diff --git a/code/.storybook/main.ts b/code/.storybook/main.ts
index 9870741de29e..48109681b6b0 100644
--- a/code/.storybook/main.ts
+++ b/code/.storybook/main.ts
@@ -160,6 +160,12 @@ const config: StorybookConfig = {
         // disable sourcemaps in CI to not run out of memory
         sourcemap: process.env.CI !== 'true',
       },
+      server: {
+        watch: {
+          // Something odd happens with tsconfig and nx which causes Storybook to keep reloading, so we ignore them
+          ignored: ['**/.nx/cache/**', '**/tsconfig.json'],
+        },
+      },
     } satisfies typeof viteConfig);
   },
   // logLevel: 'debug',
diff --git a/code/addons/test/src/node/vitest-manager.ts b/code/addons/test/src/node/vitest-manager.ts
index 4145acf18a3f..5e23088dfcbb 100644
--- a/code/addons/test/src/node/vitest-manager.ts
+++ b/code/addons/test/src/node/vitest-manager.ts
@@ -14,6 +14,7 @@ import type { TestingModuleRunRequestPayload } from 'storybook/internal/core-eve
 
 import type { DocsIndexEntry, StoryIndex, StoryIndexEntry } from '@storybook/types';
 
+import { findUp } from 'find-up';
 import path, { dirname, join, normalize } from 'pathe';
 import slash from 'slash';
 
@@ -23,6 +24,9 @@ import type { StorybookCoverageReporterOptions } from './coverage-reporter';
 import { StorybookReporter } from './reporter';
 import type { TestManager } from './test-manager';
 
+const VITEST_CONFIG_FILE_EXTENSIONS = ['mts', 'mjs', 'cts', 'cjs', 'ts', 'tsx', 'js', 'jsx'];
+const VITEST_WORKSPACE_FILE_EXTENSION = ['ts', 'js', 'json'];
+
 type TagsFilter = {
   include: string[];
   exclude: string[];
@@ -68,7 +72,13 @@ export class VitestManager {
         : { enabled: false }
     ) as CoverageOptions;
 
+    const vitestWorkspaceConfig = await findUp([
+      ...VITEST_WORKSPACE_FILE_EXTENSION.map((ext) => `vitest.workspace.${ext}`),
+      ...VITEST_CONFIG_FILE_EXTENSIONS.map((ext) => `vitest.config.${ext}`),
+    ]);
+
     this.vitest = await createVitest('test', {
+      root: vitestWorkspaceConfig ? dirname(vitestWorkspaceConfig) : process.cwd(),
       watch: true,
       passWithNoTests: false,
       // TODO:
diff --git a/code/addons/test/src/postinstall.ts b/code/addons/test/src/postinstall.ts
index bb51dfa3ff1e..cac46c5fa619 100644
--- a/code/addons/test/src/postinstall.ts
+++ b/code/addons/test/src/postinstall.ts
@@ -417,6 +417,12 @@ export default async function postInstall(options: PostinstallOptions) {
       dedent`
         import { defineWorkspace } from 'vitest/config';
         import { storybookTest } from '@storybook/experimental-addon-test/vitest-plugin';
+        import path from 'node:path';
+        import { fileURLToPath } from 'node:url';
+
+        const dirname = typeof __dirname !== 'undefined'
+          ? __dirname
+          : path.dirname(fileURLToPath(import.meta.url));
 
         // More info at: https://storybook.js.org/docs/writing-tests/test-addon
         export default defineWorkspace([
@@ -426,7 +432,7 @@ export default async function postInstall(options: PostinstallOptions) {
             plugins: [
               // The plugin will run tests for the stories defined in your Storybook config
               // See options at: https://storybook.js.org/docs/writing-tests/test-addon#storybooktest
-              storybookTest({ configDir: '${options.configDir}' }),
+              storybookTest({ configDir: path.join(dirname, '${options.configDir}') })
             ],
             test: {
               name: 'storybook',
@@ -457,13 +463,19 @@ export default async function postInstall(options: PostinstallOptions) {
       dedent`
         import { defineConfig } from 'vitest/config';
         import { storybookTest } from '@storybook/experimental-addon-test/vitest-plugin';
+        import path from 'node:path';
+        import { fileURLToPath } from 'node:url';
+
+        const dirname = typeof __dirname !== 'undefined'
+          ? __dirname
+          : path.dirname(fileURLToPath(import.meta.url));
 
