diff --git a/packages/react-router/tests/link.test.tsx b/packages/react-router/tests/link.test.tsx
index bbb9fd8f042..63495f44027 100644
--- a/packages/react-router/tests/link.test.tsx
+++ b/packages/react-router/tests/link.test.tsx
@@ -2044,10 +2044,16 @@ describe('Link', () => {
 
     const postRoute = createRoute({
       getParentRoute: () => postsRoute,
-      path: '$postId/',
+      path: '$postId',
       component: PostComponent,
     })
 
+    const postIndexRoute = createRoute({
+      getParentRoute: () => postRoute,
+      path: '/',
+      component: () => <div>Post Index</div>,
+    })
+
     const DetailsComponent = () => {
       return (
         <>
@@ -2080,7 +2086,11 @@ describe('Link', () => {
         indexRoute,
         layoutRoute.addChildren([
           postsRoute.addChildren([
-            postRoute.addChildren([detailsRoute, informationRoute]),
+            postRoute.addChildren([
+              postIndexRoute,
+              detailsRoute,
+              informationRoute,
+            ]),
           ]),
         ]),
       ]),
diff --git a/packages/router-core/src/new-process-route-tree.ts b/packages/router-core/src/new-process-route-tree.ts
index 64abb685b6a..9fa3f91a0b1 100644
--- a/packages/router-core/src/new-process-route-tree.ts
+++ b/packages/router-core/src/new-process-route-tree.ts
@@ -7,13 +7,22 @@ export const SEGMENT_TYPE_PATHNAME = 0
 export const SEGMENT_TYPE_PARAM = 1
 export const SEGMENT_TYPE_WILDCARD = 2
 export const SEGMENT_TYPE_OPTIONAL_PARAM = 3
+const SEGMENT_TYPE_INDEX = 4
 
+/**
+ * All the kinds of segments that can be present in a route path.
+ */
 export type SegmentKind =
   | typeof SEGMENT_TYPE_PATHNAME
   | typeof SEGMENT_TYPE_PARAM
   | typeof SEGMENT_TYPE_WILDCARD
   | typeof SEGMENT_TYPE_OPTIONAL_PARAM
 
+/**
+ * All the kinds of segments that can be present in the segment tree.
+ */
+type ExtendedSegmentKind = SegmentKind | typeof SEGMENT_TYPE_INDEX
+
 const PARAM_W_CURLY_BRACES_RE =
   /^([^{]*)\{\$([a-zA-Z_$][a-zA-Z0-9_$]*)\}([^}]*)$/ // prefix{$paramName}suffix
 const OPTIONAL_PARAM_W_CURLY_BRACES_RE =
@@ -326,20 +335,26 @@ function parseSegments<TRouteLike extends RouteLike>(
       }
       node = nextNode
     }
-    if ((route.path || !route.children) && !route.isRoot) {
-      const isIndex = path.endsWith('/')
-      // we cannot fuzzy match an index route,
-      // but if there is *also* a layout route at this path, save it as notFound
-      // we can use it when fuzzy matching to display the NotFound component in the layout route
-      if (!isIndex) node.notFound = route
-      // does the new route take precedence over an existing one?
-      // yes if previous is not an index route and new one is an index route
-      if (!node.route || (!node.isIndex && isIndex)) {
-        node.route = route
-        // when replacing, replace all attributes that are route-specific (`fullPath` only at the moment)
-        node.fullPath = route.fullPath ?? route.from
-      }
-      node.isIndex ||= isIndex
+
+    const isLeaf = (route.path || !route.children) && !route.isRoot
+
+    // create index node
+    if (isLeaf && path.endsWith('/')) {
+      const indexNode = createStaticNode<TRouteLike>(
+        route.fullPath ?? route.from,
+      )
+      indexNode.kind = SEGMENT_TYPE_INDEX
+      indexNode.parent = node
+      depth++
+      indexNode.depth = depth
+      node.index = indexNode
+      node = indexNode
+    }
+
+    // make node "matchable"
+    if (isLeaf && !node.route) {
+      node.route = route
+      node.fullPath = route.fullPath ?? route.from
     }
   }
   if (route.children)
@@ -417,6 +432,7 @@ function createStaticNode<T extends RouteLike>(
   return {
     kind: SEGMENT_TYPE_PATHNAME,
     depth: 0,
+    index: null,
     static: null,
     staticInsensitive: null,
     dynamic: null,
@@ -425,8 +441,6 @@ function createStaticNode<T extends RouteLike>(
     route: null,
     fullPath,
     parent: null,
-    isIndex: false,
-    notFound: null,
   }
 }
 
