diff --git a/homeassistant/components/downloader/__init__.py b/homeassistant/components/downloader/__init__.py
index eb844ad8d3f..8b33c1d7ed3 100644
--- a/homeassistant/components/downloader/__init__.py
+++ b/homeassistant/components/downloader/__init__.py
@@ -18,6 +18,9 @@ async def async_setup_entry(hass: HomeAssistant, entry: ConfigEntry) -> bool:
     # If path is relative, we assume relative to Home Assistant config dir
     if not os.path.isabs(download_path):
         download_path = hass.config.path(download_path)
+        hass.config_entries.async_update_entry(
+            entry, data={**entry.data, CONF_DOWNLOAD_DIR: download_path}
+        )
 
     if not await hass.async_add_executor_job(os.path.isdir, download_path):
         _LOGGER.error(
diff --git a/homeassistant/components/downloader/services.py b/homeassistant/components/downloader/services.py
index bb1b968dd99..0ccaee232d7 100644
--- a/homeassistant/components/downloader/services.py
+++ b/homeassistant/components/downloader/services.py
@@ -11,6 +11,7 @@ import requests
 import voluptuous as vol
 
 from homeassistant.core import HomeAssistant, ServiceCall, callback
+from homeassistant.exceptions import ServiceValidationError
 from homeassistant.helpers import config_validation as cv
 from homeassistant.helpers.service import async_register_admin_service
 from homeassistant.util import raise_if_invalid_filename, raise_if_invalid_path
@@ -34,24 +35,33 @@ def download_file(service: ServiceCall) -> None:
 
     entry = service.hass.config_entries.async_loaded_entries(DOMAIN)[0]
     download_path = entry.data[CONF_DOWNLOAD_DIR]
+    url: str = service.data[ATTR_URL]
+    subdir: str | None = service.data.get(ATTR_SUBDIR)
+    target_filename: str | None = service.data.get(ATTR_FILENAME)
+    overwrite: bool = service.data[ATTR_OVERWRITE]
+
+    if subdir:
+        # Check the path
+        try:
+            raise_if_invalid_path(subdir)
+        except ValueError as err:
+            raise ServiceValidationError(
+                translation_domain=DOMAIN,
+                translation_key="subdir_invalid",
+                translation_placeholders={"subdir": subdir},
+            ) from err
+        if os.path.isabs(subdir):
+            raise ServiceValidationError(
+                translation_domain=DOMAIN,
+                translation_key="subdir_not_relative",
+                translation_placeholders={"subdir": subdir},
+            )
 
     def do_download() -> None:
         """Download the file."""
+        final_path = None
+        filename = target_filename
         try:
-            url = service.data[ATTR_URL]
-
-            subdir = service.data.get(ATTR_SUBDIR)
-
-            filename = service.data.get(ATTR_FILENAME)
-
-            overwrite = service.data.get(ATTR_OVERWRITE)
-
-            if subdir:
-                # Check the path
-                raise_if_invalid_path(subdir)
-
-            final_path = None
-
             req = requests.get(url, stream=True, timeout=10)
 
