diff --git a/bundle/config/mutator/prepend_workspace_prefix.go b/bundle/config/mutator/prepend_workspace_prefix.go
index 616759ee4f..3124244c85 100644
--- a/bundle/config/mutator/prepend_workspace_prefix.go
+++ b/bundle/config/mutator/prepend_workspace_prefix.go
@@ -41,7 +41,7 @@ func (m *prependWorkspacePrefix) Apply(ctx context.Context, b *bundle.Bundle) di
 			v, err = dyn.MapByPattern(v, pattern, func(p dyn.Path, pv dyn.Value) (dyn.Value, error) {
 				path, ok := pv.AsString()
 				if !ok {
-					return dyn.InvalidValue, fmt.Errorf("expected string, got %s", v.Kind())
+					return dyn.InvalidValue, fmt.Errorf("expected string, got %s", pv.Kind())
 				}
 
 				// Skip prefixing if the path does not start with /, it might be variable reference or smth else.
@@ -55,7 +55,8 @@ func (m *prependWorkspacePrefix) Apply(ctx context.Context, b *bundle.Bundle) di
 					}
 				}
 
-				return dyn.NewValue("/Workspace"+path, v.Locations()), nil
+				// Use pv's locations, not the root v's, so diagnostics point at the original config line.
+				return dyn.NewValue("/Workspace"+path, pv.Locations()), nil
 			})
 			if err != nil {
 				return dyn.InvalidValue, err
diff --git a/bundle/config/mutator/prepend_workspace_prefix_test.go b/bundle/config/mutator/prepend_workspace_prefix_test.go
index b4c3f4ddaa..93b3acde92 100644
--- a/bundle/config/mutator/prepend_workspace_prefix_test.go
+++ b/bundle/config/mutator/prepend_workspace_prefix_test.go
@@ -5,6 +5,8 @@ import (
 
 	"github.com/databricks/cli/bundle"
 	"github.com/databricks/cli/bundle/config"
+	"github.com/databricks/cli/bundle/internal/bundletest"
+	"github.com/databricks/cli/libs/dyn"
 	"github.com/databricks/databricks-sdk-go/service/iam"
 	"github.com/stretchr/testify/require"
 )
@@ -63,6 +65,23 @@ func TestPrependWorkspacePrefix(t *testing.T) {
 	}
 }
 
+func TestPrependWorkspacePrefixPreservesLocations(t *testing.T) {
+	b := &bundle.Bundle{
+		Config: config.Root{
+			Workspace: config.Workspace{
+				RootPath: "/Users/test",
+			},
+		},
+	}
+	locations := []dyn.Location{{File: "databricks.yml", Line: 42, Column: 5}}
+	bundletest.SetLocation(b, "workspace.root_path", locations)
+
+	diags := bundle.Apply(t.Context(), b, PrependWorkspacePrefix())
+	require.Empty(t, diags)
+	require.Equal(t, "/Workspace/Users/test", b.Config.Workspace.RootPath)
+	require.Equal(t, locations, b.Config.GetLocations("workspace.root_path"))
+}
+
 func TestPrependWorkspaceForDefaultConfig(t *testing.T) {
 	b := &bundle.Bundle{
 		Config: config.Root{