diff --git a/.changes/next-release/bugfix-8c6afa32-afe4-41f2-a216-10d8bf5e2486.json b/.changes/next-release/bugfix-8c6afa32-afe4-41f2-a216-10d8bf5e2486.json
new file mode 100644
index 00000000000..50b175ba9dd
--- /dev/null
+++ b/.changes/next-release/bugfix-8c6afa32-afe4-41f2-a216-10d8bf5e2486.json
@@ -0,0 +1,4 @@
+{
+  "type" : "bugfix",
+  "description" : "Amazon Q /test: Test generation fails for files outside the project"
+}
\ No newline at end of file
diff --git a/plugins/amazonq/chat/jetbrains-community/src/software/aws/toolkits/jetbrains/services/amazonqCodeTest/CodeWhispererUTGChatManager.kt b/plugins/amazonq/chat/jetbrains-community/src/software/aws/toolkits/jetbrains/services/amazonqCodeTest/CodeWhispererUTGChatManager.kt
index b2913d66285..4db756a73ee 100644
--- a/plugins/amazonq/chat/jetbrains-community/src/software/aws/toolkits/jetbrains/services/amazonqCodeTest/CodeWhispererUTGChatManager.kt
+++ b/plugins/amazonq/chat/jetbrains-community/src/software/aws/toolkits/jetbrains/services/amazonqCodeTest/CodeWhispererUTGChatManager.kt
@@ -512,6 +512,7 @@ class CodeWhispererUTGChatManager(val project: Project, private val cs: Coroutin
                 AmazonqTelemetry.utgGenerateTests(
                     cwsprChatProgrammingLanguage = session.programmingLanguage.languageId,
                     hasUserPromptSupplied = session.hasUserPromptSupplied,
+                    isFileInWorkspace = true,
                     isSupportedLanguage = true,
                     credentialStartUrl = getStartUrl(project),
                     jobGroup = session.testGenerationJobGroupName,
diff --git a/plugins/amazonq/chat/jetbrains-community/src/software/aws/toolkits/jetbrains/services/amazonqCodeTest/controller/CodeTestChatController.kt b/plugins/amazonq/chat/jetbrains-community/src/software/aws/toolkits/jetbrains/services/amazonqCodeTest/controller/CodeTestChatController.kt
index 7736f42f3f5..50d1cc266d2 100644
--- a/plugins/amazonq/chat/jetbrains-community/src/software/aws/toolkits/jetbrains/services/amazonqCodeTest/controller/CodeTestChatController.kt
+++ b/plugins/amazonq/chat/jetbrains-community/src/software/aws/toolkits/jetbrains/services/amazonqCodeTest/controller/CodeTestChatController.kt
@@ -12,6 +12,7 @@ import com.intellij.openapi.application.ApplicationManager
 import com.intellij.openapi.fileEditor.FileDocumentManager
 import com.intellij.openapi.fileEditor.FileEditorManager
 import com.intellij.openapi.project.Project
+import com.intellij.openapi.project.guessProjectDir
 import com.intellij.openapi.vfs.LocalFileSystem
 import com.intellij.openapi.vfs.VirtualFile
 import com.intellij.openapi.vfs.VirtualFileManager
@@ -158,6 +159,10 @@ class CodeTestChatController(
         // check if IDE has active file open, yes return (fileName and filePath) else return null
         val project = context.project
         val fileInfo = checkActiveFileInIDE(project, message) ?: return
+        val projectRoot = Path.of(
+            project.basePath ?: project.guessProjectDir()?.path
+                ?: error("Cannot guess base directory for project ${project.name}")
+        )
         session.programmingLanguage = fileInfo.fileLanguage
         if (session.isGeneratingTests === true) {
             return
@@ -185,7 +190,8 @@ class CodeTestChatController(
             message.tabId,
             false
         )
-        if (isLanguageSupported(fileInfo.fileLanguage.languageId)) {
+        val supported = fileInfo.filePath.startsWith(projectRoot.toString()) && isLanguageSupported(fileInfo.fileLanguage.languageId)
+        if (supported) {
             // Send Capability card to chat
             codeTestChatHelper.addNewMessage(
                 CodeTestChatMessageContent(informationCard = true, message = null, type = ChatMessageType.Answer, canBeVoted = false),
@@ -231,9 +237,15 @@ class CodeTestChatController(
                 }
                 .build()
 
-            val messageContent = "<span style=\"color: #EE9D28;\">&#9888;<b> ${fileInfo.fileLanguage.languageId} is not a " +
-                "language I support specialized unit test generation for at the moment.</b><br></span>The languages " +
-                "I support now are Python and Java. I can still provide examples, instructions and code suggestions."
