diff --git a/.changeset/friendly-brooms-cry.md b/.changeset/friendly-brooms-cry.md
new file mode 100644
index 000000000..aa7fff9a7
--- /dev/null
+++ b/.changeset/friendly-brooms-cry.md
@@ -0,0 +1,6 @@
+---
+"trigger.dev": patch
+"@trigger.dev/build": patch
+---
+
+prismaExtension fixes for #1325 and #1327
diff --git a/.vscode/launch.json b/.vscode/launch.json
index 1e7cf8eb0..8fd69a9b4 100644
--- a/.vscode/launch.json
+++ b/.vscode/launch.json
@@ -36,6 +36,14 @@
       "cwd": "${workspaceFolder}/references/v3-catalog",
       "sourceMaps": true
     },
+    {
+      "type": "node-terminal",
+      "request": "launch",
+      "name": "Debug prisma-catalog deploy CLI",
+      "command": "pnpm exec trigger deploy --self-hosted --load-image",
+      "cwd": "${workspaceFolder}/references/prisma-catalog",
+      "sourceMaps": true
+    },
     {
       "type": "node-terminal",
       "request": "launch",
diff --git a/docs/config/config-file.mdx b/docs/config/config-file.mdx
index 7c898e494..661331410 100644
--- a/docs/config/config-file.mdx
+++ b/docs/config/config-file.mdx
@@ -444,12 +444,9 @@ export default defineConfig({
 ```
 
 <Note>
-  The `prismaExtension` will inject the `DATABASE_URL` environment variable into the build process
-  when running the `deploy` command. This means the CLI needs to have `process.env.DATABASE_URL` set
-  at the time of calling the `deploy` command. You can do this via a `.env` file and passing the
-  `--env-file .env` option to the deploy command or via shell environment variables. This goes for direct database URLs as well.
+  The `prismaExtension` will inject the `DATABASE_URL` environment variable into the build process. Learn more about setting environment variables for deploying in our [Environment Variables](/deploy-environment-variables) guide.
 
-These environment variables are only used during the build process and are not embedded in the final image.
+These environment variables are only used during the build process and are not embedded in the final container image.
 
 </Note>
 
diff --git a/packages/build/src/extensions/prisma.ts b/packages/build/src/extensions/prisma.ts
index 26d5253d6..b67adc7ef 100644
--- a/packages/build/src/extensions/prisma.ts
+++ b/packages/build/src/extensions/prisma.ts
@@ -127,8 +127,9 @@ export class PrismaExtension implements BuildExtension {
     if (this.options.typedSql) {
       generatorFlags.push(`--sql`);
 
-      const schemaDir = dirname(this._resolvedSchemaPath);
-      const prismaDir = dirname(schemaDir);
+      const prismaDir = usingSchemaFolder
+        ? dirname(dirname(this._resolvedSchemaPath))
+        : dirname(this._resolvedSchemaPath);
 
       context.logger.debug(`Using typedSql`);
 
@@ -226,15 +227,29 @@ export class PrismaExtension implements BuildExtension {
       commands.push(
         `${binaryForRuntime(manifest.runtime)} node_modules/prisma/build/index.js migrate deploy`
       );
+    }
 
-      env.DATABASE_URL = manifest.deploy.env?.DATABASE_URL;
+    env.DATABASE_URL = manifest.deploy.env?.DATABASE_URL;
 
-      if (this.options.directUrlEnvVarName) {
-        env[this.options.directUrlEnvVarName] =
-          manifest.deploy.env?.[this.options.directUrlEnvVarName];
-      } else {
-        env.DIRECT_URL = manifest.deploy.env?.DIRECT_URL;
+    if (this.options.directUrlEnvVarName) {
+      env[this.options.directUrlEnvVarName] =
+        manifest.deploy.env?.[this.options.directUrlEnvVarName] ??
+        process.env[this.options.directUrlEnvVarName];
+
+      if (!env[this.options.directUrlEnvVarName]) {
+        context.logger.warn(
+          `prismaExtension could not resolve the ${this.options.directUrlEnvVarName} environment variable. Make sure you add it to your environment variables or provide it as an environment variable to the deploy CLI command. See our docs for more info: https://trigger.dev/docs/deploy-environment-variables`
+        );
       }
+    } else {
+      env.DIRECT_URL = manifest.deploy.env?.DIRECT_URL;
+      env.DIRECT_DATABASE_URL = manifest.deploy.env?.DIRECT_DATABASE_URL;
+    }
+
+    if (!env.DATABASE_URL) {
+      context.logger.warn(
+        `prismaExtension could not resolve the DATABASE_URL environment variable. Make sure you add it to your environment variables. See our docs for more info: https://trigger.dev/docs/deploy-environment-variables`
+      );
     }
 
     context.logger.debug(`Adding the prisma layer with the following commands`, {
diff --git a/packages/cli-v3/src/deploy/buildImage.ts b/packages/cli-v3/src/deploy/buildImage.ts
index a5fed62b6..db933fa5b 100644
--- a/packages/cli-v3/src/deploy/buildImage.ts
+++ b/packages/cli-v3/src/deploy/buildImage.ts
@@ -492,7 +492,7 @@ COPY --chown=bun:bun . .
