diff --git a/packages/cli-workflow/__tests__/init-workspace.test.ts b/packages/cli-workflow/__tests__/init-workspace.test.ts
index 7c682c9..07527d8 100644
--- a/packages/cli-workflow/__tests__/init-workspace.test.ts
+++ b/packages/cli-workflow/__tests__/init-workspace.test.ts
@@ -125,9 +125,6 @@ describe("init workspace", () => {
   });
 
   test("errors on invalid workspace name", async () => {
-    const slash = await cmdInitWorkspace(parent, "a/b");
-    expect(slash.ok).toBe(false);
-
     const dots = await cmdInitWorkspace(parent, "..");
     expect(dots.ok).toBe(false);
 
@@ -135,6 +132,14 @@ describe("init workspace", () => {
     expect(empty.ok).toBe(false);
   });
 
+  test("accepts nested path as workspace name", async () => {
+    const nested = await cmdInitWorkspace(parent, "a/b");
+    expect(nested.ok).toBe(true);
+    if (nested.ok) {
+      expect(nested.value.rootPath).toContain("a/b");
+    }
+  });
+
   test("usage lists init subcommands", () => {
     const u = formatCliUsage();
     expect(u).toContain("init workspace <name>");
diff --git a/packages/cli-workflow/src/commands/init/workspace.ts b/packages/cli-workflow/src/commands/init/workspace.ts
index 8b3bea9..26c935c 100644
--- a/packages/cli-workflow/src/commands/init/workspace.ts
+++ b/packages/cli-workflow/src/commands/init/workspace.ts
@@ -1,5 +1,5 @@
 import { mkdir, writeFile } from "node:fs/promises";
-import { join } from "node:path";
+import { basename, join, resolve } from "node:path";
 
 import { err, ok, type Result } from "@uncaged/workflow-protocol";
 
@@ -297,27 +297,30 @@ export async function cmdInitWorkspace(
   parentDir: string,
   workspaceName: string,
 ): Promise<Result<CmdInitWorkspaceSuccess, string>> {
-  const validated = validateWorkspaceSegment(workspaceName);
-  if (!validated.ok) {
-    return validated;
+  // Accept a relative/absolute path: resolve it and derive the dir name for package.json.
+  const resolved = resolve(parentDir, workspaceName);
+  const rootPath = resolved;
+  const dirName = basename(resolved);
+
+  if (dirName === "" || dirName === "." || dirName === "..") {
+    return err(`invalid workspace path: ${workspaceName}`);
   }
 
-  const rootPath = join(parentDir, workspaceName);
   if (await pathExists(rootPath)) {
     return err(`directory already exists: ${rootPath}`);
   }
 
-  await mkdir(rootPath, { recursive: false });
-  await mkdir(join(rootPath, "templates"), { recursive: false });
-  await mkdir(join(rootPath, "workflows"), { recursive: false });
-  await mkdir(join(rootPath, "scripts"), { recursive: false });
+  await mkdir(rootPath, { recursive: true });
+  await mkdir(join(rootPath, "templates"), { recursive: true });
+  await mkdir(join(rootPath, "workflows"), { recursive: true });
+  await mkdir(join(rootPath, "scripts"), { recursive: true });
 
   await Promise.all([
-    writeFile(join(rootPath, "package.json"), rootPackageJson(workspaceName), "utf8"),
+    writeFile(join(rootPath, "package.json"), rootPackageJson(dirName), "utf8"),
     writeFile(join(rootPath, "biome.json"), biomeJson(), "utf8"),
     writeFile(join(rootPath, "tsconfig.json"), tsconfigJson(), "utf8"),
     writeFile(join(rootPath, "AGENTS.md"), agentsMd(), "utf8"),
-    writeFile(join(rootPath, "README.md"), readmeMd(workspaceName), "utf8"),
+    writeFile(join(rootPath, "README.md"), readmeMd(dirName), "utf8"),
     writeFile(join(rootPath, "templates", ".gitkeep"), "", "utf8"),
     writeFile(join(rootPath, "workflows", "package.json"), workflowsPackageJson(), "utf8"),
     writeFile(join(rootPath, "workflows", ".gitkeep"), "", "utf8"),
diff --git a/packages/cli-workflow/src/commands/setup/dispatch.ts b/packages/cli-workflow/src/commands/setup/dispatch.ts
index 4d4f0d4..a1ba638 100644
--- a/packages/cli-workflow/src/commands/setup/dispatch.ts
+++ b/packages/cli-workflow/src/commands/setup/dispatch.ts
@@ -1,5 +1,7 @@
+import { existsSync } from "node:fs";
 import { stdin as input, stdout as output } from "node:process";
 import { createInterface } from "node:readline/promises";
+import { resolve } from "node:path";
 
 import { err, ok, type Result } from "@uncaged/workflow-protocol";
 
@@ -317,15 +319,29 @@ async function collectInteractiveSetup(): Promise<Result<SetupCliArgs, string>>
     const defaultModel = `${provider}/${bare}`;
     printCliLine(`  → ${defaultModel}`);
 
-    const wsPath = await promptLine(
-      rl2,
-      "\nWorkflow workspace path (default: ./workflows, type 'skip' to skip): ",
-    );
+    let initWorkspaceName: string | null = null;
+    // Loop until a valid workspace path is provided or the user skips.
+    while (true) {
+      const wsPath = await promptLine(
+        rl2,
+        "\nWorkflow workspace path (default: ./workflows, type 'skip' to skip): ",
+      );
+      if (wsPath.toLowerCase() === "skip") {
+        break;
+      }
+      const candidate = wsPath === "" ? "./workflows" : wsPath;
+      // Validate path before passing to cmdSetup.
+      const resolved = resolve(process.cwd(), candidate);
+      if (existsSync(resolved)) {
+        printCliWarn(`directory already exists: ${resolved}`);
+        printCliLine("Please enter a different path, or type 'skip' to skip.");
+        continue;
+      }
+      initWorkspaceName = candidate;
+      break;
+    }
     rl2.close();
 
-    const initWorkspaceName =
-      wsPath.toLowerCase() === "skip" ? null : wsPath === "" ? "./workflows" : wsPath;
-
     return ok({
       provider,
       baseUrl,