Customizing VSCode file explorer through vscode API

Is there a way to customize VSCode file explorer through the API?
I would like to create an extension that allows highlighting files in the file explorer, but I can't find any way to customize the file explorer by looking at the VSCode API reference. Is that possible?

A vscode.window.registerFileDecorationProvider(provider: FileDecorationProvider): Disposable is the only way to manipulate the color of files in the Explorer.

You can have a look at this extension Highlight Files which I wrote to apply a custom color to files not in the current workspace. Here is some code from that extension.js:

let decClass = new FileDecorationProvider(coloredEnabled, badgedEnabled, badge);   // fileDecorator Class

class FileDecorationProvider {        
  constructor(colorEnabled, badgeEnabled, newBadge) {
    this.disposables = [];
    this.disposables.push(vscode.window.registerFileDecorationProvider(this));
    
    this.colorEnabled = colorEnabled;
    this.colorEnabled ? this.color = new vscode.ThemeColor("highlightFiles.nonWorkspaceFiles") : this.color = null;
    
    this.badgeEnabled = badgeEnabled;
    this.badgeEnabled ? this.newBadge = newBadge : this.newBadge = null;
    if (this.badgeEnabled) this.newBadge = this.newBadge || '!';
  }
  
  /**
   * Checks for non-workspace files
   *
   * @param {vscode.Uri} uri
   * @memberof FileDecorationProvider
   **/
  async provideFileDecoration(uri) {
    
    let workspaceFiles = await vscode.workspace.findFiles('**');
    
    if (uri.scheme === 'vscode-userdata') return;  // ignore settings.json and keybindings.json

    const isFile = await vscode.workspace.fs.stat(uri);
    const result = workspaceFiles.findIndex(file => file.fsPath === uri.fsPath);

    const workspaces = vscode.workspace.workspaceFolders;
    const thisWorkspaceFolder = vscode.workspace.getWorkspaceFolder(uri).name;

    // if ((isFile.type === 1) && (thisWorkspaceFolder === "TestMultiRoot"))    // is a file, not a directory && not in workspace
    if (thisWorkspaceFolder === "TestMultiRoot")    // is a file, not a directory && not in workspace
      return {
        badge: this.newBadge,
        // badge: "\u26D6",  // ⛖
        color: new vscode.ThemeColor("highlightFiles.workspaceFolder1"),
        propagate: true,
        tooltip: "Workspace TestMultiRoot"
      };
    else
      return {
        color: new vscode.ThemeColor("highlightFiles.workspaceFolder2"),
        propagate: true,
        tooltip: "Workspace is not TestMultiRoot"
      };
    }
    
    // if ((isFile.type === 1) && (result < 0))    // is a file, not a directory && not in workspace
    //   return {
    //     badge: this.newBadge,
    //     // badge: "\u26D6",  // ⛖
    //     color: this.color,
    //     tooltip: "File not in workspace"
    //   };
    // }

  dispose() {
    this.disposables.forEach((d) => d.dispose());
  }
}