 
 ${postInstallCommands}
 
-from build as indexer
+FROM build AS indexer
 
 USER bun
 WORKDIR /app
@@ -601,7 +601,7 @@ COPY --chown=node:node . .
 
 ${postInstallCommands}
 
-from build as indexer
+FROM build AS indexer
 
 USER node
 WORKDIR /app
diff --git a/pnpm-lock.yaml b/pnpm-lock.yaml
index 8f1c6e2b3..6d4af21c3 100644
--- a/pnpm-lock.yaml
+++ b/pnpm-lock.yaml
@@ -1360,6 +1360,28 @@ importers:
         specifier: workspace:*
         version: link:../../packages/cli-v3
 
+  references/prisma-catalog:
+    dependencies:
+      '@prisma/client':
+        specifier: 5.19.0
+        version: 5.19.0(prisma@5.19.0)
+      '@trigger.dev/sdk':
+        specifier: workspace:*
+        version: link:../../packages/trigger-sdk
+    devDependencies:
+      '@trigger.dev/build':
+        specifier: workspace:*
+        version: link:../../packages/build
+      prisma:
+        specifier: 5.19.0
+        version: 5.19.0
+      trigger.dev:
+        specifier: workspace:*
+        version: link:../../packages/cli-v3
+      typescript:
+        specifier: ^5.5.4
+        version: 5.5.4
+
   references/v3-catalog:
     dependencies:
       '@infisical/sdk':
diff --git a/references/prisma-catalog/package.json b/references/prisma-catalog/package.json
new file mode 100644
index 000000000..74f9f3943
--- /dev/null
+++ b/references/prisma-catalog/package.json
@@ -0,0 +1,18 @@
+{
+  "name": "references-prisma-catalog",
+  "private": true,
+  "type": "module",
+  "devDependencies": {
+    "trigger.dev": "workspace:*",
+    "@trigger.dev/build": "workspace:*",
+    "typescript": "^5.5.4",
+    "prisma": "5.19.0"
+  },
+  "dependencies": {
+    "@trigger.dev/sdk": "workspace:*",
+    "@prisma/client": "5.19.0"
+  },
+  "scripts": {
+    "generate:prisma": "prisma generate --sql"
+  }
+}
\ No newline at end of file
diff --git a/references/prisma-catalog/prisma/migrations/20240919122925_add_initial_schema/migration.sql b/references/prisma-catalog/prisma/migrations/20240919122925_add_initial_schema/migration.sql
new file mode 100644
index 000000000..4af85373f
--- /dev/null
+++ b/references/prisma-catalog/prisma/migrations/20240919122925_add_initial_schema/migration.sql
@@ -0,0 +1,20 @@
+-- CreateTable
+CREATE TABLE "User" (
+    "id" SERIAL NOT NULL,
+    "name" TEXT NOT NULL,
+
+    CONSTRAINT "User_pkey" PRIMARY KEY ("id")
+);
+
+-- CreateTable
+CREATE TABLE "Post" (
+    "id" SERIAL NOT NULL,
+    "title" TEXT NOT NULL,
+    "content" TEXT NOT NULL,
+    "authorId" INTEGER NOT NULL,
+
+    CONSTRAINT "Post_pkey" PRIMARY KEY ("id")
+);
+
+-- AddForeignKey
+ALTER TABLE "Post" ADD CONSTRAINT "Post_authorId_fkey" FOREIGN KEY ("authorId") REFERENCES "User"("id") ON DELETE RESTRICT ON UPDATE CASCADE;
diff --git a/references/prisma-catalog/prisma/migrations/migration_lock.toml b/references/prisma-catalog/prisma/migrations/migration_lock.toml
new file mode 100644
index 000000000..fbffa92c2
--- /dev/null
+++ b/references/prisma-catalog/prisma/migrations/migration_lock.toml
@@ -0,0 +1,3 @@
+# Please do not edit this file manually
+# It should be added in your version-control system (i.e. Git)
+provider = "postgresql"
\ No newline at end of file
diff --git a/references/prisma-catalog/prisma/schema.prisma b/references/prisma-catalog/prisma/schema.prisma
new file mode 100644
index 000000000..b05278b72
--- /dev/null
+++ b/references/prisma-catalog/prisma/schema.prisma
@@ -0,0 +1,26 @@
+generator client {
+  provider        = "prisma-client-js"
+  previewFeatures = ["typedSql"]
