diff --git a/packages/filesystem/src/browser/file-resource.ts b/packages/filesystem/src/browser/file-resource.ts
index 845b817fab951..274267dfaea88 100644
--- a/packages/filesystem/src/browser/file-resource.ts
+++ b/packages/filesystem/src/browser/file-resource.ts
@@ -19,10 +19,11 @@ import { Resource, ResourceVersion, ResourceResolver, ResourceError, ResourceSav
 import { DisposableCollection } from '@theia/core/lib/common/disposable';
 import { Emitter, Event } from '@theia/core/lib/common/event';
 import URI from '@theia/core/lib/common/uri';
-import { FileOperation, FileOperationError, FileOperationResult, ETAG_DISABLED, FileSystemProviderCapabilities } from '../common/files';
+import { FileOperation, FileOperationError, FileOperationResult, ETAG_DISABLED, FileSystemProviderCapabilities, FileReadStreamOptions, BinarySize } from '../common/files';
 import { FileService, TextFileOperationError, TextFileOperationResult } from './file-service';
 import { ConfirmDialog } from '@theia/core/lib/browser/dialogs';
 import { LabelProvider } from '@theia/core/lib/browser/label-provider';
+import { GENERAL_MAX_FILE_SIZE_MB } from './filesystem-preferences';
 
 export interface FileResourceVersion extends ResourceVersion {
     readonly encoding: string;
@@ -43,6 +44,7 @@ export interface FileResourceOptions {
 export class FileResource implements Resource {
 
     protected acceptTextOnly = true;
+    protected limits: FileReadStreamOptions['limits'];
 
     protected readonly toDispose = new DisposableCollection();
     protected readonly onDidChangeContentsEmitter = new Emitter<void>();
@@ -95,7 +97,8 @@ export class FileResource implements Resource {
             const stat = await this.fileService.read(this.uri, {
                 encoding,
                 etag: ETAG_DISABLED,
-                acceptTextOnly: this.acceptTextOnly
+                acceptTextOnly: this.acceptTextOnly,
+                limits: this.limits
             });
             this._version = {
                 encoding: stat.encoding,
@@ -105,14 +108,20 @@ export class FileResource implements Resource {
             return stat.value;
         } catch (e) {
             if (e instanceof TextFileOperationError && e.textFileOperationResult === TextFileOperationResult.FILE_IS_BINARY) {
-                if (await this.shouldOpenAsText(e.message)) {
+                if (await this.shouldOpenAsText('The file is either binary or uses an unsupported text encoding.')) {
                     this.acceptTextOnly = false;
                     return this.readContents(options);
-                } else {
-                    throw e;
                 }
-            }
-            if (e instanceof FileOperationError && e.fileOperationResult === FileOperationResult.FILE_NOT_FOUND) {
+            } else if (e instanceof FileOperationError && e.fileOperationResult === FileOperationResult.FILE_TOO_LARGE) {
+                const stat = await this.fileService.resolve(this.uri, { resolveMetadata: true });
+                const maxFileSize = GENERAL_MAX_FILE_SIZE_MB * 1024 * 1024;
+                if (this.limits?.size !== maxFileSize && await this.shouldOpenAsText(`The file is too large (${BinarySize.formatSize(stat.size)}).`)) {
+                    this.limits = {
+                        size: maxFileSize
+                    };
+                    return this.readContents(options);
+                }
+            } else if (e instanceof FileOperationError && e.fileOperationResult === FileOperationResult.FILE_NOT_FOUND) {
                 this._version = undefined;
                 const { message, stack } = e;
                 throw ResourceError.NotFound({
@@ -266,7 +275,7 @@ export class FileResourceResolver implements ResourceResolver {
     protected async shouldOpenAsText(uri: URI, error: string): Promise<boolean> {
         const dialog = new ConfirmDialog({
             title: error,
-            msg: `Do you want to open '${this.labelProvider.getLongName(uri)}' anyway?`,
+            msg: `Opening it might take some time and might make the IDE unresponsive. Do you want to open '${this.labelProvider.getLongName(uri)}' anyway?`,
             ok: 'Yes',
             cancel: 'No'
         });
diff --git a/packages/filesystem/src/browser/file-service.ts b/packages/filesystem/src/browser/file-service.ts
index 7d928162a9ea9..294ac4b084c9a 100644
--- a/packages/filesystem/src/browser/file-service.ts
+++ b/packages/filesystem/src/browser/file-service.ts
@@ -63,6 +63,7 @@ import type { TextDocumentContentChangeEvent } from 'vscode-languageserver-proto
 import { EncodingRegistry } from '@theia/core/lib/browser/encoding-registry';
 import { UTF8, UTF8_with_bom } from '@theia/core/lib/common/encodings';
 import { EncodingService, ResourceEncoding } from '@theia/core/lib/common/encoding-service';
+import { Mutable } from '@theia/core/lib/common/types';
 
 export interface FileOperationParticipant {
 
@@ -565,10 +566,7 @@ export class FileService {
     }
 
     async read(resource: URI, options?: ReadTextFileOptions): Promise<TextFileContent> {
-        options = {
-            ...options,
-            autoGuessEncoding: typeof options?.autoGuessEncoding === 'boolean' ? options.autoGuessEncoding : this.preferences['files.autoGuessEncoding']
-        };
+        options = this.resolveReadOptions(options);
         const content = await this.readFile(resource, options);
         // TODO stream
         const detected = await this.encodingService.detectEncoding(content.value, options.autoGuessEncoding);
@@ -580,6 +578,18 @@ export class FileService {
         return { ...content, encoding, value };
     }
 
