diff --git a/CMakeLists.txt b/CMakeLists.txt
index c7e499304b..d684bbd9c9 100644
--- a/CMakeLists.txt
+++ b/CMakeLists.txt
@@ -90,6 +90,11 @@ if(CONFIG_COMPILER_DUMP_RTL_FILES)
     list(APPEND compile_options "-fdump-rtl-expand")
 endif()
 
+if(CONFIG_COMPILER_HIDE_PATHS_MACROS)
+    list(APPEND compile_options "-fmacro-prefix-map=${CMAKE_SOURCE_DIR}=.")
+    list(APPEND compile_options "-fmacro-prefix-map=${IDF_PATH}=IDF")
+endif()
+
 # GCC-specific options
 if(CMAKE_C_COMPILER_ID STREQUAL "GNU")
     list(APPEND compile_options "-fstrict-volatile-bitfields"
diff --git a/Kconfig b/Kconfig
index 1d498baf59..6ea56d39ac 100644
--- a/Kconfig
+++ b/Kconfig
@@ -279,6 +279,22 @@ mainmenu "Espressif IoT Development Framework Configuration"
 
         endchoice # assertions
 
+        menuconfig COMPILER_HIDE_PATHS_MACROS
+            bool "Replace ESP-IDF and project paths in binaries"
+            default y
+            depends on IDF_CMAKE
+            help
+                When expanding the __FILE__ and __BASE_FILE__ macros, replace paths inside ESP-IDF
+                with paths relative to the placeholder string "IDF", and convert paths inside the
+                project directory to relative paths.
+
+                This allows building the project with assertions or other code that embeds file paths,
+                without the binary containing the exact path to the IDF or project directories.
+
+                This option passes -fmacro-prefix-map options to the GCC command line. To replace additional
+                paths in your binaries, modify the project CMakeLists.txt file to pass custom -fmacro-prefix-map or
+                -ffile-prefix-map arguments.
+
         menuconfig COMPILER_CXX_EXCEPTIONS
             bool "Enable C++ exceptions"
             default n
diff --git a/tools/test_apps/system/no_embedded_paths/CMakeLists.txt b/tools/test_apps/system/no_embedded_paths/CMakeLists.txt
index e6fdc3cb6b..4edc089d8e 100644
--- a/tools/test_apps/system/no_embedded_paths/CMakeLists.txt
+++ b/tools/test_apps/system/no_embedded_paths/CMakeLists.txt
@@ -9,9 +9,11 @@ idf_build_get_property(idf_path IDF_PATH)
 idf_build_get_property(python PYTHON)
 idf_build_get_property(elf EXECUTABLE)
 
-# If the configuration is one that doesn't expect any paths to be found then run this build step
+# If the configuration is one that doesn't expect the IDF_PATH to be found in binaries then run this build step
 # after building the ELF, will fail if it finds any file paths in binary files
-if(CONFIG_OPTIMIZATION_ASSERTIONS_SILENT OR CONFIG_OPTIMIZATION_ASSERTIONS_DISABLED)
+if(CONFIG_OPTIMIZATION_ASSERTIONS_SILENT OR
+        CONFIG_OPTIMIZATION_ASSERTIONS_DISABLED OR
+        CONFIG_COMPILER_HIDE_PATHS_MACROS)
     add_custom_command(
         TARGET ${elf}
         POST_BUILD
diff --git a/tools/test_apps/system/no_embedded_paths/README.md b/tools/test_apps/system/no_embedded_paths/README.md
index 32a9312a32..5206c2df8e 100644
--- a/tools/test_apps/system/no_embedded_paths/README.md
+++ b/tools/test_apps/system/no_embedded_paths/README.md
@@ -3,12 +3,12 @@
 This test app exists to verify that paths (like __FILE__) are not compiled into
 any object files in configurations where this should be avoided.
 
