diff --git a/README.md b/README.md
index e97d576..2d1dfbc 100644
--- a/README.md
+++ b/README.md
@@ -74,7 +74,7 @@ These options are resolved relative to the [workspace file](https://code.visuals
 
 ### Other Options
 
-- `vitest.packagePath`: The path to a `package.json` file of a Vitest executable (it's usually inside `node_modules`) in case the extension cannot find it. It will be used to resolve Vitest API paths. This should be used as a last resort fix.
+- `vitest.vitestPackagePath`: The path to a `package.json` file of a Vitest executable (it's usually inside `node_modules`) in case the extension cannot find it. It will be used to resolve Vitest API paths. This should be used as a last resort fix.
 - `vitest.nodeEnv`: Environment passed to the runner process in addition to
   `process.env`
 - `vitest.debugExclude`: Excludes files matching specified glob patterns from debugging. Default:
diff --git a/package.json b/package.json
index 5d7fe0c..0e534d7 100644
--- a/package.json
+++ b/package.json
@@ -85,7 +85,7 @@
     "configuration": {
       "title": "Vitest",
       "properties": {
-        "vitest.packagePath": {
+        "vitest.vitestPackagePath": {
           "markdownDescription": "The path to the `package.json` file of Vitest executable (it's usually inside `node_modules`) in case the extension cannot find it.",
           "type": "string",
           "scope": "resource"
diff --git a/src/api/pkg.ts b/src/api/pkg.ts
index 8b2d6c3..b9b14eb 100644
--- a/src/api/pkg.ts
+++ b/src/api/pkg.ts
@@ -55,6 +55,13 @@ function resolveVitestConfig(showWarning: boolean, configOrWorkspaceFile: vscode
   }
 
   const pkg = _require(vitest.vitestPackageJsonPath)
+  if (pkg.name !== 'vitest') {
+    vscode.window.showErrorMessage(
+      `Package was resolved to "${pkg.name}" instead of "vitest". If you are using "vitest.vitestPackagePath", make sure it points to a "vitest" package.`,
+    )
+    delete require.cache[vitest.vitestPackageJsonPath]
+    return null
+  }
   if (!gte(pkg.version, minimumVersion)) {
     const warning = `Vitest v${pkg.version} is not supported. Vitest v${minimumVersion} or newer is required.`
     if (showWarning)
diff --git a/src/config.ts b/src/config.ts
index 4105ea2..655f30d 100644
--- a/src/config.ts
+++ b/src/config.ts
@@ -14,7 +14,7 @@ export function getConfigValue<T>(
   return folderConfig.get(key) ?? rootConfig.get(key) ?? defaultValue
 }
 
-export function getConfig(workspaceFolder?: WorkspaceFolder | vscode.Uri | string) {
+export function getConfig(workspaceFolder?: WorkspaceFolder) {
   let workspace: WorkspaceFolder | vscode.Uri | undefined
   if (typeof workspaceFolder === 'string')
     workspace = vscode.Uri.from({ scheme: 'file', path: workspaceFolder })
@@ -37,10 +37,16 @@ export function getConfig(workspaceFolder?: WorkspaceFolder | vscode.Uri | strin
 
   const configSearchPatternExclude = get<string>('configSearchPatternExclude', '**/{node_modules,.*}/**')!
 
+  const vitestPackagePath = get<string | undefined>('vitestPackagePath')
+  const resolvedVitestPackagePath = workspaceFolder && vitestPackagePath
+    // eslint-disable-next-line no-template-curly-in-string
+    ? resolve(workspaceFolder.uri.fsPath, vitestPackagePath.replace('${workspaceFolder}', workspaceFolder.uri.fsPath))
+    : vitestPackagePath
+
   return {
     env: get<null | Record<string, string>>('nodeEnv', null),
     debugExclude: get<string[]>('debugExclude', []),
-    packagePath: get<string | undefined>('packagePath'),
+    vitestPackagePath: resolvedVitestPackagePath,
     workspaceConfig: resolvePath(workspaceConfig),
     rootConfig: resolvePath(rootConfigFile),
     configSearchPatternExclude,
diff --git a/src/extension.ts b/src/extension.ts
index 87542a3..9659475 100644
--- a/src/extension.ts
+++ b/src/extension.ts
@@ -208,7 +208,7 @@ class VitestExtension {
     this.testController.items.replace([this.loadingTestItem])
 
     const reloadConfigNames = [
-      'vitest.packagePath',
+      'vitest.vitestPackagePath',
       'vitest.nodeExecutable',
       'vitest.workspaceConfig',
       'vitest.rootConfig',