@@ -447,6 +461,7 @@ function createDynamicNode<T extends RouteLike>(
   return {
     kind,
     depth: 0,
+    index: null,
     static: null,
     staticInsensitive: null,
     dynamic: null,
@@ -455,8 +470,6 @@ function createDynamicNode<T extends RouteLike>(
     route: null,
     fullPath,
     parent: null,
-    isIndex: false,
-    notFound: null,
     caseSensitive,
     prefix,
     suffix,
@@ -464,7 +477,7 @@ function createDynamicNode<T extends RouteLike>(
 }
 
 type StaticSegmentNode<T extends RouteLike> = SegmentNode<T> & {
-  kind: typeof SEGMENT_TYPE_PATHNAME
+  kind: typeof SEGMENT_TYPE_PATHNAME | typeof SEGMENT_TYPE_INDEX
 }
 
 type DynamicSegmentNode<T extends RouteLike> = SegmentNode<T> & {
@@ -482,12 +495,15 @@ type AnySegmentNode<T extends RouteLike> =
   | DynamicSegmentNode<T>
 
 type SegmentNode<T extends RouteLike> = {
-  kind: SegmentKind
+  kind: ExtendedSegmentKind
+
+  /** Exact index segment (highest priority) */
+  index: StaticSegmentNode<T> | null
 
-  /** Static segments (highest priority) */
+  /** Static segments (2nd priority) */
   static: Map<string, StaticSegmentNode<T>> | null
 
-  /** Case insensitive static segments (second highest priority) */
+  /** Case insensitive static segments (3rd highest priority) */
   staticInsensitive: Map<string, StaticSegmentNode<T>> | null
 
   /** Dynamic segments ($param) */
@@ -508,12 +524,6 @@ type SegmentNode<T extends RouteLike> = {
   parent: AnySegmentNode<T> | null
 
   depth: number
-
-  /** is it an index route (trailing / path), only valid for nodes with a `route` */
-  isIndex: boolean
-
-  /** Same as `route`, but only present if both an "index route" and a "layout route" exist at this path */
-  notFound: T | null
 }
 
 type RouteLike = {
@@ -713,11 +723,8 @@ function findMatch<T extends RouteLike>(
   const leaf = getNodeMatch(path, parts, segmentTree, fuzzy)
   if (!leaf) return null
   const params = extractParams(path, parts, leaf)
-  const isFuzzyMatch = '**' in leaf
-  if (isFuzzyMatch) params['**'] = leaf['**']
-  const route = isFuzzyMatch
-    ? (leaf.node.notFound ?? leaf.node.route!)
-    : leaf.node.route!
+  if ('**' in leaf) params['**'] = leaf['**']!
+  const route = leaf.node.route!
   return {
     route,
     params,
@@ -837,6 +844,11 @@ function getNodeMatch<T extends RouteLike>(
   segmentTree: AnySegmentNode<T>,
   fuzzy: boolean,
 ) {
+  // quick check for root index
+  // this is an optimization, algorithm should work correctly without this block
+  if (path === '/' && segmentTree.index)
+    return { node: segmentTree.index, skipped: 0 }
+
   const trailingSlash = !last(parts)
   const pathIsIndex = trailingSlash && path !== '/'
   const partsLength = parts.length - (trailingSlash ? 1 : 0)
@@ -872,22 +884,36 @@ function getNodeMatch<T extends RouteLike>(
     let { node, index, skipped, depth, statics, dynamics, optionals } = frame
 
     // In fuzzy mode, track the best partial match we've found so far
-    if (fuzzy && node.notFound && isFrameMoreSpecific(bestFuzzy, frame)) {
+    if (
+      fuzzy &&
+      node.route &&
+      node.kind !== SEGMENT_TYPE_INDEX &&
+      isFrameMoreSpecific(bestFuzzy, frame)
+    ) {
       bestFuzzy = frame
     }
 
     const isBeyondPath = index === partsLength
     if (isBeyondPath) {
-      if (node.route && (!pathIsIndex || node.isIndex)) {
+      if (node.route && (!pathIsIndex || node.kind === SEGMENT_TYPE_INDEX)) {
         if (isFrameMoreSpecific(bestMatch, frame)) {
           bestMatch = frame
         }
 
