diff --git a/codeflash/lsp/beta.py b/codeflash/lsp/beta.py
index 28a6ec655..57a65723a 100644
--- a/codeflash/lsp/beta.py
+++ b/codeflash/lsp/beta.py
@@ -131,10 +131,11 @@ def get_optimizable_functions(
     return path_to_qualified_names
 
 
-def _find_pyproject_toml(workspace_path: str) -> Path | None:
+def _find_pyproject_toml(workspace_path: str) -> tuple[Path | None, bool]:
     workspace_path_obj = Path(workspace_path)
     max_depth = 2
     base_depth = len(workspace_path_obj.parts)
+    top_level_pyproject = None
 
     for root, dirs, files in os.walk(workspace_path_obj):
         depth = len(Path(root).parts) - base_depth
@@ -145,32 +146,39 @@ def _find_pyproject_toml(workspace_path: str) -> Path | None:
 
         if "pyproject.toml" in files:
             file_path = Path(root) / "pyproject.toml"
+            if depth == 0:
+                top_level_pyproject = file_path
             with file_path.open("r", encoding="utf-8", errors="ignore") as f:
                 for line in f:
                     if line.strip() == "[tool.codeflash]":
-                        return file_path.resolve()
-    return None
+                        return file_path.resolve(), True
+    return top_level_pyproject, False
 
 
 # should be called the first thing to initialize and validate the project
 @server.feature("initProject")
-def init_project(server: CodeflashLanguageServer, params: ValidateProjectParams) -> dict[str, str]:
+def init_project(server: CodeflashLanguageServer, params: ValidateProjectParams) -> dict[str, str]:  # noqa: PLR0911
     from codeflash.cli_cmds.cmd_init import is_valid_pyproject_toml
 
-    pyproject_toml_path: Path | None = getattr(params, "config_file", None)
+    pyproject_toml_path: Path | None = getattr(params, "config_file", None) or getattr(server.args, "config_file", None)
 
-    if server.args is None:
-        if pyproject_toml_path is not None:
-            # if there is a config file provided use it
+    if pyproject_toml_path is not None:
+        # if there is a config file provided use it
+        server.prepare_optimizer_arguments(pyproject_toml_path)
+    else:
+        # otherwise look for it
+        pyproject_toml_path, has_codeflash_config = _find_pyproject_toml(params.root_path_abs)
+        if pyproject_toml_path and has_codeflash_config:
+            server.show_message_log(f"Found pyproject.toml at: {pyproject_toml_path}", "Info")
             server.prepare_optimizer_arguments(pyproject_toml_path)
+        elif pyproject_toml_path and not has_codeflash_config:
+            return {
+                "status": "error",
+                "message": "pyproject.toml found in workspace, but no codeflash config.",
+                "pyprojectPath": pyproject_toml_path,
+            }
         else:
-            # otherwise look for it
-            pyproject_toml_path = _find_pyproject_toml(params.root_path_abs)
-            server.show_message_log(f"Found pyproject.toml at: {pyproject_toml_path}", "Info")
-            if pyproject_toml_path:
-                server.prepare_optimizer_arguments(pyproject_toml_path)
-            else:
-                return {"status": "error", "message": "No pyproject.toml found in workspace."}
+            return {"status": "error", "message": "No pyproject.toml found in workspace."}
 
     # since we are using worktrees, optimization diffs are generated with respect to the root of the repo.
     root = str(git_root_dir())
@@ -187,10 +195,7 @@ def init_project(server: CodeflashLanguageServer, params: ValidateProjectParams)
     config = is_valid_pyproject_toml(pyproject_toml_path)
     if config is None:
         server.show_message_log("pyproject.toml is not valid", "Error")
-        return {
-            "status": "error",
-            "message": "pyproject.toml is not valid",  # keep the error message the same, the extension is matching "pyproject.toml" in the error message to show the codeflash init instructions,
-        }
+        return {"status": "error", "message": "not valid", "pyprojectPath": pyproject_toml_path}
 
     args = process_args(server)
     repo = git.Repo(args.module_root, search_parent_directories=True)