diff --git a/cmd/ftl/cmd_schema.go b/cmd/ftl/cmd_schema.go
index 5dda1834ce..15469dc3ce 100644
--- a/cmd/ftl/cmd_schema.go
+++ b/cmd/ftl/cmd_schema.go
@@ -4,6 +4,8 @@ import (
 	"context"
 	"fmt"
 	"os"
+	"path/filepath"
+	"strings"
 	"time"
 
 	"connectrpc.com/connect"
@@ -91,6 +93,19 @@ func (s *schemaGenerateCmd) Run(ctx context.Context, client ftlv1connect.Control
 	watch := watcher.New()
 	defer watch.Close()
 
+	absTemplatePath, err := filepath.Abs(s.Template)
+	if err != nil {
+		return errors.WithStack(err)
+	}
+	absDestPath, err := filepath.Abs(s.Dest)
+	if err != nil {
+		return errors.WithStack(err)
+	}
+
+	if strings.HasPrefix(absDestPath, absTemplatePath) {
+		return fmt.Errorf("destination directory %s must not be inside the template directory %s", absDestPath, absTemplatePath)
+	}
+
 	logger := log.FromContext(ctx)
 	logger.Infof("Watching %s", s.Template)