diff --git a/_extension/src/session.ts b/_extension/src/session.ts
index 6bb76a1cf03..11b02bde953 100644
--- a/_extension/src/session.ts
+++ b/_extension/src/session.ts
@@ -349,19 +349,31 @@ interface DetectedVersion {
     label: string;
     version: string;
     tsdkPath: string;
+    relativeTsdkPath: string;
     exePath: string;
 }
 
 async function findWorkspaceNativePreviewPackages(): Promise<DetectedVersion[]> {
     const results: DetectedVersion[] = [];
-    for (const folder of vscode.workspace.workspaceFolders ?? []) {
-        const packagePath = vscode.Uri.joinPath(folder.uri, "node_modules", "@typescript", "native-preview");
+    const folders = vscode.workspace.workspaceFolders ?? [];
+    const relativeWorkspacePath = "node_modules/@typescript/native-preview";
+    const pathSegments = relativeWorkspacePath.split("/");
+    for (let i = 0; i < folders.length; i++) {
+        const folder = folders[i];
+        const packagePath = vscode.Uri.joinPath(folder.uri, ...pathSegments);
         const resolved = await resolveTsdkPathToExe(path.normalize(packagePath.fsPath));
         if (!resolved) continue;
+        // Use a relative path only for the first workspace folder since
+        // workspaceResolve anchors relative paths there. For other folders,
+        // fall back to the absolute path so the setting resolves correctly.
+        const relativeTsdkPath = i === 0
+            ? `./${relativeWorkspacePath}`
+            : path.normalize(packagePath.fsPath);
         results.push({
             label: folder.name,
             version: resolved?.version ?? "unknown",
             tsdkPath: path.normalize(packagePath.fsPath),
+            relativeTsdkPath,
             exePath: resolved?.path ?? "",
         });
     }
@@ -383,7 +395,9 @@ async function promptSelectVersion(context: vscode.ExtensionContext, client: Cli
         detail: builtinExe.path,
         run: async () => {
             await context.workspaceState.update(useWorkspaceTsdkStorageKey, false);
-            await config.update("tsdk", undefined, vscode.ConfigurationTarget.Workspace);
+            // Suppress the workspace-version prompt so it doesn't re-fire
+            // after the user explicitly chose bundled.
+            await context.workspaceState.update("typescript.native-preview.suppressPromptWorkspaceTsdk", true);
             outputChannel.appendLine("Switched to bundled tsgo version.");
         },
     });
@@ -391,14 +405,15 @@ async function promptSelectVersion(context: vscode.ExtensionContext, client: Cli
     // Workspace versions
     if (vscode.workspace.isTrusted) {
         for (const wsVersion of workspaceVersions) {
-            const isActive = currentExePath === wsVersion.tsdkPath;
+            const isActive = currentExePath === wsVersion.exePath;
             items.push({
                 label: (isActive ? "• " : "") + "Use Workspace Version",
                 description: wsVersion.version,
-                detail: wsVersion.tsdkPath,
+                detail: wsVersion.relativeTsdkPath,
                 run: async () => {
                     await context.workspaceState.update(useWorkspaceTsdkStorageKey, true);
-                    await config.update("tsdk", wsVersion.tsdkPath, vscode.ConfigurationTarget.Workspace);
+                    await context.workspaceState.update("typescript.native-preview.suppressPromptWorkspaceTsdk", false);
+                    await config.update("tsdk", wsVersion.relativeTsdkPath, vscode.ConfigurationTarget.Workspace);
                     outputChannel.appendLine(`Switched to workspace tsgo version (${wsVersion.version}).`);
                 },
             });
@@ -473,6 +488,7 @@ export async function promptUseWorkspaceVersion(context: vscode.ExtensionContext
     const workspaceVersions = await findWorkspaceNativePreviewPackages();
     if (workspaceVersions.length === 0) return;
 
+    const config = vscode.workspace.getConfiguration("typescript.native-preview");
     const wsVersion = workspaceVersions[0];
     const allow = "Allow";
     const dismiss = "Dismiss";
@@ -488,8 +504,14 @@ export async function promptUseWorkspaceVersion(context: vscode.ExtensionContext
     if (result === allow) {
         if (!vscode.workspace.isTrusted) return;
         await context.workspaceState.update(useWorkspaceTsdkStorageKey, true);
-        const config = vscode.workspace.getConfiguration("typescript.native-preview");
-        await config.update("tsdk", wsVersion.tsdkPath, vscode.ConfigurationTarget.Workspace);
+        // Only write tsdk if it isn't already pointing at the workspace install,
+        // so we don't overwrite a committed relative path with a new value.
+        const currentTsdk = config.get<string>("tsdk");
+        const resolvedCurrent = currentTsdk ? await resolveTsdkPathToExe(currentTsdk) : undefined;
+        const alreadyResolved = resolvedCurrent && workspaceVersions.some(ws => ws.exePath === resolvedCurrent.path);
+        if (!alreadyResolved) {
+            await config.update("tsdk", wsVersion.relativeTsdkPath, vscode.ConfigurationTarget.Workspace);
+        }
         await vscode.commands.executeCommand("typescript.native-preview.restart");
     }
     else if (result === suppress) {