             if req.status_code != HTTPStatus.OK:
diff --git a/homeassistant/components/downloader/strings.json b/homeassistant/components/downloader/strings.json
index 7db7ea459d7..98c4a0a6c82 100644
--- a/homeassistant/components/downloader/strings.json
+++ b/homeassistant/components/downloader/strings.json
@@ -12,6 +12,14 @@
       "single_instance_allowed": "[%key:common::config_flow::abort::single_instance_allowed%]"
     }
   },
+  "exceptions": {
+    "subdir_invalid": {
+      "message": "Invalid subdirectory, got: {subdir}"
+    },
+    "subdir_not_relative": {
+      "message": "Subdirectory must be relative, got: {subdir}"
+    }
+  },
   "services": {
     "download_file": {
       "name": "Download file",
diff --git a/tests/components/downloader/conftest.py b/tests/components/downloader/conftest.py
new file mode 100644
index 00000000000..3bb63455ccc
--- /dev/null
+++ b/tests/components/downloader/conftest.py
@@ -0,0 +1,94 @@
+"""Provide common fixtures for downloader tests."""
+
+import asyncio
+from pathlib import Path
+
+import pytest
+from requests_mock import Mocker
+
+from homeassistant.components.downloader.const import (
+    CONF_DOWNLOAD_DIR,
+    DOMAIN,
+    DOWNLOAD_COMPLETED_EVENT,
+    DOWNLOAD_FAILED_EVENT,
+)
+from homeassistant.core import Event, HomeAssistant, callback
+
+from tests.common import MockConfigEntry
+
+
+@pytest.fixture
+async def setup_integration(
+    hass: HomeAssistant,
+    mock_config_entry: MockConfigEntry,
+) -> MockConfigEntry:
+    """Set up the downloader integration for testing."""
+    await hass.config_entries.async_setup(mock_config_entry.entry_id)
+    await hass.async_block_till_done()
+
+    return mock_config_entry
+
+
+@pytest.fixture
+def mock_config_entry(
+    hass: HomeAssistant,
+    download_dir: Path,
+) -> MockConfigEntry:
+    """Return a mocked config entry."""
+    config_entry = MockConfigEntry(
+        domain=DOMAIN,
+        data={CONF_DOWNLOAD_DIR: str(download_dir)},
+    )
+    config_entry.add_to_hass(hass)
+    return config_entry
+
+
+@pytest.fixture
+def download_dir(tmp_path: Path) -> Path:
+    """Return a download directory."""
+    return tmp_path
+
+
+@pytest.fixture(autouse=True)
+def mock_download_request(
+    requests_mock: Mocker,
+    download_url: str,
+) -> None:
+    """Mock the download request."""
+    requests_mock.get(download_url, text="{'one': 1}")
+
+
+@pytest.fixture
+def download_url() -> str:
+    """Return a mock download URL."""
+    return "http://example.com/file.txt"
+
+
+@pytest.fixture
+def download_completed(hass: HomeAssistant) -> asyncio.Event:
+    """Return an asyncio event to wait for download completion."""
+    download_event = asyncio.Event()
+
+    @callback
+    def download_set(event: Event[dict[str, str]]) -> None:
+        """Set the event when download is completed."""
+        download_event.set()
+
+    hass.bus.async_listen_once(f"{DOMAIN}_{DOWNLOAD_COMPLETED_EVENT}", download_set)
+
+    return download_event
+
+
+@pytest.fixture
+def download_failed(hass: HomeAssistant) -> asyncio.Event:
+    """Return an asyncio event to wait for download failure."""
+    download_event = asyncio.Event()
+
+    @callback
+    def download_set(event: Event[dict[str, str]]) -> None:
+        """Set the event when download has failed."""
+        download_event.set()
+
+    hass.bus.async_listen_once(f"{DOMAIN}_{DOWNLOAD_FAILED_EVENT}", download_set)
+
+    return download_event
diff --git a/tests/components/downloader/test_init.py b/tests/components/downloader/test_init.py
index e74eb376b39..fe001838afe 100644
--- a/tests/components/downloader/test_init.py
+++ b/tests/components/downloader/test_init.py
@@ -1,6 +1,8 @@
 """Tests for the downloader component init."""
 
-from unittest.mock import patch
+from pathlib import Path
+
+import pytest
 
 from homeassistant.components.downloader.const import (
     CONF_DOWNLOAD_DIR,
@@ -13,17 +15,57 @@ from homeassistant.core import HomeAssistant
 from tests.common import MockConfigEntry
 
