diff --git a/acceptance/acceptance_test.go b/acceptance/acceptance_test.go
index cfcb0d29f..9a4564ffa 100644
--- a/acceptance/acceptance_test.go
+++ b/acceptance/acceptance_test.go
@@ -188,12 +188,12 @@ func runTest(t *testing.T, dir, coverDir string, repls testdiff.ReplacementsCont
 		tmpDir = t.TempDir()
 	}
 
-	repls.Set("/private"+tmpDir, "$TMPDIR")
-	repls.Set("/private"+filepath.Dir(tmpDir), "$TMPPARENT")
-	repls.Set("/private"+filepath.Dir(filepath.Dir(tmpDir)), "$TMPGPARENT")
-	repls.Set(tmpDir, "$TMPDIR")
-	repls.Set(filepath.Dir(tmpDir), "$TMPPARENT")
-	repls.Set(filepath.Dir(filepath.Dir(tmpDir)), "$TMPGPARENT")
+	// Converts C:\Users\DENIS~1.BIL -> C:\Users\denis.bilenko
+	tmpDirEvalled, err1 := filepath.EvalSymlinks(tmpDir)
+	if err1 == nil && tmpDirEvalled != tmpDir {
+		repls.SetPathWithParents(tmpDirEvalled, "$TMPDIR")
+	}
+	repls.SetPathWithParents(tmpDir, "$TMPDIR")
 
 	scriptContents := readMergedScriptContents(t, dir)
 	testutil.WriteFile(t, filepath.Join(tmpDir, EntryPointScript), scriptContents)
diff --git a/acceptance/bundle/sync-paths-dotdot/script b/acceptance/bundle/sync-paths-dotdot/script
deleted file mode 100644
index 72555b332..000000000
--- a/acceptance/bundle/sync-paths-dotdot/script
+++ /dev/null
@@ -1 +0,0 @@
-$CLI bundle validate
diff --git a/acceptance/bundle/sync-paths-dotdot/databricks.yml b/acceptance/bundle/syncroot/dotdot-git/databricks.yml
similarity index 100%
rename from acceptance/bundle/sync-paths-dotdot/databricks.yml
rename to acceptance/bundle/syncroot/dotdot-git/databricks.yml
diff --git a/acceptance/bundle/sync-paths-dotdot/output.txt b/acceptance/bundle/syncroot/dotdot-git/output.txt
similarity index 69%
rename from acceptance/bundle/sync-paths-dotdot/output.txt
rename to acceptance/bundle/syncroot/dotdot-git/output.txt
index 11db3e9ee..f1dc5fb01 100644
--- a/acceptance/bundle/sync-paths-dotdot/output.txt
+++ b/acceptance/bundle/syncroot/dotdot-git/output.txt
@@ -1,4 +1,4 @@
-Error: path "$TMPPARENT" is not within repository root "$TMPDIR"
+Error: path "$TMPDIR" is not within repository root "$TMPDIR/myrepo"
 
 Name: test-bundle
 Target: default
diff --git a/acceptance/bundle/syncroot/dotdot-git/script b/acceptance/bundle/syncroot/dotdot-git/script
new file mode 100644
index 000000000..0706a1d5e
--- /dev/null
+++ b/acceptance/bundle/syncroot/dotdot-git/script
@@ -0,0 +1,6 @@
+# This should error, we do not allow syncroot outside of git repo.
+mkdir myrepo
+cd myrepo
+cp ../databricks.yml .
+git-repo-init
+$CLI bundle validate | sed 's/\\\\/\//g'
diff --git a/acceptance/bundle/syncroot/dotdot-nogit/databricks.yml b/acceptance/bundle/syncroot/dotdot-nogit/databricks.yml
new file mode 100644
index 000000000..7215ffea2
--- /dev/null
+++ b/acceptance/bundle/syncroot/dotdot-nogit/databricks.yml
@@ -0,0 +1,5 @@
+bundle:
+  name: test-bundle
+sync:
+  paths:
+    - ..
diff --git a/acceptance/bundle/syncroot/dotdot-nogit/output.txt b/acceptance/bundle/syncroot/dotdot-nogit/output.txt
new file mode 100644
index 000000000..34059e276
--- /dev/null
+++ b/acceptance/bundle/syncroot/dotdot-nogit/output.txt
@@ -0,0 +1,11 @@
+Error: path "$TMPDIR_PARENT" is not within repository root "$TMPDIR"
+
+Name: test-bundle
+Target: default
+Workspace:
+  User: $USERNAME
+  Path: /Workspace/Users/$USERNAME/.bundle/test-bundle/default
+
+Found 1 error
+
+Exit code: 1
diff --git a/acceptance/bundle/syncroot/dotdot-nogit/script b/acceptance/bundle/syncroot/dotdot-nogit/script
new file mode 100644
index 000000000..d3388903e
--- /dev/null
+++ b/acceptance/bundle/syncroot/dotdot-nogit/script
@@ -0,0 +1,2 @@
+# This should not error, syncroot can be outside bundle root.
+$CLI bundle validate
diff --git a/libs/testdiff/replacement.go b/libs/testdiff/replacement.go
index 207f425aa..ca76b159c 100644
--- a/libs/testdiff/replacement.go
+++ b/libs/testdiff/replacement.go
@@ -3,7 +3,9 @@ package testdiff
 import (
 	"encoding/json"
 	"fmt"
+	"path/filepath"
 	"regexp"
+	"runtime"
 	"slices"
 	"strings"
 
@@ -74,13 +76,48 @@ func (r *ReplacementsContext) Set(old, new string) {
 	if err == nil {
 		encodedOld, err := json.Marshal(old)
 		if err == nil {
-			r.appendLiteral(string(encodedOld), string(encodedNew))
+			r.appendLiteral(trimQuotes(string(encodedOld)), trimQuotes(string(encodedNew)))
 		}
 	}
 
 	r.appendLiteral(old, new)
 }
 
+func trimQuotes(s string) string {
+	if len(s) > 0 && s[0] == '"' {
+		s = s[1:]
+	}
+	if len(s) > 0 && s[len(s)-1] == '"' {
+		s = s[:len(s)-1]
+	}
+	return s
+}
+
+func (r *ReplacementsContext) SetPath(old, new string) {
+	r.Set(old, new)
+
+	if runtime.GOOS != "windows" {
+		return
+	}
+
+	// Support both forward and backward slashes
+	m1 := strings.ReplaceAll(old, "\\", "/")
+	if m1 != old {
+		r.Set(m1, new)
+	}
+
+	m2 := strings.ReplaceAll(old, "/", "\\")
+	if m2 != old && m2 != m1 {
+		r.Set(m2, new)
+	}
+}
+
+func (r *ReplacementsContext) SetPathWithParents(old, new string) {
+	r.SetPath(old, new)
+	r.SetPath(filepath.Dir(old), new+"_PARENT")
+	r.SetPath(filepath.Dir(filepath.Dir(old)), new+"_GPARENT")
+}
+
 func PrepareReplacementsWorkspaceClient(t testutil.TestingT, r *ReplacementsContext, w *databricks.WorkspaceClient) {
 	t.Helper()
 	// in some clouds (gcp) w.Config.Host includes "https://" prefix in others it's really just a host (azure)