+    protected resolveReadOptions(options?: ReadTextFileOptions): ReadTextFileOptions {
+        options = {
+            ...options,
+            autoGuessEncoding: typeof options?.autoGuessEncoding === 'boolean' ? options.autoGuessEncoding : this.preferences['files.autoGuessEncoding']
+        };
+        const limits: Mutable<ReadTextFileOptions['limits']> = options.limits = options.limits || {};
+        if (typeof limits.size !== 'number') {
+            limits.size = this.preferences['files.maxFileSizeMB'] * 1024 * 1024;
+        }
+        return options;
+    }
+
     async update(resource: URI, changes: TextDocumentContentChangeEvent[], options: UpdateTextFileOptions): Promise<FileStatWithMetadata & { encoding: string }> {
         const provider = this.throwIfFileSystemIsReadonly(await this.withWriteProvider(resource), resource);
         try {
@@ -828,9 +838,30 @@ export class FileService {
             throw new FileOperationError('File not modified since', FileOperationResult.FILE_NOT_MODIFIED_SINCE, options);
         }
 
+        // Throw if file is too large to load
+        this.validateReadFileLimits(resource, stat.size, options);
+
         return stat;
     }
 
+    private validateReadFileLimits(resource: URI, size: number, options?: ReadFileOptions): void {
+        if (options?.limits) {
+            let tooLargeErrorResult: FileOperationResult | undefined = undefined;
+
+            if (typeof options.limits.memory === 'number' && size > options.limits.memory) {
+                tooLargeErrorResult = FileOperationResult.FILE_EXCEEDS_MEMORY_LIMIT;
+            }
+
+            if (typeof options.limits.size === 'number' && size > options.limits.size) {
+                tooLargeErrorResult = FileOperationResult.FILE_TOO_LARGE;
+            }
+
+            if (typeof tooLargeErrorResult === 'number') {
+                throw new FileOperationError(`Unable to read file '${this.resourceForError(resource)}' that is too large to open`, tooLargeErrorResult);
+            }
+        }
+    }
+
     // #endregion
 
     // #region Move/Copy/Delete/Create Folder
diff --git a/packages/filesystem/src/browser/filesystem-preferences.ts b/packages/filesystem/src/browser/filesystem-preferences.ts
index 57044a67fd0c9..5c8e872b6dc14 100644
--- a/packages/filesystem/src/browser/filesystem-preferences.ts
+++ b/packages/filesystem/src/browser/filesystem-preferences.ts
@@ -23,6 +23,13 @@ import {
     PreferenceContribution
 } from '@theia/core/lib/browser/preferences';
 import { SUPPORTED_ENCODINGS } from '@theia/core/lib/browser/supported-encodings';
+import { environment } from '@theia/application-package/lib/environment';
+
+// See https://github.com/Microsoft/vscode/issues/30180
+export const WIN32_MAX_FILE_SIZE_MB = 300; // 300 MB
+export const GENERAL_MAX_FILE_SIZE_MB = 16 * 1024; // 16 GB
+
+export const MAX_FILE_SIZE_MB = environment.electron.is() ? process.arch === 'ia32' ? WIN32_MAX_FILE_SIZE_MB : GENERAL_MAX_FILE_SIZE_MB : 32;
 
 export const filesystemPreferenceSchema: PreferenceSchema = {
     'type': 'object',
@@ -66,6 +73,11 @@ These have precedence over the default associations of the languages installed.'
             type: 'number',
             default: 5000,
             markdownDescription: 'Timeout in milliseconds after which file participants for create, rename, and delete are cancelled. Use `0` to disable participants.'
+        },
+        'files.maxFileSizeMB': {
+            type: 'number',
+            default: MAX_FILE_SIZE_MB,
+            markdownDescription: 'Controls the max file size in MB which is possible to open.'
         }
     }
 };
@@ -78,6 +90,7 @@ export interface FileSystemConfiguration {
     'files.encoding': string;
     'files.autoGuessEncoding': boolean;
     'files.participants.timeout': number;
+    'files.maxFileSizeMB': number;
 }
 
 export const FileSystemPreferences = Symbol('FileSystemPreferences');
diff --git a/packages/filesystem/src/common/files.ts b/packages/filesystem/src/common/files.ts
index 193c2c66526cf..b521ca006fa61 100644
--- a/packages/filesystem/src/common/files.ts
+++ b/packages/filesystem/src/common/files.ts
@@ -443,6 +443,14 @@ export interface FileReadStreamOptions {
 	 * will be read.
 	 */
     readonly length?: number;
+
+	/**
+	 * If provided, the size of the file will be checked against the limits.
+	 */
+    limits?: {
+        readonly size?: number;
+        readonly memory?: number;
+    };
 }
 
 export interface FileUpdateOptions {
@@ -695,3 +703,28 @@ export function etag(stat: { mtime: number | undefined, size: number | undefined
 
     return stat.mtime.toString(29) + stat.size.toString(31);
 }
+/**
+ * Helper to format a raw byte size into a human readable label.
+ */
+export class BinarySize {
+    static readonly KB = 1024;
+    static readonly MB = BinarySize.KB * BinarySize.KB;
+    static readonly GB = BinarySize.MB * BinarySize.KB;
+    static readonly TB = BinarySize.GB * BinarySize.KB;
+
+    static formatSize(size: number): string {
+        if (size < BinarySize.KB) {
+            return size + 'B';
+        }
+        if (size < BinarySize.MB) {
+            return (size / BinarySize.KB).toFixed(2) + 'KB';
+        }
+        if (size < BinarySize.GB) {
+            return (size / BinarySize.MB).toFixed(2) + 'MB';
+        }
+        if (size < BinarySize.TB) {
+            return (size / BinarySize.GB).toFixed(2) + 'GB';
+        }
+        return (size / BinarySize.TB).toFixed(2) + 'TB';
+    }
+}