 
-async def test_initialization(hass: HomeAssistant) -> None:
-    """Test the initialization of the downloader component."""
-    config_entry = MockConfigEntry(
-        domain=DOMAIN,
-        data={
-            CONF_DOWNLOAD_DIR: "/test_dir",
-        },
-    )
-    config_entry.add_to_hass(hass)
-    with patch("os.path.isdir", return_value=True):
-        assert await hass.config_entries.async_setup(config_entry.entry_id)
+@pytest.fixture
+def download_dir(tmp_path: Path, request: pytest.FixtureRequest) -> Path:
+    """Return a download directory."""
+    if hasattr(request, "param"):
+        return tmp_path / request.param
+    return tmp_path
+
+
+async def test_config_entry_setup(
+    hass: HomeAssistant, setup_integration: MockConfigEntry
+) -> None:
+    """Test config entry setup."""
+    config_entry = setup_integration
 
     assert hass.services.has_service(DOMAIN, SERVICE_DOWNLOAD_FILE)
     assert config_entry.state is ConfigEntryState.LOADED
+
+
+async def test_config_entry_setup_relative_directory(
+    hass: HomeAssistant, mock_config_entry: MockConfigEntry
+) -> None:
+    """Test config entry setup with a relative download directory."""
+    relative_directory = "downloads"
+    hass.config_entries.async_update_entry(
+        mock_config_entry,
+        data={**mock_config_entry.data, CONF_DOWNLOAD_DIR: relative_directory},
+    )
+
+    await hass.config_entries.async_setup(mock_config_entry.entry_id)
+
+    # The config entry will fail to set up since the directory does not exist.
+    # This is not relevant for this test.
+    assert mock_config_entry.state is ConfigEntryState.SETUP_ERROR
+    assert mock_config_entry.data[CONF_DOWNLOAD_DIR] == hass.config.path(
+        relative_directory
+    )
+
+
+@pytest.mark.parametrize(
+    "download_dir",
+    [
+        "not_existing_path",
+    ],
+    indirect=True,
+)
+async def test_config_entry_setup_not_existing_directory(
+    hass: HomeAssistant,
+    mock_config_entry: MockConfigEntry,
+) -> None:
+    """Test config entry setup without existing download directory."""
+    await hass.config_entries.async_setup(mock_config_entry.entry_id)
+
+    assert not hass.services.has_service(DOMAIN, SERVICE_DOWNLOAD_FILE)
+    assert mock_config_entry.state is ConfigEntryState.SETUP_ERROR
diff --git a/tests/components/downloader/test_services.py b/tests/components/downloader/test_services.py
new file mode 100644
index 00000000000..fbdc088021a
--- /dev/null
+++ b/tests/components/downloader/test_services.py
@@ -0,0 +1,54 @@
+"""Test downloader services."""
+
+import asyncio
+from contextlib import AbstractContextManager, nullcontext as does_not_raise
+
+import pytest
+
+from homeassistant.components.downloader.const import DOMAIN
+from homeassistant.core import HomeAssistant
+from homeassistant.exceptions import ServiceValidationError
+
+
+@pytest.mark.usefixtures("setup_integration")
+@pytest.mark.parametrize(
+    ("subdir", "expected_result"),
+    [
+        ("test", does_not_raise()),
+        ("test/path", does_not_raise()),
+        ("~test/path", pytest.raises(ServiceValidationError)),
+        ("~/../test/path", pytest.raises(ServiceValidationError)),
+        ("../test/path", pytest.raises(ServiceValidationError)),
+        (".../test/path", pytest.raises(ServiceValidationError)),
+        ("/test/path", pytest.raises(ServiceValidationError)),
+    ],
+)
+async def test_download_invalid_subdir(
+    hass: HomeAssistant,
+    download_completed: asyncio.Event,
+    download_failed: asyncio.Event,
+    download_url: str,
+    subdir: str,
+    expected_result: AbstractContextManager,
+) -> None:
+    """Test service invalid subdirectory."""
+
+    async def call_service() -> None:
+        """Call the download service."""
+        completed = hass.async_create_task(download_completed.wait())
+        failed = hass.async_create_task(download_failed.wait())
+        await hass.services.async_call(
+            DOMAIN,
+            "download_file",
+            {
+                "url": download_url,
+                "subdir": subdir,
+                "filename": "file.txt",
+                "overwrite": True,
+            },
+            blocking=True,
+        )
+        await asyncio.wait((completed, failed), return_when=asyncio.FIRST_COMPLETED)
+
+    with expected_result:
+        await call_service()