+            val messageContent = if (fileInfo.filePath.startsWith(projectRoot.toString())) {
+                "<span style=\"color: #EE9D28;\">&#9888;<b> ${fileInfo.fileLanguage.languageId} is not a " +
+                    "language I support specialized unit test generation for at the moment.</b><br></span>The languages " +
+                    "I support now are Python and Java. I can still provide examples, instructions and code suggestions."
+            } else {
+                "<span style=\"color: #EE9D28;\">&#9888;<b> I can't generate tests for ${fileInfo.fileName}" +
+                    " because it's outside the project directory.</b><br></span> " +
+                    "I can still provide examples, instructions and code suggestions."
+            }
 
             codeTestChatHelper.addNewMessage(
                 CodeTestChatMessageContent(
@@ -288,7 +300,8 @@ class CodeTestChatController(
                 AmazonqTelemetry.utgGenerateTests(
                     cwsprChatProgrammingLanguage = session.programmingLanguage.languageId,
                     hasUserPromptSupplied = session.hasUserPromptSupplied,
-                    isSupportedLanguage = false,
+                    isFileInWorkspace = fileInfo.filePath.startsWith(projectRoot.toString()),
+                    isSupportedLanguage = isLanguageSupported(fileInfo.fileLanguage.languageId),
                     credentialStartUrl = getStartUrl(project),
                     result = MetricResult.Succeeded,
                     perfClientLatency = (Instant.now().toEpochMilli() - session.startTimeOfTestGeneration),
@@ -590,6 +603,7 @@ class CodeTestChatController(
                 AmazonqTelemetry.utgGenerateTests(
                     cwsprChatProgrammingLanguage = session.programmingLanguage.languageId,
                     hasUserPromptSupplied = session.hasUserPromptSupplied,
+                    isFileInWorkspace = true,
                     isSupportedLanguage = true,
                     credentialStartUrl = getStartUrl(project = context.project),
                     jobGroup = session.testGenerationJobGroupName,
@@ -785,6 +799,7 @@ class CodeTestChatController(
                 AmazonqTelemetry.utgGenerateTests(
                     cwsprChatProgrammingLanguage = session.programmingLanguage.languageId,
                     hasUserPromptSupplied = session.hasUserPromptSupplied,
+                    isFileInWorkspace = true,
                     isSupportedLanguage = true,
                     credentialStartUrl = getStartUrl(project = context.project),
                     jobGroup = session.testGenerationJobGroupName,
diff --git a/plugins/core/jetbrains-community/resources/telemetryOverride.json b/plugins/core/jetbrains-community/resources/telemetryOverride.json
index 5637baaa16e..1901f917406 100644
--- a/plugins/core/jetbrains-community/resources/telemetryOverride.json
+++ b/plugins/core/jetbrains-community/resources/telemetryOverride.json
@@ -215,6 +215,11 @@
             "type": "boolean",
             "description": "True if user selected code snippet as input else false"
         },
+        {
+            "name": "isFileInWorkspace",
+            "type": "boolean",
+            "description": "Indicate if the file is in the current workspace."
+        },
         {
             "name": "isSupportedLanguage",
             "type": "boolean",
@@ -573,6 +578,9 @@
                     "type": "isCodeBlockSelected",
                     "required": false
                 },
+                {
+                    "type": "isFileInWorkspace"
+                },
                 {
                     "type": "isSupportedLanguage"
                 },