diff --git a/apps/ui/src/components/layout/sidebar/components/sidebar-navigation.tsx b/apps/ui/src/components/layout/sidebar/components/sidebar-navigation.tsx
index f1671a78..d95f0c3a 100644
--- a/apps/ui/src/components/layout/sidebar/components/sidebar-navigation.tsx
+++ b/apps/ui/src/components/layout/sidebar/components/sidebar-navigation.tsx
@@ -41,7 +41,13 @@ export function SidebarNavigation({
                 </span>
               </div>
             )}
-            {section.label && !sidebarOpen && <div className="h-px bg-border/30 mx-2 my-1.5"></div>}
+            {/* Separator for sections without label (visual separation) */}
+            {!section.label && sectionIdx > 0 && sidebarOpen && (
+              <div className="h-px bg-border/40 mx-3 mb-4"></div>
+            )}
+            {(section.label || sectionIdx > 0) && !sidebarOpen && (
+              <div className="h-px bg-border/30 mx-2 my-1.5"></div>
+            )}
 
             {/* Nav Items */}
             <div className="space-y-1.5">
diff --git a/apps/ui/src/components/layout/sidebar/hooks/use-navigation.ts b/apps/ui/src/components/layout/sidebar/hooks/use-navigation.ts
index cb1399c1..79462ab7 100644
--- a/apps/ui/src/components/layout/sidebar/hooks/use-navigation.ts
+++ b/apps/ui/src/components/layout/sidebar/hooks/use-navigation.ts
@@ -168,14 +168,6 @@ export function useNavigation({
       });
     }
 
-    // Add Project Settings to Project section
-    projectItems.push({
-      id: 'project-settings',
-      label: 'Settings',
-      icon: Settings,
-      shortcut: shortcuts.projectSettings,
-    });
-
     const sections: NavSection[] = [
       {
         label: 'Project',
@@ -209,6 +201,19 @@ export function useNavigation({
       });
     }
 
+    // Add Project Settings as a standalone section (no label for visual separation)
+    sections.push({
+      label: '',
+      items: [
+        {
+          id: 'project-settings',
+          label: 'Project Settings',
+          icon: Settings,
+          shortcut: shortcuts.projectSettings,
+        },
+      ],
+    });
+
     return sections;
   }, [
     shortcuts,