         // perfect match, no need to continue
-        if (statics === partsLength && node.isIndex) return bestMatch
+        // this is an optimization, algorithm should work correctly without this block
+        if (
+          statics === partsLength &&
+          !dynamics &&
+          !optionals &&
+          !skipped &&
+          node.kind === SEGMENT_TYPE_INDEX
+        ) {
+          return bestMatch
+        }
       }
-      // beyond the length of the path parts, only skipped optional segments or wildcard segments can match
-      if (!node.optional && !node.wildcard) continue
+      // beyond the length of the path parts, only index segments, or skipped optional segments, or wildcard segments can match
+      if (!node.optional && !node.wildcard && !node.index) continue
     }
 
     const part = isBeyondPath ? undefined : parts[index]!
@@ -1022,6 +1048,19 @@ function getNodeMatch<T extends RouteLike>(
         })
       }
     }
+
+    // 0. Try index match
+    if (isBeyondPath && node.index) {
+      stack.push({
+        node: node.index,
+        index,
+        skipped,
+        depth: depth + 1,
+        statics,
+        dynamics,
+        optionals,
+      })
+    }
   }
 
   if (bestMatch && wildcardMatch) {
@@ -1064,8 +1103,10 @@ function isFrameMoreSpecific(
         (next.dynamics === prev.dynamics &&
           (next.optionals > prev.optionals ||
             (next.optionals === prev.optionals &&
-              (next.node.isIndex > prev.node.isIndex ||
-                (next.node.isIndex === prev.node.isIndex &&
+              ((next.node.kind === SEGMENT_TYPE_INDEX) >
+                (prev.node.kind === SEGMENT_TYPE_INDEX) ||
+                ((next.node.kind === SEGMENT_TYPE_INDEX) ===
+                  (prev.node.kind === SEGMENT_TYPE_INDEX) &&
                   next.depth > prev.depth)))))))
   )
 }
diff --git a/packages/router-core/tests/new-process-route-tree.test.ts b/packages/router-core/tests/new-process-route-tree.test.ts
index 746cd470928..47083567e21 100644
--- a/packages/router-core/tests/new-process-route-tree.test.ts
+++ b/packages/router-core/tests/new-process-route-tree.test.ts
@@ -718,7 +718,7 @@ describe('findRouteMatch', () => {
             path: 'dashboard/',
           },
           {
-            id: '/dashboard',
+            id: '/dashboard/invoices',
             fullPath: '/dashboard/invoices',
             path: 'invoices',
           },
diff --git a/packages/router-plugin/src/core/route-hmr-statement.ts b/packages/router-plugin/src/core/route-hmr-statement.ts
index a5771ebee7e..b910c1340b4 100644
--- a/packages/router-plugin/src/core/route-hmr-statement.ts
+++ b/packages/router-plugin/src/core/route-hmr-statement.ts
@@ -40,8 +40,7 @@ function handleRouteUpdate(
     node: AnyRouter['processedTree']['segmentTree'],
   ) {
     if (node.route?.id === route.id) node.route = route
-    if (node.notFound?.id === route.id) node.notFound = route
-
+    if (node.index) walkReplaceSegmentTree(route, node.index)
     node.static?.forEach((child) => walkReplaceSegmentTree(route, child))
     node.staticInsensitive?.forEach((child) =>
       walkReplaceSegmentTree(route, child),
diff --git a/packages/router-plugin/tests/add-hmr/snapshots/react/arrow-function@true.tsx b/packages/router-plugin/tests/add-hmr/snapshots/react/arrow-function@true.tsx
index f80eab81e9f..5a3588a7dc8 100644
--- a/packages/router-plugin/tests/add-hmr/snapshots/react/arrow-function@true.tsx
+++ b/packages/router-plugin/tests/add-hmr/snapshots/react/arrow-function@true.tsx
@@ -34,7 +34,7 @@ if (import.meta.hot) {
         ;
         function walkReplaceSegmentTree(route, node) {
           if (node.route?.id === route.id) node.route = route;
-          if (node.notFound?.id === route.id) node.notFound = route;
+          if (node.index) walkReplaceSegmentTree(route, node.index);
           node.static?.forEach(child => walkReplaceSegmentTree(route, child));
           node.staticInsensitive?.forEach(child => walkReplaceSegmentTree(route, child));
           node.dynamic?.forEach(child => walkReplaceSegmentTree(route, child));
diff --git a/packages/router-plugin/tests/add-hmr/snapshots/react/function-declaration@true.tsx b/packages/router-plugin/tests/add-hmr/snapshots/react/function-declaration@true.tsx
index 1664f20bbbc..bee310532ff 100644
--- a/packages/router-plugin/tests/add-hmr/snapshots/react/function-declaration@true.tsx
+++ b/packages/router-plugin/tests/add-hmr/snapshots/react/function-declaration@true.tsx
@@ -34,7 +34,7 @@ if (import.meta.hot) {
         ;
         function walkReplaceSegmentTree(route, node) {
           if (node.route?.id === route.id) node.route = route;
-          if (node.notFound?.id === route.id) node.notFound = route;
+          if (node.index) walkReplaceSegmentTree(route, node.index);
           node.static?.forEach(child => walkReplaceSegmentTree(route, child));
           node.staticInsensitive?.forEach(child => walkReplaceSegmentTree(route, child));
           node.dynamic?.forEach(child => walkReplaceSegmentTree(route, child));
diff --git a/packages/router-plugin/tests/add-hmr/snapshots/solid/arrow-function@true.tsx b/packages/router-plugin/tests/add-hmr/snapshots/solid/arrow-function@true.tsx
index e140124caa2..3ad31b8eb2b 100644
--- a/packages/router-plugin/tests/add-hmr/snapshots/solid/arrow-function@true.tsx
+++ b/packages/router-plugin/tests/add-hmr/snapshots/solid/arrow-function@true.tsx
@@ -33,7 +33,7 @@ if (import.meta.hot) {
         ;
         function walkReplaceSegmentTree(route, node) {
           if (node.route?.id === route.id) node.route = route;
-          if (node.notFound?.id === route.id) node.notFound = route;
+          if (node.index) walkReplaceSegmentTree(route, node.index);
           node.static?.forEach(child => walkReplaceSegmentTree(route, child));
           node.staticInsensitive?.forEach(child => walkReplaceSegmentTree(route, child));
           node.dynamic?.forEach(child => walkReplaceSegmentTree(route, child));
diff --git a/packages/solid-router/tests/link.test.tsx b/packages/solid-router/tests/link.test.tsx
index 8d9f36374d8..5adfee22474 100644
--- a/packages/solid-router/tests/link.test.tsx
+++ b/packages/solid-router/tests/link.test.tsx
@@ -2064,10 +2064,16 @@ describe('Link', () => {
 
