diff --git a/IPython/html/base/handlers.py b/IPython/html/base/handlers.py
index 5566013..4cb674b 100644
--- a/IPython/html/base/handlers.py
+++ b/IPython/html/base/handlers.py
@@ -265,7 +265,7 @@ class AuthenticatedFileHandler(IPythonHandler, web.StaticFileHandler):
         """
         abs_path = super(AuthenticatedFileHandler, self).validate_absolute_path(root, absolute_path)
         abs_root = os.path.abspath(root)
-        if is_hidden(abs_root, abs_path):
+        if is_hidden(abs_path, abs_root):
             raise web.HTTPError(404)
         return abs_path
 
diff --git a/IPython/html/services/notebooks/filenbmanager.py b/IPython/html/services/notebooks/filenbmanager.py
index 5e8bd35..33606be 100644
--- a/IPython/html/services/notebooks/filenbmanager.py
+++ b/IPython/html/services/notebooks/filenbmanager.py
@@ -127,7 +127,7 @@ class FileNotebookManager(NotebookManager):
         """
         path = path.strip('/')
         os_path = self.get_os_path(path=path)
-        return is_hidden(self.notebook_dir, os_path)
+        return is_hidden(os_path, self.notebook_dir)
 
     def get_os_path(self, name=None, path=''):
         """Given a notebook name and a URL path, return its file system
@@ -179,13 +179,13 @@ class FileNotebookManager(NotebookManager):
         """List the directories for a given API style path."""
         path = path.strip('/')
         os_path = self.get_os_path('', path)
-        if not os.path.isdir(os_path) or is_hidden(self.notebook_dir, os_path):
+        if not os.path.isdir(os_path) or is_hidden(os_path, self.notebook_dir):
             raise web.HTTPError(404, u'directory does not exist: %r' % os_path)
         dir_names = os.listdir(os_path)
         dirs = []
         for name in dir_names:
             os_path = self.get_os_path(name, path)
-            if os.path.isdir(os_path) and not is_hidden(self.notebook_dir, os_path):
+            if os.path.isdir(os_path) and not is_hidden(os_path, self.notebook_dir):
                 try:
                     model = self.get_dir_model(name, path)
                 except IOError:
diff --git a/IPython/html/tests/test_utils.py b/IPython/html/tests/test_utils.py
index a58d372..0eb6166 100644
--- a/IPython/html/tests/test_utils.py
+++ b/IPython/html/tests/test_utils.py
@@ -66,10 +66,11 @@ def test_is_hidden():
     with TemporaryDirectory() as root:
         subdir1 = os.path.join(root, 'subdir')
         os.makedirs(subdir1)
-        nt.assert_equal(is_hidden(root, subdir1), False)
+        nt.assert_equal(is_hidden(subdir1, root), False)
         subdir2 = os.path.join(root, '.subdir2')
         os.makedirs(subdir2)
-        nt.assert_equal(is_hidden(root, subdir2), True)
+        nt.assert_equal(is_hidden(subdir2, root), True)
         subdir34 = os.path.join(root, 'subdir3', '.subdir4')
         os.makedirs(subdir34)
-        nt.assert_equal(is_hidden(root, subdir34), True)
+        nt.assert_equal(is_hidden(subdir34, root), True)
+        nt.assert_equal(is_hidden(subdir34), True)
diff --git a/IPython/html/utils.py b/IPython/html/utils.py
index 75d0425..d0442a2 100644
--- a/IPython/html/utils.py
+++ b/IPython/html/utils.py
@@ -80,24 +80,31 @@ def url_unescape(path):
         for p in py3compat.unicode_to_str(path).split('/')
     ])
 
-def is_hidden(absolute_root, absolute_path):
+def is_hidden(abs_path, abs_root=''):
     """Is a file is hidden or contained in a hidden directory.
     
-    Hidden is determined by either name starting with '.' or the UF_HIDDEN
-    flag as reported by stat.
+    This will start with the rightmost path element and work backwards to the
+    given root to see if a path is hidden or in a hidden directory. Hidden is
+    determined by either name starting with '.' or the UF_HIDDEN flag as 
+    reported by stat.
     
     Parameters
     ----------
-    absolute_root : unicode
-    absolute_path : unicode
+    abs_path : unicode
+        The absolute path to check for hidden directories.
+    abs_root : unicode
+        The absolute path of the root directory in which hidden directories
+        should be check for.
     """
-    inside_root = absolute_path[len(absolute_root):]
+    if not abs_root:
+        abs_root = abs_path.split(os.sep, 1)[0] + os.sep
+    inside_root = abs_path[len(abs_root):]
     if any(part.startswith('.') for part in inside_root.split(os.sep)):
         return True
     
     # check UF_HIDDEN on any location up to root
-    path = absolute_path
-    while path and path.startswith(absolute_root) and path != absolute_root:
+    path = abs_path
+    while path and path.startswith(abs_root) and path != abs_root:
         st = os.stat(path)
         if getattr(st, 'st_flags', 0) & UF_HIDDEN:
             return True