diff --git a/bundle/config/mutator/expand_workspace_root.go b/bundle/config/mutator/expand_workspace_root.go
index 8954abd464..3f0547de1a 100644
--- a/bundle/config/mutator/expand_workspace_root.go
+++ b/bundle/config/mutator/expand_workspace_root.go
@@ -33,7 +33,7 @@ func (m *expandWorkspaceRoot) Apply(ctx context.Context, b *bundle.Bundle) diag.
 	}
 
 	if strings.HasPrefix(root, "~/") {
-		home := fmt.Sprintf("/Users/%s", currentUser.UserName)
+		home := fmt.Sprintf("/Workspace/Users/%s", currentUser.UserName)
 		b.Config.Workspace.RootPath = path.Join(home, root[2:])
 	}
 
diff --git a/bundle/config/mutator/expand_workspace_root_test.go b/bundle/config/mutator/expand_workspace_root_test.go
index e6260dbd8f..40bf35ca76 100644
--- a/bundle/config/mutator/expand_workspace_root_test.go
+++ b/bundle/config/mutator/expand_workspace_root_test.go
@@ -27,7 +27,7 @@ func TestExpandWorkspaceRoot(t *testing.T) {
 	}
 	diags := bundle.Apply(context.Background(), b, mutator.ExpandWorkspaceRoot())
 	require.NoError(t, diags.Error())
-	assert.Equal(t, "/Users/jane@doe.com/foo", b.Config.Workspace.RootPath)
+	assert.Equal(t, "/Workspace/Users/jane@doe.com/foo", b.Config.Workspace.RootPath)
 }
 
