diff --git a/lib/tbot/tshwrap/wrap.go b/lib/tbot/tshwrap/wrap.go
index f09df1039159f..38447ce57b19d 100644
--- a/lib/tbot/tshwrap/wrap.go
+++ b/lib/tbot/tshwrap/wrap.go
@@ -130,22 +130,28 @@ type destinationHolder interface {
 	GetDestination() bot.Destination
 }
 
-// GetDestinationDirectory attempts to select an unambiguous destination, either from
-// CLI or YAML config. It returns an error if the selected destination is
-// invalid.
-func GetDestinationDirectory(botConfig *config.BotConfig) (*config.DestinationDirectory, error) {
+// GetDestinationDirectory attempts to select an unambiguous destination, either
+// from CLI or YAML config. It returns an error if the selected destination is
+// invalid. Note that CLI destinations will not be validated.
+func GetDestinationDirectory(cliDestinationPath string, botConfig *config.BotConfig) (*config.DestinationDirectory, error) {
+	if cliDestinationPath != "" {
+		d := &config.DestinationDirectory{
+			Path: cliDestinationPath,
+		}
+		if err := d.CheckAndSetDefaults(); err != nil {
+			return nil, trace.Wrap(err)
+		}
+
+		return d, nil
+	}
+
 	var destinationHolders []destinationHolder
 	for _, svc := range botConfig.Services {
 		if v, ok := svc.(destinationHolder); ok {
 			destinationHolders = append(destinationHolders, v)
 		}
 	}
-	// WARNING:
-	// This code is dependent on some unexpected "behavior" in
-	// config.FromCLIConf() - when users provide --destination-dir then all
-	// outputs configured in the YAML file are overwritten by an identity
-	// output with a directory destination with a path of --destination-dir.
-	// See: https://github.com/gravitational/teleport/issues/27206
+
 	if len(destinationHolders) == 0 {
 		return nil, trace.BadParameter("either --destination-dir or a config file containing an output or service must be specified")
 	} else if len(destinationHolders) > 1 {
diff --git a/lib/tbot/tshwrap/wrap_test.go b/lib/tbot/tshwrap/wrap_test.go
index df6ca637800ee..2e4b81d7d0648 100644
--- a/lib/tbot/tshwrap/wrap_test.go
+++ b/lib/tbot/tshwrap/wrap_test.go
@@ -68,16 +68,16 @@ func TestGetDestinationDirectory(t *testing.T) {
 		return cfg
 	}
 	t.Run("one output configured", func(t *testing.T) {
-		dest, err := GetDestinationDirectory(config(1))
+		dest, err := GetDestinationDirectory("", config(1))
 		require.NoError(t, err)
 		require.Equal(t, "/from-bot-config0", dest.Path)
 	})
 	t.Run("no outputs specified", func(t *testing.T) {
-		_, err := GetDestinationDirectory(config(0))
+		_, err := GetDestinationDirectory("", config(0))
 		require.ErrorContains(t, err, "either --destination-dir or a config file containing an output or service must be specified")
 	})
 	t.Run("multiple outputs specified", func(t *testing.T) {
-		_, err := GetDestinationDirectory(config(2))
+		_, err := GetDestinationDirectory("", config(2))
 		require.ErrorContains(t, err, "the config file contains multiple outputs and services; a --destination-dir must be specified")
 	})
 }
diff --git a/tool/tbot/db.go b/tool/tbot/db.go
index e2fe32375a31a..59d67c148563d 100644
--- a/tool/tbot/db.go
+++ b/tool/tbot/db.go
@@ -40,7 +40,7 @@ func onDBCommand(globalCfg *cli.GlobalArgs, dbCmd *cli.DBCommand) error {
 		return trace.Wrap(err)
 	}
 
-	destination, err := tshwrap.GetDestinationDirectory(botConfig)
+	destination, err := tshwrap.GetDestinationDirectory(dbCmd.DestinationDir, botConfig)
 	if err != nil {
 		return trace.Wrap(err)
 	}
diff --git a/tool/tbot/proxy.go b/tool/tbot/proxy.go
index 677a0caeb93a0..6dc3804092249 100644
--- a/tool/tbot/proxy.go
+++ b/tool/tbot/proxy.go
@@ -44,7 +44,7 @@ func onProxyCommand(
 		return trace.Wrap(err)
 	}
 
-	destination, err := tshwrap.GetDestinationDirectory(botConfig)
+	destination, err := tshwrap.GetDestinationDirectory(proxyCmd.DestinationDir, botConfig)
 	if err != nil {
 		return trace.Wrap(err)
 	}