diff --git a/CHANGELOG.md b/CHANGELOG.md
index df104bda0..dd87bc70f 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -7,6 +7,10 @@
 - Add support for Python UDFs ([#1336](https://github.com/databricks/dbt-databricks/pull/1336))
 - Add support for key-only `databricks_tags` for table and column tagging. This can now be configured by setting tag values to empty strings `""` or `None`. ([#1339](https://github.com/databricks/dbt-databricks/pull/1339))
 
+### Under the Hood
+
+- **BREAKING:** `databricks_tags` defined at different hierarchy levels (e.g. project-level and model-level) now merge additively instead of the child config completely replacing the parent.
+
 ## dbt-databricks 1.11.7 (Apr 17, 2026)
 
 ### Features
diff --git a/dbt/adapters/databricks/impl.py b/dbt/adapters/databricks/impl.py
index b7234e278..5b461967c 100644
--- a/dbt/adapters/databricks/impl.py
+++ b/dbt/adapters/databricks/impl.py
@@ -5,7 +5,7 @@
 from collections.abc import Iterable, Iterator
 from concurrent.futures import Future
 from contextlib import contextmanager
-from dataclasses import dataclass
+from dataclasses import dataclass, field
 from importlib import metadata
 from multiprocessing.context import SpawnContext
 from typing import TYPE_CHECKING, Any, ClassVar, Generic, NamedTuple, Optional, Union, cast
@@ -29,7 +29,7 @@
     SparkAdapter,
 )
 from dbt_common.behavior_flags import BehaviorFlag
-from dbt_common.contracts.config.base import BaseConfig
+from dbt_common.contracts.config.base import BaseConfig, MergeBehavior
 from dbt_common.exceptions import DbtConfigError, DbtInternalError
 from dbt_common.utils import executor
 from dbt_common.utils.dict import AttrDict
@@ -176,7 +176,9 @@ class DatabricksConfig(AdapterConfig):
     options: Optional[dict[str, str]] = None
     merge_update_columns: Optional[str] = None
     merge_exclude_columns: Optional[str] = None
-    databricks_tags: Optional[dict[str, str]] = None
+    databricks_tags: Optional[dict[str, str]] = field(
+        default=None, metadata=MergeBehavior.Update.meta()
+    )
     query_tags: Optional[str] = None
     tblproperties: Optional[dict[str, str]] = None
     zorder: Optional[Union[list[str], str]] = None
diff --git a/tests/functional/adapter/tags/fixtures.py b/tests/functional/adapter/tags/fixtures.py
index 3dad09a82..6044876cc 100644
--- a/tests/functional/adapter/tags/fixtures.py
+++ b/tests/functional/adapter/tags/fixtures.py
@@ -16,6 +16,15 @@
 select cast(1 as bigint) as id, 'hello' as msg, 'blue' as color
 """
 
+tags_merged_sql = """
+{{ config(
+    materialized = 'table',
+    databricks_tags = {'c': 'd', 'k': ''},
+) }}
+
+select cast(1 as bigint) as id, 'hello' as msg, 'blue' as color
+"""
+
 streaming_table_tags_sql = """
 {{ config(
     materialized='streaming_table',
diff --git a/tests/functional/adapter/tags/test_databricks_tags.py b/tests/functional/adapter/tags/test_databricks_tags.py
index e28d11510..aad562bb9 100644
--- a/tests/functional/adapter/tags/test_databricks_tags.py
+++ b/tests/functional/adapter/tags/test_databricks_tags.py
@@ -62,6 +62,24 @@ def test_updated_tags(self, project):
         assert actual_tags == expected_tags
 
 
+@pytest.mark.skip_profile("databricks_cluster")
+class TestTableTagsMerged(BaseTestTags):
+    @pytest.fixture(scope="class")
+    def models(self):
+        return {"tags.sql": fixtures.tags_merged_sql}
+
+    @pytest.fixture(scope="class")
+    def project_config_update(self):
+        return {
+            "models": {
+                "+databricks_tags": {
+                    "a": "b",
+                    "c": "TO_BE_REPLACED_AT_MODEL_LEVEL",
+                }
+            }
+        }
+
+
 @pytest.mark.skip_profile("databricks_cluster")
 class TestTableTagsUpdateViaAlter(BaseTestTagsUpdateViaAlter):
     pass