 func TestExpandWorkspaceRootDoesNothing(t *testing.T) {
diff --git a/bundle/config/mutator/prepend_workspace_prefix.go b/bundle/config/mutator/prepend_workspace_prefix.go
new file mode 100644
index 0000000000..dd467344b8
--- /dev/null
+++ b/bundle/config/mutator/prepend_workspace_prefix.go
@@ -0,0 +1,67 @@
+package mutator
+
+import (
+	"context"
+	"fmt"
+	"strings"
+
+	"github.com/databricks/cli/bundle"
+	"github.com/databricks/cli/libs/diag"
+	"github.com/databricks/cli/libs/dyn"
+)
+
+type prependWorkspacePrefix struct{}
+
+// PrependWorkspacePrefix prepends the workspace root path to all paths in the bundle.
+func PrependWorkspacePrefix() bundle.Mutator {
+	return &prependWorkspacePrefix{}
+}
+
+func (m *prependWorkspacePrefix) Name() string {
+	return "PrependWorkspacePrefix"
+}
+
+var skipPrefixes = []string{
+	"/Workspace/",
+	"/Volumes/",
+}
+
+func (m *prependWorkspacePrefix) Apply(ctx context.Context, b *bundle.Bundle) diag.Diagnostics {
+	patterns := []dyn.Pattern{
+		dyn.NewPattern(dyn.Key("workspace"), dyn.Key("root_path")),
+		dyn.NewPattern(dyn.Key("workspace"), dyn.Key("file_path")),
+		dyn.NewPattern(dyn.Key("workspace"), dyn.Key("artifact_path")),
+		dyn.NewPattern(dyn.Key("workspace"), dyn.Key("state_path")),
+	}
+
+	err := b.Config.Mutate(func(v dyn.Value) (dyn.Value, error) {
+		var err error
+		for _, pattern := range patterns {
+			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())
+				}
+
+				for _, prefix := range skipPrefixes {
+					if strings.HasPrefix(path, prefix) {
+						return pv, nil
+					}
+				}
+
+				return dyn.NewValue(fmt.Sprintf("/Workspace%s", path), v.Locations()), nil
+			})
+
+			if err != nil {
+				return dyn.InvalidValue, err
+			}
+		}
+		return v, nil
+	})
+
+	if err != nil {
+		return diag.FromErr(err)
+	}
+
+	return nil
+}
diff --git a/bundle/config/mutator/prepend_workspace_prefix_test.go b/bundle/config/mutator/prepend_workspace_prefix_test.go
new file mode 100644
index 0000000000..287c694d3a
--- /dev/null
+++ b/bundle/config/mutator/prepend_workspace_prefix_test.go
@@ -0,0 +1,79 @@
+package mutator
+
+import (
+	"context"
+	"testing"
+
+	"github.com/databricks/cli/bundle"
+	"github.com/databricks/cli/bundle/config"
+	"github.com/databricks/databricks-sdk-go/service/iam"
+	"github.com/stretchr/testify/require"
+)
+
+func TestPrependWorkspacePrefix(t *testing.T) {
+	testCases := []struct {
+		path     string
+		expected string
+	}{
+		{
+			path:     "/Users/test",
+			expected: "/Workspace/Users/test",
+		},
+		{
+			path:     "/Shared/test",
+			expected: "/Workspace/Shared/test",
+		},
+		{
+			path:     "/Workspace/Users/test",
+			expected: "/Workspace/Users/test",
+		},
+		{
+			path:     "/Volumes/Users/test",
+			expected: "/Volumes/Users/test",
+		},
+	}
+
+	for _, tc := range testCases {
+		b := &bundle.Bundle{
+			Config: config.Root{
+				Workspace: config.Workspace{
+					RootPath:     tc.path,
+					ArtifactPath: tc.path,
+					FilePath:     tc.path,
+					StatePath:    tc.path,
+				},
+			},
+		}
+
+		diags := bundle.Apply(context.Background(), b, PrependWorkspacePrefix())
+		require.Empty(t, diags)
+		require.Equal(t, tc.expected, b.Config.Workspace.RootPath)
+		require.Equal(t, tc.expected, b.Config.Workspace.ArtifactPath)
+		require.Equal(t, tc.expected, b.Config.Workspace.FilePath)
+		require.Equal(t, tc.expected, b.Config.Workspace.StatePath)
+	}
+}
+
+func TestPrependWorkspaceForDefaultConfig(t *testing.T) {
+	b := &bundle.Bundle{
+		Config: config.Root{
+			Bundle: config.Bundle{
+				Name:   "test",
+				Target: "dev",
+			},
+			Workspace: config.Workspace{
+				CurrentUser: &config.User{
+					User: &iam.User{
+						UserName: "jane@doe.com",
+					},
+				},
+			},
+		},
+	}
+	diags := bundle.Apply(context.Background(), b, bundle.Seq(DefineDefaultWorkspaceRoot(), ExpandWorkspaceRoot(), DefineDefaultWorkspacePaths(), PrependWorkspacePrefix()))
+	require.Empty(t, diags)
+	require.Equal(t, "/Workspace/Users/jane@doe.com/.bundle/test/dev", b.Config.Workspace.RootPath)
+	require.Equal(t, "/Workspace/Users/jane@doe.com/.bundle/test/dev/artifacts", b.Config.Workspace.ArtifactPath)
+	require.Equal(t, "/Workspace/Users/jane@doe.com/.bundle/test/dev/files", b.Config.Workspace.FilePath)
+	require.Equal(t, "/Workspace/Users/jane@doe.com/.bundle/test/dev/state", b.Config.Workspace.StatePath)
+}
diff --git a/bundle/config/mutator/rewrite_workspace_prefix.go b/bundle/config/mutator/rewrite_workspace_prefix.go
new file mode 100644
index 0000000000..8a39ee8a12
--- /dev/null
+++ b/bundle/config/mutator/rewrite_workspace_prefix.go
@@ -0,0 +1,72 @@
+package mutator
+
+import (
+	"context"
+	"fmt"
+	"strings"
+
+	"github.com/databricks/cli/bundle"
+	"github.com/databricks/cli/libs/diag"
+	"github.com/databricks/cli/libs/dyn"
+)
+
+type rewriteWorkspacePrefix struct{}
+
+// RewriteWorkspacePrefix finds any strings in bundle configration that have
+// workspace prefix plus workspace path variable used and removes workspace prefix from it.
+func RewriteWorkspacePrefix() bundle.Mutator {
+	return &rewriteWorkspacePrefix{}
+}
+
+func (m *rewriteWorkspacePrefix) Name() string {
+	return "RewriteWorkspacePrefix"
+}
+
+func (m *rewriteWorkspacePrefix) Apply(ctx context.Context, b *bundle.Bundle) diag.Diagnostics {
+	diags := diag.Diagnostics{}
+	paths := map[string]string{