-It doubles up as a build-time check that disabling assertions doesn't lead to
-any warnings.
+Configurations where this is relevant include:
 
-(These configurations include: assertions disabled, 'silent' asserts, any reproducible
-builds configuration.)
+* Assertions disabled (doubles up as a build-time check that disabling assertions doesn't lead to any warnings)
+* Silent assertions
+* CONFIG_COMPILER_HIDE_PATHS_MACROS is set to replace IDF_PATH and project dir with placeholders when expanding `__FILE__`
 
 Not embedding paths reduces the binary size, avoids leaking information about
-the compilation environment, and is a necessary step to supporet reproducible
+the compilation environment, and is a necessary step to support reproducible
 builds across projects built in different directories.
diff --git a/tools/test_apps/system/no_embedded_paths/main/test_no_embedded_paths_main.c b/tools/test_apps/system/no_embedded_paths/main/test_no_embedded_paths_main.c
index c6d6340883..7fce3f7efc 100644
--- a/tools/test_apps/system/no_embedded_paths/main/test_no_embedded_paths_main.c
+++ b/tools/test_apps/system/no_embedded_paths/main/test_no_embedded_paths_main.c
@@ -1,4 +1,14 @@
-/* This test app only exists for the build stage, so doesn't need to do anything at runtime */
+/* This test app only exists for the build stage, so doesn't need to do anything at runtime
+   apart from embedding an assert to check asserts inside the project dir */
+#include <assert.h>
+
+// Declared non-static to avoid the assert being optimized out
+int other_function(void)
+{
+    return 3;
+}
+
 void app_main(void)
 {
+    assert(other_function() == 3);
 }
diff --git a/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.noasserts b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.noasserts
index 446a04da0b..22cb4d70ea 100644
--- a/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.noasserts
+++ b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.noasserts
@@ -1,5 +1,6 @@
 CONFIG_COMPILER_OPTIMIZATION_ASSERTIONS_DISABLE=y
 CONFIG_FREERTOS_ASSERT_DISABLE=y
+CONFIG_COMPILER_HIDE_PATHS_MACROS=n
 
 # compiling as many files as possible here (we don't have 100% coverage of course, due to config options, but
 # try to maximize what we can check
diff --git a/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.noasserts.nimble b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.noasserts.nimble
index b91ad2022d..7d8ccfe182 100644
--- a/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.noasserts.nimble
+++ b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.noasserts.nimble
@@ -1,5 +1,6 @@
 CONFIG_COMPILER_OPTIMIZATION_ASSERTIONS_DISABLE=y
 CONFIG_FREERTOS_ASSERT_DISABLE=y
+CONFIG_COMPILER_HIDE_PATHS_MACROS=n
 
 # the other sdkconfig builds Bluedroid, build NimBLE here
 #
diff --git a/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.replacepaths b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.replacepaths
new file mode 100644
index 0000000000..966b86d989
--- /dev/null
+++ b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.replacepaths
@@ -0,0 +1,8 @@
+# this is the default value, actually
+CONFIG_COMPILER_HIDE_PATHS_MACROS=y
+
+# compiling as many files as possible here (we don't have 100% coverage of course, due to config options, but
+# try to maximize what we can check
+CONFIG_BT_ENABLED=y
+CONFIG_BT_BLUEDROID_ENABLED=y
+CONFIG_BLE_MESH=y
diff --git a/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.silentasserts b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.silentasserts
index 9b54479ee9..f75fef7686 100644
--- a/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.silentasserts
+++ b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.silentasserts
@@ -1,4 +1,5 @@
 CONFIG_COMPILER_OPTIMIZATION_ASSERTIONS_SILENT=y
+CONFIG_COMPILER_HIDE_PATHS_MACROS=n
 
 # compiling as many files as possible here (we don't have 100% coverage of course, due to config options, but
 # try to maximize what we can check
diff --git a/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.silentasserts.nimble b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.silentasserts.nimble
index ab0cd5aa6d..640f0fd2e1 100644
--- a/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.silentasserts.nimble
+++ b/tools/test_apps/system/no_embedded_paths/sdkconfig.ci.silentasserts.nimble
@@ -1,5 +1,6 @@
 CONFIG_COMPILER_OPTIMIZATION_ASSERTIONS_SILENT=y
 CONFIG_FREERTOS_ASSERT_DISABLE=y
+CONFIG_COMPILER_HIDE_PATHS_MACROS=n
 
 # the other sdkconfig builds Bluedroid, build NimBLE here
 #