diff --git a/extensions/vscode/.gitignore b/extensions/vscode/.gitignore
index fc7e732e25..34960bea4b 100644
--- a/extensions/vscode/.gitignore
+++ b/extensions/vscode/.gitignore
@@ -12,6 +12,7 @@ dist
 dist-ssr
 *.local
 *.vsix
+**/*.map
 
 # Editor directories and files
 .vscode/*
diff --git a/extensions/vscode/src/config.ts b/extensions/vscode/src/config.ts
new file mode 100644
index 0000000000..5ad1abeaf6
--- /dev/null
+++ b/extensions/vscode/src/config.ts
@@ -0,0 +1,41 @@
+import * as vscode from "vscode"
+import * as fs from 'fs'
+import * as path from 'path'
+
+export const getProjectOrWorkspaceRoot = async (): Promise<string> => {
+  const workspaceFolders = vscode.workspace.workspaceFolders
+  if (!workspaceFolders) {
+    vscode.window.showErrorMessage("FTL extension requires an open folder or workspace to work correctly.")
+    return ""
+  }
+
+  // Check each folder for the 'ftl-project.toml' file
+  for (const folder of workspaceFolders) {
+    const workspaceRootPath = folder.uri.fsPath
+    const ftlProjectPath = await findFileInWorkspace(workspaceRootPath, 'ftl-project.toml')
+    if (ftlProjectPath) {
+      return ftlProjectPath.replace('ftl-project.toml', '')
+    }
+  }
+
+  return workspaceFolders[0].uri.fsPath
+}
+
+export const findFileInWorkspace = async (rootPath: string, fileName: string): Promise<string | null> => {
+  try {
+    const filesAndFolders = await fs.promises.readdir(rootPath, { withFileTypes: true })
+
+    for (const dirent of filesAndFolders) {
+      const fullPath = path.join(rootPath, dirent.name)
+      if (dirent.isDirectory()) {
+        const result = await findFileInWorkspace(fullPath, fileName)
+        if (result) { return result }
+      } else if (dirent.isFile() && dirent.name === fileName) {
+        return fullPath
+      }
+    }
+  } catch (error) {
+    console.error('Failed to read directory:', rootPath)
+  }
+  return null
+}
diff --git a/extensions/vscode/src/extension.ts b/extensions/vscode/src/extension.ts
index 23246574e9..6516059bf5 100644
--- a/extensions/vscode/src/extension.ts
+++ b/extensions/vscode/src/extension.ts
@@ -7,6 +7,7 @@ import {
 } from "vscode-languageclient/node"
 import * as vscode from "vscode"
 import { FTLStatus } from "./status"
+import { getProjectOrWorkspaceRoot } from "./config"
 
 const clientName = "ftl languge server"
 const clientId = "ftl"
@@ -56,7 +57,7 @@ export async function activate(context: ExtensionContext) {
   statusBarItem.command = "ftl.statusItemClicked"
   statusBarItem.show()
 
-  startClient(context)
+  await startClient(context)
 
   context.subscriptions.push(
     restartCmd,
@@ -71,43 +72,34 @@ export async function deactivate() {
   await stopClient()
 }
 
-function startClient(context: ExtensionContext) {
+
+async function startClient(context: ExtensionContext) {
   console.log("Starting client")
   FTLStatus.starting(statusBarItem)
+  outputChannel = vscode.window.createOutputChannel("FTL", 'log')
+
   const ftlConfig = vscode.workspace.getConfiguration("ftl")
-  const ftlPath = ftlConfig.get("executablePath") ?? "ftl"
+  const ftlPath = ftlConfig.get<string>("executablePath") ?? "ftl"
   const userFlags = ftlConfig.get<string[]>("devCommandFlags") ?? []
 
-  let workspaceRootPath =
-    vscode.workspace.workspaceFolders &&
-      vscode.workspace.workspaceFolders.length > 0
-      ? vscode.workspace.workspaceFolders[0].uri.fsPath
-      : null
-
-  if (!workspaceRootPath) {
-    vscode.window.showErrorMessage(
-      "FTL extension requires an open folder to work correctly."
-    )
-    return
-  }
-
+  const root = await getProjectOrWorkspaceRoot()
   const flags = ["--lsp", ...userFlags]
   let serverOptions: ServerOptions = {
     run: {
       command: `${ftlPath}`,
       args: ["dev", ".", ...flags],
-      options: { cwd: workspaceRootPath },
+      options: { cwd: root }
     },
     debug: {
       command: `${ftlPath}`,
       args: ["dev", ".", ...flags],
-      options: { cwd: workspaceRootPath },
+      options: { cwd: root }
     },
   }
 
+  outputChannel.appendLine(`Running ${ftlPath} with flags: ${flags.join(" ")}`)
   console.log(serverOptions.debug.args)
 
-  outputChannel = vscode.window.createOutputChannel("FTL Logs")
   let clientOptions: LanguageClientOptions = {
     documentSelector: [
       { scheme: "file", language: "kotlin" },