+		"/Workspace/${workspace.root_path}":     "${workspace.root_path}",
+		"/Workspace${workspace.root_path}":      "${workspace.root_path}",
+		"/Workspace/${workspace.file_path}":     "${workspace.file_path}",
+		"/Workspace${workspace.file_path}":      "${workspace.file_path}",
+		"/Workspace/${workspace.artifact_path}": "${workspace.artifact_path}",
+		"/Workspace${workspace.artifact_path}":  "${workspace.artifact_path}",
+		"/Workspace/${workspace.state_path}":    "${workspace.state_path}",
+		"/Workspace${workspace.state_path}":     "${workspace.state_path}",
+	}
+
+	err := b.Config.Mutate(func(root dyn.Value) (dyn.Value, error) {
+		// Walk through the bundle configuration, check all the string leafs and
+		// see if any of the prefixes are used in the remote path.
+		return dyn.Walk(root, func(p dyn.Path, v dyn.Value) (dyn.Value, error) {
+			vv, ok := v.AsString()
+			if !ok {
+				return v, nil
+			}
+
+			for path, replacePath := range paths {
+				if strings.Contains(vv, path) {
+					newPath := strings.Replace(vv, path, replacePath, 1)
+					diags = append(diags, diag.Diagnostic{
+						Severity:  diag.Warning,
+						Summary:   fmt.Sprintf("substring %q found in %q. Please update this to %q.", path, vv, newPath),
+						Detail:    "For more information, please refer to: https://docs.databricks.com/en/release-notes/dev-tools/bundles.html#workspace-paths",
+						Locations: v.Locations(),
+						Paths:     []dyn.Path{p},
+					})
+
+					// Remove the workspace prefix from the string.
+					return dyn.NewValue(newPath, v.Locations()), nil
+				}
+			}
+
+			return v, nil
+		})
+	})
+
+	if err != nil {
+		return diag.FromErr(err)
+	}
+
+	return diags
+}
diff --git a/bundle/config/mutator/rewrite_workspace_prefix_test.go b/bundle/config/mutator/rewrite_workspace_prefix_test.go
new file mode 100644
index 0000000000..d75ec89dbd
--- /dev/null
+++ b/bundle/config/mutator/rewrite_workspace_prefix_test.go
@@ -0,0 +1,85 @@
+package mutator
+
+import (
+	"context"
+	"testing"
+
+	"github.com/databricks/cli/bundle"
+	"github.com/databricks/cli/bundle/config"
+	"github.com/databricks/cli/bundle/config/resources"
+	"github.com/databricks/cli/libs/diag"
+	"github.com/databricks/databricks-sdk-go/service/compute"
+	"github.com/databricks/databricks-sdk-go/service/jobs"
+	"github.com/stretchr/testify/require"
+)
+
+func TestNoWorkspacePrefixUsed(t *testing.T) {
+	b := &bundle.Bundle{
+		Config: config.Root{
+			Workspace: config.Workspace{
+				RootPath:     "/Workspace/Users/test",
+				ArtifactPath: "/Workspace/Users/test/artifacts",
+				FilePath:     "/Workspace/Users/test/files",
+				StatePath:    "/Workspace/Users/test/state",
+			},
+
+			Resources: config.Resources{
+				Jobs: map[string]*resources.Job{
+					"test_job": {
+						JobSettings: &jobs.JobSettings{
+							Tasks: []jobs.Task{
+								{
+									SparkPythonTask: &jobs.SparkPythonTask{
+										PythonFile: "/Workspace/${workspace.root_path}/file1.py",
+									},
+								},
+								{
+									NotebookTask: &jobs.NotebookTask{
+										NotebookPath: "/Workspace${workspace.file_path}/notebook1",
+									},
+									Libraries: []compute.Library{
+										{
+											Jar: "/Workspace/${workspace.artifact_path}/jar1.jar",
+										},
+									},
+								},
+								{
+									NotebookTask: &jobs.NotebookTask{
+										NotebookPath: "${workspace.file_path}/notebook2",
+									},
+									Libraries: []compute.Library{
+										{
+											Jar: "${workspace.artifact_path}/jar2.jar",
+										},
+									},
+								},
+							},
+						},
+					},
+				},
+			},
+		},
+	}
+
+	diags := bundle.Apply(context.Background(), b, RewriteWorkspacePrefix())
+	require.Len(t, diags, 3)
+
+	expectedErrors := map[string]bool{
+		`substring "/Workspace/${workspace.root_path}" found in "/Workspace/${workspace.root_path}/file1.py". Please update this to "${workspace.root_path}/file1.py".`:             true,
+		`substring "/Workspace${workspace.file_path}" found in "/Workspace${workspace.file_path}/notebook1". Please update this to "${workspace.file_path}/notebook1".`:             true,
+		`substring "/Workspace/${workspace.artifact_path}" found in "/Workspace/${workspace.artifact_path}/jar1.jar". Please update this to "${workspace.artifact_path}/jar1.jar".`: true,
+	}
+
+	for _, d := range diags {
+		require.Equal(t, d.Severity, diag.Warning)
+		require.Contains(t, expectedErrors, d.Summary)
+		delete(expectedErrors, d.Summary)
+	}
+
+	require.Equal(t, "${workspace.root_path}/file1.py", b.Config.Resources.Jobs["test_job"].JobSettings.Tasks[0].SparkPythonTask.PythonFile)
+	require.Equal(t, "${workspace.file_path}/notebook1", b.Config.Resources.Jobs["test_job"].JobSettings.Tasks[1].NotebookTask.NotebookPath)
+	require.Equal(t, "${workspace.artifact_path}/jar1.jar", b.Config.Resources.Jobs["test_job"].JobSettings.Tasks[1].Libraries[0].Jar)
+	require.Equal(t, "${workspace.file_path}/notebook2", b.Config.Resources.Jobs["test_job"].JobSettings.Tasks[2].NotebookTask.NotebookPath)
+	require.Equal(t, "${workspace.artifact_path}/jar2.jar", b.Config.Resources.Jobs["test_job"].JobSettings.Tasks[2].Libraries[0].Jar)
+
+}
diff --git a/bundle/config/workspace.go b/bundle/config/workspace.go
index 878d07838d..e64808ab3d 100644
--- a/bundle/config/workspace.go
+++ b/bundle/config/workspace.go
@@ -47,7 +47,7 @@ type Workspace struct {
 