         // More info at: https://storybook.js.org/docs/writing-tests/test-addon
         export default defineConfig({
           plugins: [
             // The plugin will run tests for the stories defined in your Storybook config
             // See options at: https://storybook.js.org/docs/writing-tests/test-addon#storybooktest
-            storybookTest({ configDir: '${options.configDir}' }),
+            storybookTest({ configDir: path.join(dirname, '${options.configDir}') })
           ],
           test: {
             name: 'storybook',
diff --git a/docs/_snippets/vitest-plugin-vitest-config.md b/docs/_snippets/vitest-plugin-vitest-config.md
index 382fe191b76e..e61f9e9f5c9b 100644
--- a/docs/_snippets/vitest-plugin-vitest-config.md
+++ b/docs/_snippets/vitest-plugin-vitest-config.md
@@ -1,6 +1,11 @@
 ```ts filename="vitest.config.ts" renderer="react"
 import { defineConfig, mergeConfig } from 'vitest/config';
 import { storybookTest } from '@storybook/experimental-addon-test/vitest-plugin';
+import path from 'node:path';
+import { fileURLToPath } from 'node:url';
+
+const dirname =
+  typeof __dirname !== 'undefined' ? __dirname : path.dirname(fileURLToPath(import.meta.url));
 
 import viteConfig from './vite.config';
 
@@ -10,7 +15,7 @@ export default mergeConfig(
     plugins: [
       storybookTest({
         // The location of your Storybook config, main.js|ts
-        configDir: './.storybook',
+        configDir: path.join(dirname, '.storybook'),
         // This should match your package.json script to run Storybook
         // The --ci flag will skip prompts and not open a browser
         storybookScript: 'yarn storybook --ci',
@@ -35,16 +40,21 @@ export default mergeConfig(
 import { defineConfig, mergeConfig } from 'vitest/config';
 import { storybookTest } from '@storybook/experimental-addon-test/vitest-plugin';
 import { storybookVuePlugin } from '@storybook/vue3-vite/vite-plugin';
+import path from 'node:path';
+import { fileURLToPath } from 'node:url';
 
 import viteConfig from './vite.config';
 
+const dirname =
+  typeof __dirname !== 'undefined' ? __dirname : path.dirname(fileURLToPath(import.meta.url));
+
 export default mergeConfig(
   viteConfig,
   defineConfig({
     plugins: [
       storybookTest({
         // The location of your Storybook config, main.js|ts
-        configDir: './.storybook',
+        configDir: path.join(dirname, '.storybook'),
         // This should match your package.json script to run Storybook
         // The --ci flag will skip prompts and not open a browser
         storybookScript: 'yarn storybook --ci',
@@ -69,6 +79,11 @@ export default mergeConfig(
 ```ts filename="vitest.config.ts" renderer="svelte"
 import { defineConfig, mergeConfig } from 'vitest/config';
 import { storybookTest } from '@storybook/experimental-addon-test/vitest-plugin';
+import path from 'node:path';
+import { fileURLToPath } from 'node:url';
+
+const dirname =
+  typeof __dirname !== 'undefined' ? __dirname : path.dirname(fileURLToPath(import.meta.url));
 
 import viteConfig from './vite.config';
 