     const postRoute = createRoute({
       getParentRoute: () => postsRoute,
-      path: '$postId/',
+      path: '$postId',
       component: PostComponent,
     })
 
+    const postIndexRoute = createRoute({
+      getParentRoute: () => postRoute,
+      path: '/',
+      component: () => <div>Post Index</div>,
+    })
+
     const DetailsComponent = () => {
       return (
         <>
@@ -2100,7 +2106,11 @@ describe('Link', () => {
         indexRoute,
         layoutRoute.addChildren([
           postsRoute.addChildren([
-            postRoute.addChildren([detailsRoute, informationRoute]),
+            postRoute.addChildren([
+              postIndexRoute,
+              detailsRoute,
+              informationRoute,
+            ]),
           ]),
         ]),
       ]),
diff --git a/packages/vue-router/tests/link.test.tsx b/packages/vue-router/tests/link.test.tsx
index b4abc5c5818..b49cc08fb8b 100644
--- a/packages/vue-router/tests/link.test.tsx
+++ b/packages/vue-router/tests/link.test.tsx
@@ -2068,10 +2068,16 @@ describe('Link', () => {
 
     const postRoute = createRoute({
       getParentRoute: () => postsRoute,
-      path: '$postId/',
+      path: '$postId',
       component: PostComponent,
     })
 
+    const postIndexRoute = createRoute({
+      getParentRoute: () => postRoute,
+      path: '/',
+      component: () => <div>Post Index</div>,
+    })
+
     const DetailsComponent = () => {
       return (
         <>
@@ -2104,7 +2110,11 @@ describe('Link', () => {
         indexRoute,
         layoutRoute.addChildren([
           postsRoute.addChildren([
-            postRoute.addChildren([detailsRoute, informationRoute]),
+            postRoute.addChildren([
+              postIndexRoute,
+              detailsRoute,
+              informationRoute,
+            ]),
           ]),
         ]),
       ]),