 	// Remote workspace base path for deployment state, for artifacts, as synchronization target.
 	// This defaults to "~/.bundle/${bundle.name}/${bundle.target}" where "~" expands to
-	// the current user's home directory in the workspace (e.g. `/Users/jane@doe.com`).
+	// the current user's home directory in the workspace (e.g. `/Workspace/Users/jane@doe.com`).
 	RootPath string `json:"root_path,omitempty"`
 
 	// Remote workspace path to synchronize local files to.
diff --git a/bundle/phases/initialize.go b/bundle/phases/initialize.go
index 93ce61b258..a41819c769 100644
--- a/bundle/phases/initialize.go
+++ b/bundle/phases/initialize.go
@@ -39,9 +39,16 @@ func Initialize() bundle.Mutator {
 			mutator.MergePipelineClusters(),
 			mutator.InitializeWorkspaceClient(),
 			mutator.PopulateCurrentUser(),
+
 			mutator.DefineDefaultWorkspaceRoot(),
 			mutator.ExpandWorkspaceRoot(),
 			mutator.DefineDefaultWorkspacePaths(),
+			mutator.PrependWorkspacePrefix(),
+
+			// This mutator needs to be run before variable interpolation because it
+			// searches for strings with variable references in them.
+			mutator.RewriteWorkspacePrefix(),
+
 			mutator.SetVariables(),
 			// Intentionally placed before ResolveVariableReferencesInLookup, ResolveResourceReferences,
 			// ResolveVariableReferencesInComplexVariables and ResolveVariableReferences.
diff --git a/bundle/tests/pipeline_glob_paths_test.go b/bundle/tests/pipeline_glob_paths_test.go
index c1c62cfb6d..d17f0404f1 100644
--- a/bundle/tests/pipeline_glob_paths_test.go
+++ b/bundle/tests/pipeline_glob_paths_test.go
@@ -11,7 +11,7 @@ func TestExpandPipelineGlobPaths(t *testing.T) {
 	require.NoError(t, diags.Error())
 	require.Equal(
 		t,
-		"/Users/user@domain.com/.bundle/pipeline_glob_paths/default/files/dlt/nyc_taxi_loader",
+		"/Workspace/Users/user@domain.com/.bundle/pipeline_glob_paths/default/files/dlt/nyc_taxi_loader",
 		b.Config.Resources.Pipelines["nyc_taxi_pipeline"].Libraries[0].Notebook.Path,
 	)
 }
diff --git a/bundle/tests/relative_path_translation_test.go b/bundle/tests/relative_path_translation_test.go
index 199871d23c..0f553ac3d3 100644
--- a/bundle/tests/relative_path_translation_test.go
+++ b/bundle/tests/relative_path_translation_test.go
@@ -12,9 +12,9 @@ func TestRelativePathTranslationDefault(t *testing.T) {
 	require.NoError(t, diags.Error())
 
