diff --git a/Makefile b/Makefile
index 70d1543b6b..b5fce1205d 100644
--- a/Makefile
+++ b/Makefile
@@ -1356,6 +1356,7 @@ THIRD_PARTY_SOURCES += $(UNIT_TEST_DIR)/clar/%
 THIRD_PARTY_SOURCES += $(UNIT_TEST_DIR)/clar/clar/%
 
 CLAR_TEST_SUITES += u-ctype
+CLAR_TEST_SUITES += u-dir
 CLAR_TEST_SUITES += u-example-decorate
 CLAR_TEST_SUITES += u-hash
 CLAR_TEST_SUITES += u-hashmap
diff --git a/dir.c b/dir.c
index a374972b62..2ee108eeb6 100644
--- a/dir.c
+++ b/dir.c
@@ -277,7 +277,7 @@ int within_depth(const char *name, int namelen,
 		if (depth > max_depth)
 			return 0;
 	}
-	return 1;
+	return depth <= max_depth;
 }
 
 /*
diff --git a/t/meson.build b/t/meson.build
index d052fc3e23..56ea96f04a 100644
--- a/t/meson.build
+++ b/t/meson.build
@@ -1,5 +1,6 @@
 clar_test_suites = [
   'unit-tests/u-ctype.c',
+  'unit-tests/u-dir.c',
   'unit-tests/u-example-decorate.c',
   'unit-tests/u-hash.c',
   'unit-tests/u-hashmap.c',
diff --git a/t/unit-tests/u-dir.c b/t/unit-tests/u-dir.c
new file mode 100644
index 0000000000..2d0adaa39e
--- /dev/null
+++ b/t/unit-tests/u-dir.c
@@ -0,0 +1,47 @@
+#include "unit-test.h"
+#include "dir.h"
+
+#define TEST_WITHIN_DEPTH(path, depth, max_depth, expect) do { \
+		int actual = within_depth(path, strlen(path), \
+					  depth, max_depth); \
+		if (actual != expect) \
+			cl_failf("path '%s' with depth '%d' and max-depth '%d': expected %d, got %d", \
+				 path, depth, max_depth, expect, actual); \
+	} while (0)
+
+void test_dir__within_depth(void)
+{
+	/* depth = 0; max_depth = 0 */
+	TEST_WITHIN_DEPTH("",         0, 0, 1);
+	TEST_WITHIN_DEPTH("file",     0, 0, 1);
+	TEST_WITHIN_DEPTH("a",        0, 0, 1);
+	TEST_WITHIN_DEPTH("a/file",   0, 0, 0);
+	TEST_WITHIN_DEPTH("a/b",      0, 0, 0);
+	TEST_WITHIN_DEPTH("a/b/file", 0, 0, 0);
+
+	/* depth = 0; max_depth = 1 */
+	TEST_WITHIN_DEPTH("",         0, 1, 1);
+	TEST_WITHIN_DEPTH("file",     0, 1, 1);
+	TEST_WITHIN_DEPTH("a",        0, 1, 1);
+	TEST_WITHIN_DEPTH("a/file",   0, 1, 1);
+	TEST_WITHIN_DEPTH("a/b",      0, 1, 1);
+	TEST_WITHIN_DEPTH("a/b/file", 0, 1, 0);
+
+	/* depth = 1; max_depth = 1 */
+	TEST_WITHIN_DEPTH("",         1, 1, 1);
+	TEST_WITHIN_DEPTH("file",     1, 1, 1);
+	TEST_WITHIN_DEPTH("a",        1, 1, 1);
+	TEST_WITHIN_DEPTH("a/file",   1, 1, 0);
+	TEST_WITHIN_DEPTH("a/b",      1, 1, 0);
+	TEST_WITHIN_DEPTH("a/b/file", 1, 1, 0);
+
+	/* depth = 1; max_depth = 0 */
+	TEST_WITHIN_DEPTH("",         1, 0, 0);
+	TEST_WITHIN_DEPTH("file",     1, 0, 0);
+	TEST_WITHIN_DEPTH("a",        1, 0, 0);
+	TEST_WITHIN_DEPTH("a/file",   1, 0, 0);
+	TEST_WITHIN_DEPTH("a/b",      1, 0, 0);
+	TEST_WITHIN_DEPTH("a/b/file", 1, 0, 0);
+
+
+}