diff --git a/packages/language/src/generated/grammar.ts b/packages/language/src/generated/grammar.ts
index 40d95905a..f29f11fdf 100644
--- a/packages/language/src/generated/grammar.ts
+++ b/packages/language/src/generated/grammar.ts
@@ -3429,7 +3429,7 @@ export const ZModelGrammar = (): Grammar => loadedZModelGrammar ?? (loadedZModel
       "name": "STRING",
       "definition": {
         "$type": "RegexToken",
-        "regex": "\\"[^\\"]*\\"|'[^']*'"
+        "regex": "\\"(\\\\\\\\.|[^\\"\\\\\\\\])*\\"|'(\\\\\\\\.|[^'\\\\\\\\])*'"
       },
       "fragment": false,
       "hidden": false
diff --git a/packages/language/src/zmodel.langium b/packages/language/src/zmodel.langium
index 7354a525f..8a920cecb 100644
--- a/packages/language/src/zmodel.langium
+++ b/packages/language/src/zmodel.langium
@@ -275,7 +275,7 @@ hidden terminal WS: /\s+/;
 terminal NULL: 'null';
 terminal THIS: 'this';
 terminal ID: /[_a-zA-Z][\w_]*/;
-terminal STRING: /"[^"]*"|'[^']*'/;
+terminal STRING: /"(\\.|[^"\\])*"|'(\\.|[^'\\])*'/;
 terminal NUMBER: /[+-]?[0-9]+(\.[0-9]+)?/;
 terminal TRIPLE_SLASH_COMMENT: /\/\/\/[^\n\r]*/;
 hidden terminal ML_COMMENT: /\/\*[\s\S]*?\*\//;
diff --git a/packages/schema/src/plugins/prisma/prisma-builder.ts b/packages/schema/src/plugins/prisma/prisma-builder.ts
index 493e7c46d..15b9f0b20 100644
--- a/packages/schema/src/plugins/prisma/prisma-builder.ts
+++ b/packages/schema/src/plugins/prisma/prisma-builder.ts
@@ -285,7 +285,8 @@ export class AttributeArgValue {
     toString(): string {
         switch (this.type) {
             case 'String':
-                return `"${this.value}"`;
+                // use JSON.stringify to escape quotes
+                return JSON.stringify(this.value);
             case 'Number':
                 return this.value.toString();
             case 'FieldReference': {
diff --git a/packages/schema/tests/schema/parser.test.ts b/packages/schema/tests/schema/parser.test.ts
index dacf8e8f4..b72749126 100644
--- a/packages/schema/tests/schema/parser.test.ts
+++ b/packages/schema/tests/schema/parser.test.ts
@@ -102,6 +102,24 @@ describe('Parsing Tests', () => {
         expect(m.fields[2].attributes[0].args[0].value.$resolvedType?.decl).toBe(firstEnum);
     });
 
+    it('string escape', async () => {
+        const content = `
+            model Example {
+                id Int @id
+                doubleQuote String @default("s\\"1")
+                singleQuote String @default('s\\'1')
+                json Json @default("{\\"theme\\": \\"light\\", \\"consoleDrawer\\": false}")
+            }
+        `;
+        const doc = await loadModel(content, false);
+        const model = doc.declarations[0] as DataModel;
+        expect((model.fields[1].attributes[0].args[0].value as StringLiteral).value).toBe('s"1');
+        expect((model.fields[2].attributes[0].args[0].value as StringLiteral).value).toBe("s'1");
+        expect((model.fields[3].attributes[0].args[0].value as StringLiteral).value).toBe(
+            '{"theme": "light", "consoleDrawer": false}'
+        );
+    });
+
     it('model field types', async () => {
         const content = `
             model User {
diff --git a/packages/testtools/src/schema.ts b/packages/testtools/src/schema.ts
index 42d30df04..6a6a80137 100644
--- a/packages/testtools/src/schema.ts
+++ b/packages/testtools/src/schema.ts
@@ -67,10 +67,16 @@ export function getWorkspaceNpmCacheFolder(start: string) {
 }
 
 function makePrelude(options: SchemaLoadOptions) {
+    let dbUrl = options.dbUrl ?? (options.provider === 'postgresql' ? 'env("DATABASE_URL")' : 'file:./dev.db');
+
+    if (!dbUrl.includes('env(') && !dbUrl.startsWith("'") && !dbUrl.startsWith('"')) {
+        dbUrl = `'${dbUrl}'`;
+    }
+
     return `
 datasource db {
     provider = '${options.provider}'
-    url = '${options.dbUrl}'
+    url = ${dbUrl}
 }
 
 generator js {
@@ -106,7 +112,6 @@ const defaultOptions: SchemaLoadOptions = {
     compile: false,
     logPrismaQuery: false,
     provider: 'sqlite',
-    dbUrl: 'file:./test.db',
 };
 
 export async function loadSchemaFromFile(schemaFile: string, options?: SchemaLoadOptions) {
diff --git a/tests/integration/tests/regression/issue-416.test.ts b/tests/integration/tests/regression/issue-416.test.ts
new file mode 100644
index 000000000..d911effd9
--- /dev/null
+++ b/tests/integration/tests/regression/issue-416.test.ts
@@ -0,0 +1,17 @@
+import { loadSchema } from '@zenstackhq/testtools';
+
+describe('Regression: issue 416', () => {
+    it('regression', async () => {
+        await loadSchema(
+            `
+model Example {
+    id Int @id
+    doubleQuote String @default("s\\"1")
+    singleQuote String @default('s\\'1')
+    json Json @default("{\\"theme\\": \\"light\\", \\"consoleDrawer\\": false}")
+}
+        `,
+            { provider: 'postgresql', dbUrl: 'env("DATABASE_URL")', pushDb: false }
+        );
+    });
+});