@@ -78,7 +93,7 @@ export default mergeConfig(
     plugins: [
       storybookTest({
         // The location of your Storybook config, main.js|ts
-        configDir: './.storybook',
+        configDir: path.join(dirname, '.storybook'),
         // This should match your package.json script to run Storybook
         // The --ci flag will skip prompts and not open a browser
         storybookScript: 'yarn storybook --ci',
diff --git a/docs/_snippets/vitest-plugin-vitest-workspace.md b/docs/_snippets/vitest-plugin-vitest-workspace.md
index 99e3e4371c15..9363f21df907 100644
--- a/docs/_snippets/vitest-plugin-vitest-workspace.md
+++ b/docs/_snippets/vitest-plugin-vitest-workspace.md
@@ -1,6 +1,11 @@
 ```ts filename="vitest.workspace.ts" renderer="react"
 import { defineWorkspace } from 'vitest/config';
 import { storybookTest } from '@storybook/experimental-addon-test/vitest-plugin';
+import path from 'node:path';
+import { fileURLToPath } from 'node:url';
+
+const dirname =
+  typeof __dirname !== 'undefined' ? __dirname : path.dirname(fileURLToPath(import.meta.url));
 
 export default defineWorkspace([
   // This is the path to your existing Vitest config file
@@ -11,7 +16,7 @@ export default defineWorkspace([
     plugins: [
       storybookTest({
         // The location of your Storybook config, main.js|ts
-        configDir: './.storybook',
+        configDir: path.join(dirname, '.storybook'),
         // This should match your package.json script to run Storybook
         // The --ci flag will skip prompts and not open a browser
         storybookScript: 'yarn storybook --ci',
@@ -36,9 +41,14 @@ export default defineWorkspace([
 ```ts filename="vitest.config.ts" renderer="vue"
 import { defineConfig, mergeConfig } from 'vitest/config';
 import { storybookTest } from '@storybook/experimental-addon-test/vitest-plugin';
+import path from 'node:path';
+import { fileURLToPath } from 'node:url';
 
 import viteConfig from './vite.config';
 
+const dirname =
+  typeof __dirname !== 'undefined' ? __dirname : path.dirname(fileURLToPath(import.meta.url));
+
 export default defineWorkspace([
   // This is the path to your existing Vitest config file
   './vitest.config.ts',
@@ -48,7 +58,7 @@ export default defineWorkspace([
     plugins: [
       storybookTest({
         // The location of your Storybook config, main.js|ts
-        configDir: './.storybook',
+        configDir: path.join(dirname, '.storybook'),
         // This should match your package.json script to run Storybook
         // The --ci flag will skip prompts and not open a browser
         storybookScript: 'yarn storybook --ci',
@@ -73,9 +83,14 @@ export default defineWorkspace([
 ```ts filename="vitest.config.ts" renderer="svelte"
 import { defineConfig, mergeConfig } from 'vitest/config';
 import { storybookTest } from '@storybook/experimental-addon-test/vitest-plugin';
+import path from 'node:path';
+import { fileURLToPath } from 'node:url';
 
 import viteConfig from './vite.config';
 
+const dirname =
+  typeof __dirname !== 'undefined' ? __dirname : path.dirname(fileURLToPath(import.meta.url));
+
 export default defineWorkspace([
   // This is the path to your existing Vitest config file
   './vitest.config.ts',
@@ -85,7 +100,7 @@ export default defineWorkspace([
     plugins: [
       storybookTest({
         // The location of your Storybook config, main.js|ts
-        configDir: './.storybook',
+        configDir: path.join(dirname, '.storybook'),
         // This should match your package.json script to run Storybook
         // The --ci flag will skip prompts and not open a browser
         storybookScript: 'yarn storybook --ci',
diff --git a/scripts/tasks/sandbox-parts.ts b/scripts/tasks/sandbox-parts.ts
index b95bbffb16dd..56ab7176a63c 100644
--- a/scripts/tasks/sandbox-parts.ts
+++ b/scripts/tasks/sandbox-parts.ts
@@ -451,12 +451,20 @@ export async function setupVitest(details: TemplateDetails, options: PassedOptio
     dedent`
       import { defineWorkspace, defaultExclude } from "vitest/config";
       import { storybookTest } from "@storybook/experimental-addon-test/vitest-plugin";
+      import path from 'node:path';
+      import { fileURLToPath } from 'node:url';
+
+      import viteConfig from './vite.config';
+
+      const dirname =
+        typeof __dirname !== 'undefined' ? __dirname : path.dirname(fileURLToPath(import.meta.url));
 
       export default defineWorkspace([
         {
           ${!isNextjs ? `extends: "${viteConfigPath}",` : ''}
           plugins: [
             storybookTest({
+              configDir: path.join(dirname, '.storybook'),
               storybookScript: "yarn storybook --ci",
               tags: {
                 include: ["vitest"],