 	t0 := b.Config.Resources.Jobs["job"].Tasks[0]
-	assert.Equal(t, "/remote/src/file1.py", t0.SparkPythonTask.PythonFile)
+	assert.Equal(t, "/Workspace/remote/src/file1.py", t0.SparkPythonTask.PythonFile)
 	t1 := b.Config.Resources.Jobs["job"].Tasks[1]
-	assert.Equal(t, "/remote/src/file1.py", t1.SparkPythonTask.PythonFile)
+	assert.Equal(t, "/Workspace/remote/src/file1.py", t1.SparkPythonTask.PythonFile)
 }
 
 func TestRelativePathTranslationOverride(t *testing.T) {
@@ -22,7 +22,7 @@ func TestRelativePathTranslationOverride(t *testing.T) {
 	require.NoError(t, diags.Error())
 
 	t0 := b.Config.Resources.Jobs["job"].Tasks[0]
-	assert.Equal(t, "/remote/src/file2.py", t0.SparkPythonTask.PythonFile)
+	assert.Equal(t, "/Workspace/remote/src/file2.py", t0.SparkPythonTask.PythonFile)
 	t1 := b.Config.Resources.Jobs["job"].Tasks[1]
-	assert.Equal(t, "/remote/src/file2.py", t1.SparkPythonTask.PythonFile)
+	assert.Equal(t, "/Workspace/remote/src/file2.py", t1.SparkPythonTask.PythonFile)
 }
diff --git a/internal/bundle/deploy_test.go b/internal/bundle/deploy_test.go
index 736c880dbc..8854358555 100644
--- a/internal/bundle/deploy_test.go
+++ b/internal/bundle/deploy_test.go
@@ -236,7 +236,7 @@ func TestAccDeployBasicBundleLogs(t *testing.T) {
 
 	stdout, stderr := blackBoxRun(t, root, "bundle", "deploy")
 	assert.Equal(t, strings.Join([]string{
-		fmt.Sprintf("Uploading bundle files to /Users/%s/.bundle/%s/files...", currentUser.UserName, uniqueId),
+		fmt.Sprintf("Uploading bundle files to /Workspace/Users/%s/.bundle/%s/files...", currentUser.UserName, uniqueId),
 		"Deploying resources...",
 		"Updating deployment state...",
 		"Deployment complete!\n",
diff --git a/internal/bundle/helpers.go b/internal/bundle/helpers.go
index 3547c17559..b8c81a8d2c 100644
--- a/internal/bundle/helpers.go
+++ b/internal/bundle/helpers.go
@@ -114,7 +114,7 @@ func getBundleRemoteRootPath(w *databricks.WorkspaceClient, t *testing.T, unique
 	// Compute root path for the bundle deployment
 	me, err := w.CurrentUser.Me(context.Background())
 	require.NoError(t, err)
-	root := fmt.Sprintf("/Users/%s/.bundle/%s", me.UserName, uniqueId)
+	root := fmt.Sprintf("/Workspace/Users/%s/.bundle/%s", me.UserName, uniqueId)
 	return root
 }
 
