diff --git a/.changeset/cyan-jobs-report.md b/.changeset/cyan-jobs-report.md
new file mode 100644
index 000000000..2b698200a
--- /dev/null
+++ b/.changeset/cyan-jobs-report.md
@@ -0,0 +1,5 @@
+---
+'@graphprotocol/graph-cli': patch
+---
+
+Add prompt for existing directory in `init` flow
diff --git a/packages/cli/src/commands/init.ts b/packages/cli/src/commands/init.ts
index f7ad931b1..a739b9972 100644
--- a/packages/cli/src/commands/init.ts
+++ b/packages/cli/src/commands/init.ts
@@ -387,10 +387,6 @@ async function processFromExampleInitForm(
         name: 'directory',
         message: 'Directory to create the subgraph in',
         initial: () => initDirectory || getSubgraphBasename(subgraphName),
-        validate: value =>
-          filesystem.exists(value || initDirectory || getSubgraphBasename(subgraphName))
-            ? 'Directory already exists'
-            : true,
       },
     ]);
 
@@ -506,10 +502,6 @@ async function processInitForm(
         name: 'directory',
         message: 'Directory to create the subgraph in',
         initial: () => initDirectory || getSubgraphBasename(subgraphName),
-        validate: value =>
-          filesystem.exists(value || initDirectory || getSubgraphBasename(subgraphName))
-            ? 'Directory already exists'
-            : true,
       },
     ]);
 
@@ -889,9 +881,17 @@ async function initSubgraphFromExample(
     };
   },
 ) {
-  // Fail if the output directory already exists
+  let overwrite = false;
   if (filesystem.exists(directory)) {
-    this.error(`Directory or file "${directory}" already exists`, { exit: 1 });
+    overwrite = await prompt.confirm(
+      'Directory already exists, do you want to initialize the subgraph here (files will be overwritten) ?',
+      false,
+    );
+
+    if (!overwrite) {
+      this.exit(1);
+      return;
+    }
   }
 
   // Clone the example subgraph repository
@@ -921,7 +921,7 @@ async function initSubgraphFromExample(
           return { result: false, error: `Example not found: ${fromExample}` };
         }
 
-        filesystem.copy(exampleSubgraphPath, directory);
+        filesystem.copy(exampleSubgraphPath, directory, { overwrite });
         return true;
       } finally {
         filesystem.remove(tmpDir);
@@ -1050,9 +1050,15 @@ async function initSubgraphFromContract(
 ) {
   const isSubstreams = protocolInstance.name === 'substreams';
 
-  // Fail if the output directory already exists
-  if (filesystem.exists(directory)) {
-    this.error(`Directory or file "${directory}" already exists`, { exit: 1 });
+  if (
+    filesystem.exists(directory) &&
+    !(await prompt.confirm(
+      'Directory already exists, do you want to initialize the subgraph here (files will be overwritten) ?',
+      false,
+    ))
+  ) {
+    this.exit(1);
+    return;
   }
 
   if (