+}
+
+datasource db {
+  provider  = "postgresql"
+  url       = env("DATABASE_URL")
+  directUrl = env("DIRECT_DATABASE_URL")
+}
+
+// user.prisma
+model User {
+  id    Int    @id @default(autoincrement())
+  name  String
+  posts Post[]
+}
+
+// post.prisma
+model Post {
+  id       Int    @id @default(autoincrement())
+  title    String
+  content  String
+  authorId Int
+  author   User   @relation(fields: [authorId], references: [id])
+}
diff --git a/references/prisma-catalog/prisma/sql/getUsersWithPosts.sql b/references/prisma-catalog/prisma/sql/getUsersWithPosts.sql
new file mode 100644
index 000000000..8f0cb3576
--- /dev/null
+++ b/references/prisma-catalog/prisma/sql/getUsersWithPosts.sql
@@ -0,0 +1,10 @@
+SELECT
+  u.id,
+  u.name,
+  COUNT(p.id) as "postCount"
+FROM
+  "User" u
+  LEFT JOIN "Post" p ON u.id = p."authorId"
+GROUP BY
+  u.id,
+  u.name;
\ No newline at end of file
diff --git a/references/prisma-catalog/src/db.ts b/references/prisma-catalog/src/db.ts
new file mode 100644
index 000000000..5e029ca06
--- /dev/null
+++ b/references/prisma-catalog/src/db.ts
@@ -0,0 +1,6 @@
+import { PrismaClient } from "@prisma/client";
+import { getUsersWithPosts } from "@prisma/client/sql";
+
+export const prisma = new PrismaClient();
+
+export { getUsersWithPosts };
diff --git a/references/prisma-catalog/src/trigger/dbTasks.ts b/references/prisma-catalog/src/trigger/dbTasks.ts
new file mode 100644
index 000000000..7edb46601
--- /dev/null
+++ b/references/prisma-catalog/src/trigger/dbTasks.ts
@@ -0,0 +1,21 @@
+import { getUsersWithPosts, prisma } from "../db.js";
+import { logger, task } from "@trigger.dev/sdk/v3";
+
+export const prismaTask = task({
+  id: "prisma-task",
+  run: async () => {
+    const users = await prisma.user.findMany();
+
+    await prisma.user.create({
+      data: {
+        name: "Alice",
+      },
+    });
+
+    const usersWithPosts = await prisma.$queryRawTyped(getUsersWithPosts());
+
+    logger.info("Users with posts", { usersWithPosts });
+
+    return users;
+  },
+});
diff --git a/references/prisma-catalog/trigger.config.ts b/references/prisma-catalog/trigger.config.ts
new file mode 100644
index 000000000..1bbf0eb2c
--- /dev/null
+++ b/references/prisma-catalog/trigger.config.ts
@@ -0,0 +1,26 @@
+import { prismaExtension } from "@trigger.dev/build/extensions/prisma";
+import { defineConfig } from "@trigger.dev/sdk/v3";
+
+export default defineConfig({
+  runtime: "node",
+  project: "proj_mpzmrzygzbvmfjnnpcsk",
+  retries: {
+    enabledInDev: false,
+    default: {
+      maxAttempts: 3,
+      minTimeoutInMs: 5_000,
+      maxTimeoutInMs: 30_000,
+      factor: 2,
+      randomize: true,
+    },
+  },
+  build: {
+    extensions: [
+      prismaExtension({
+        schema: "prisma/schema.prisma",
+        directUrlEnvVarName: "DIRECT_DATABASE_URL",
+        typedSql: true,
+      }),
+    ],
+  },
+});
diff --git a/references/prisma-catalog/tsconfig.json b/references/prisma-catalog/tsconfig.json
new file mode 100644
index 000000000..9a5ee0b9d
--- /dev/null
+++ b/references/prisma-catalog/tsconfig.json
@@ -0,0 +1,15 @@
+{
+  "compilerOptions": {
+    "target": "ES2023",
+    "module": "Node16",
+    "moduleResolution": "Node16",
+    "esModuleInterop": true,
+    "strict": true,
+    "skipLibCheck": true,
+    "customConditions": ["@triggerdotdev/source"],
+    "jsx": "preserve",
+    "lib": ["DOM", "DOM.Iterable"],
+    "noEmit": true
+  },
+  "include": ["./src/**/*.ts", "trigger.config.ts"]
+}