diff --git a/libs/template/templates/dbt-sql/template/{{.project_name}}/databricks.yml.tmpl b/libs/template/templates/dbt-sql/template/{{.project_name}}/databricks.yml.tmpl
index f96ce4fe68..5594749a90 100644
--- a/libs/template/templates/dbt-sql/template/{{.project_name}}/databricks.yml.tmpl
+++ b/libs/template/templates/dbt-sql/template/{{.project_name}}/databricks.yml.tmpl
@@ -24,8 +24,8 @@ targets:
     mode: production
     workspace:
       host: {{workspace_host}}
-      # We explicitly specify /Users/{{user_name}} to make sure we only have a single copy.
-      root_path: /Users/{{user_name}}/.bundle/${bundle.name}/${bundle.target}
+      # We explicitly specify /Workspace/Users/{{user_name}} to make sure we only have a single copy.
+      root_path: /Workspace/Users/{{user_name}}/.bundle/${bundle.name}/${bundle.target}
     permissions:
       - {{if is_service_principal}}service_principal{{else}}user{{end}}_name: {{user_name}}
         level: CAN_MANAGE
diff --git a/libs/template/templates/default-python/template/{{.project_name}}/databricks.yml.tmpl b/libs/template/templates/default-python/template/{{.project_name}}/databricks.yml.tmpl
index 8544dc8348..c42b822a8d 100644
--- a/libs/template/templates/default-python/template/{{.project_name}}/databricks.yml.tmpl
+++ b/libs/template/templates/default-python/template/{{.project_name}}/databricks.yml.tmpl
@@ -21,8 +21,8 @@ targets:
     mode: production
     workspace:
       host: {{workspace_host}}
-      # We explicitly specify /Users/{{user_name}} to make sure we only have a single copy.
-      root_path: /Users/{{user_name}}/.bundle/${bundle.name}/${bundle.target}
+      # We explicitly specify /Workspace/Users/{{user_name}} to make sure we only have a single copy.
+      root_path: /Workspace/Users/{{user_name}}/.bundle/${bundle.name}/${bundle.target}
     permissions:
       - {{if is_service_principal}}service_principal{{else}}user{{end}}_name: {{user_name}}
         level: CAN_MANAGE
diff --git a/libs/template/templates/default-python/template/{{.project_name}}/resources/{{.project_name}}.pipeline.yml.tmpl b/libs/template/templates/default-python/template/{{.project_name}}/resources/{{.project_name}}.pipeline.yml.tmpl
index bf46904612..50e5ad97ca 100644
--- a/libs/template/templates/default-python/template/{{.project_name}}/resources/{{.project_name}}.pipeline.yml.tmpl
+++ b/libs/template/templates/default-python/template/{{.project_name}}/resources/{{.project_name}}.pipeline.yml.tmpl
@@ -15,4 +15,4 @@ resources:
             path: ../src/dlt_pipeline.ipynb
 
       configuration:
-        bundle.sourcePath: /Workspace/${workspace.file_path}/src
+        bundle.sourcePath: ${workspace.file_path}/src
diff --git a/libs/template/templates/default-sql/template/{{.project_name}}/databricks.yml.tmpl b/libs/template/templates/default-sql/template/{{.project_name}}/databricks.yml.tmpl
index 55c1aae4a9..51d03e99af 100644
--- a/libs/template/templates/default-sql/template/{{.project_name}}/databricks.yml.tmpl
+++ b/libs/template/templates/default-sql/template/{{.project_name}}/databricks.yml.tmpl
@@ -41,8 +41,8 @@ targets:
     mode: production
     workspace:
       host: {{workspace_host}}
-      # We explicitly specify /Users/{{user_name}} to make sure we only have a single copy.
-      root_path: /Users/{{user_name}}/.bundle/${bundle.name}/${bundle.target}
+      # We explicitly specify /Workspace/Users/{{user_name}} to make sure we only have a single copy.
+      root_path: /Workspace/Users/{{user_name}}/.bundle/${bundle.name}/${bundle.target}
     variables:
       warehouse_id: {{index ((regexp "[^/]+$").FindStringSubmatch .http_path) 0}}
       catalog: {{.default_catalog}}