diff --git a/bundle/config/mutator/apply_presets.go b/bundle/config/mutator/apply_presets.go
index c9491b1a5..1e86da0a0 100644
--- a/bundle/config/mutator/apply_presets.go
+++ b/bundle/config/mutator/apply_presets.go
@@ -230,6 +230,7 @@ func (m *applyPresets) Apply(ctx context.Context, b *bundle.Bundle) diag.Diagnos
 		} else {
 			disabled := false
 			b.Config.Presets.InPlaceDeployment = &disabled
+			diags = diags.Extend(diag.Warningf("in-place deployment is available only in the Databricks Workspace"))
 		}
 	}
 
diff --git a/bundle/config/mutator/apply_presets_test.go b/bundle/config/mutator/apply_presets_test.go
index 662b18a11..eaf4a56c2 100644
--- a/bundle/config/mutator/apply_presets_test.go
+++ b/bundle/config/mutator/apply_presets_test.go
@@ -387,6 +387,7 @@ func TestApplyPresetsInPlaceDeployment(t *testing.T) {
 		initialValue     *bool
 		expectedValue    *bool
 		expectedFilePath string
+		expectedWarning  string
 	}{
 		{
 			name:             "preset enabled, bundle in Workspace, databricks runtime",
@@ -395,6 +396,7 @@ func TestApplyPresetsInPlaceDeployment(t *testing.T) {
 			initialValue:     &enabled,
 			expectedValue:    &enabled,
 			expectedFilePath: workspacePath,
+			expectedWarning:  "",
 		},
 		{
 			name:             "preset enabled, bundle not in Workspace, databricks runtime",
@@ -403,6 +405,7 @@ func TestApplyPresetsInPlaceDeployment(t *testing.T) {
 			initialValue:     &enabled,
 			expectedValue:    &disabled,
 			expectedFilePath: remotePath,
+			expectedWarning:  "in-place deployment is available only in the Databricks Workspace",
 		},
 		{
 			name:             "preset enabled, bundle in Workspace, not databricks runtime",
@@ -411,6 +414,7 @@ func TestApplyPresetsInPlaceDeployment(t *testing.T) {
 			initialValue:     &enabled,
 			expectedValue:    &disabled,
 			expectedFilePath: remotePath,
+			expectedWarning:  "in-place deployment is available only in the Databricks Workspace",
 		},
 		{
 			name:             "preset disabled, bundle in Workspace, databricks runtime",
@@ -450,8 +454,13 @@ func TestApplyPresetsInPlaceDeployment(t *testing.T) {
 				t.Fatalf("unexpected error: %v", diags)
 			}
 
+			if tt.expectedWarning != "" {
+				require.Equal(t, tt.expectedWarning, diags[0].Summary)
+			}
+
 			require.Equal(t, tt.expectedFilePath, b.Config.Workspace.FilePath)
 			require.Equal(t, tt.expectedValue, b.Config.Presets.InPlaceDeployment)
 		})
 	}
+
 }
diff --git a/bundle/config/mutator/process_target_mode.go b/bundle/config/mutator/process_target_mode.go
index 6ea0e7efd..81330d87e 100644
--- a/bundle/config/mutator/process_target_mode.go
+++ b/bundle/config/mutator/process_target_mode.go
@@ -6,6 +6,7 @@ import (
 
 	"github.com/databricks/cli/bundle"
 	"github.com/databricks/cli/bundle/config"
+	"github.com/databricks/cli/libs/dbr"
 	"github.com/databricks/cli/libs/diag"
 	"github.com/databricks/cli/libs/dyn"
 	"github.com/databricks/cli/libs/iamutil"
@@ -63,8 +64,13 @@ func transformDevelopmentMode(ctx context.Context, b *bundle.Bundle) {
 	}
 
 	if !config.IsExplicitlyDisabled(t.PipelinesDevelopment) {
-		enabled := true
-		t.PipelinesDevelopment = &enabled
+		root := b.SyncRootPath
+		isInWorkspace := strings.HasPrefix(root, "/Workspace/")
+
+		if isInWorkspace && dbr.RunsOnRuntime(ctx) {
+			enabled := true
+			t.PipelinesDevelopment = &enabled
+		}
 	}
 }