and the following disclaimer.
+#  * Redistributions in binary form must reproduce the above copyright notice, this list of
+#    conditions and the following disclaimer in the documentation and/or other materials provided
+#    with the distribution.
+#  * Neither the name of the zsh-syntax-highlighting contributors nor the names of its contributors
+#    may be used to endorse or promote products derived from this software without specific prior
+#    written permission.
+#
+# THIS SOFTWARE IS PROVIDED BY THE COPYRIGHT HOLDERS AND CONTRIBUTORS "AS IS" AND ANY EXPRESS OR
+# IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
+# FITNESS FOR A PARTICULAR PURPOSE ARE DISCLAIMED. IN NO EVENT SHALL THE COPYRIGHT HOLDER OR
+# CONTRIBUTORS BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, OR CONSEQUENTIAL
+# DAMAGES (INCLUDING, BUT NOT LIMITED TO, PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES; LOSS OF USE,
+# DATA, OR PROFITS; OR BUSINESS INTERRUPTION) HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER
+# IN CONTRACT, STRICT LIABILITY, OR TORT (INCLUDING NEGLIGENCE OR OTHERWISE) ARISING IN ANY WAY OUT
+# OF THE USE OF THIS SOFTWARE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
+# -------------------------------------------------------------------------------------------------
+# -*- mode: zsh; sh-indentation: 2; indent-tabs-mode: nil; sh-basic-offset: 2; -*-
+# vim: ft=zsh sw=2 ts=2 et
+# -------------------------------------------------------------------------------------------------
+
+setopt autocd
+
+BUFFER=$'$PWD; ${PWD}'
+
+expected_region_highlight=(
+  '1 4 arg0' # $PWD
+  '5 5 commandseparator' # ;
+  '7 12 arg0' # ${PWD}
+)
diff --git a/highlighters/main/test-data/plain-file-in-command-position.zsh b/highlighters/main/test-data/plain-file-in-command-position.zsh
index b16e43c..141ffac 100644
--- a/highlighters/main/test-data/plain-file-in-command-position.zsh
+++ b/highlighters/main/test-data/plain-file-in-command-position.zsh
@@ -33,7 +33,7 @@ chmod -x foo
 BUFFER=$'./foo; ./foo'
 
 expected_region_highlight=(
-  '1 5 unknown-token "issue #202"' # ./foo (in middle)
+  '1 5 unknown-token' # ./foo (in middle)
   '6 6 commandseparator' # ;
-  '8 12 unknown-token "issue #202"' # ./foo (at end)
+  '8 12 unknown-token' # ./foo (at end)
 )