diff --git a/DESCRIPTION b/DESCRIPTION
index dc4ddc87..0f9fbdd6 100644
--- a/DESCRIPTION
+++ b/DESCRIPTION
@@ -22,6 +22,7 @@ Imports:
     jsonlite,
     openssl,
     rlang,
+    rstudioapi,
     withr,
     yaml
 Suggests:
diff --git a/R/interactive.R b/R/interactive.R
index e97200f6..1d078cfb 100644
--- a/R/interactive.R
+++ b/R/interactive.R
@@ -1,16 +1,54 @@
+is_plausible_orderly_report <- function(path) {
+  path_split <- fs::path_split(path)[[1]]
+
+  length(path_split) > 2 &&
+    path_split[[length(path_split) - 1]] == "src" &&
+    file.exists(file.path(path, "../..", "orderly_config.yml"))
+}
+
+rstudio_get_current_active_editor_path <- function() {
+  if (rstudioapi::isAvailable()) {
+    rstudioapi::getSourceEditorContext()$path
+  } else {
+    NULL
+  }
+}
+
 ## This is something that we might improve over time - it will likely
 ## be useful to have some sort of "register interactive" function
 ## which we could then just look up.
 ##
 ## I am not sure if we also want to allow working interactively from a
 ## draft directory too.
-detect_orderly_interactive_path <- function(path = getwd()) {
-  path_split <- fs::path_split(path)[[1]]
-  is_plausible <- length(path_split) > 2 &&
-    path_split[[length(path_split) - 1]] == "src" &&
-    file.exists(file.path(path, "../..", "orderly_config.yml"))
-  if (!is_plausible) {
-    stop(sprintf("Failed to detect orderly path at '%s'", path))
+detect_orderly_interactive_path <- function(path = getwd(),
+                                            editor_path = rstudio_get_current_active_editor_path()) {
+  is_valid <- is_plausible_orderly_report(path)
+  suggested_wd <- NULL
+  if (!is.null(editor_path)) {
+    dir <- fs::path_dir(editor_path)
+    if (paths_are_different(dir, path) && is_plausible_orderly_report(dir)) {
+      suggested_wd <- dir
+    }
+  }
+
+  if (!is_plausible_orderly_report(path)) {
+    msg <- c("Working directory {.path {path}} is not a valid orderly report.")
+    if (!is.null(suggested_wd)) {
+      cli::cli_abort(
+        c(msg, i = "Use {.code setwd({.str {suggested_wd}})} to set the working directory to the report currently open in RStudio."))
+    } else {
+      cli::cli_abort(msg)
+    }
+  }
+
+  if (!is.null(suggested_wd)) {
+    # For some reason, cli_warn has a different behaviour than cli_abort and
+    # doesn't make individual bullet points available in the condition object.
+    # The following mimicks cli_abort more closely, making testing easier.
+    msg <- c(
+      "Working directory {.path {path}} does not match the report currently open in RStudio.",
+      i = "Use {.code setwd({.str {suggested_wd}})} to switch working directories.")
+    rlang::warn(vcapply(msg, cli::format_inline), use_cli_format = TRUE)
   }
   as.character(fs::path_norm(file.path(path, "../..")))
 }
diff --git a/R/util.R b/R/util.R
index 0c9bdcdc..5faa86c2 100644
--- a/R/util.R
+++ b/R/util.R
@@ -632,3 +632,12 @@ saverds_atomic <- function(data, path, allow_fail = FALSE) {
       finally = unlink(tmp))
   }
 }
+
+
+paths_are_different <- function(x, y) {
+  tryCatch({
+    x_real <- fs::path_real(x)
+    y_real <- fs::path_real(y)
+    x_real != y_real
+  }, error = function(e) FALSE)
+}
diff --git a/tests/testthat/helper-orderly.R b/tests/testthat/helper-orderly.R
index 9ce5646d..48cd9f84 100644
--- a/tests/testthat/helper-orderly.R
+++ b/tests/testthat/helper-orderly.R
@@ -1,6 +1,6 @@
 options(outpack.schema_validate =
           requireNamespace("jsonvalidate", quietly = TRUE) &&
-          packageVersion("jsonvalidate") >= "1.4.0",
+          utils::packageVersion("jsonvalidate") >= "1.4.0",
         orderly_index_progress = FALSE)
 
 
diff --git a/tests/testthat/test-interactive.R b/tests/testthat/test-interactive.R
index 1fb86052..1d46063d 100644
--- a/tests/testthat/test-interactive.R
+++ b/tests/testthat/test-interactive.R
@@ -1,18 +1,58 @@
 test_that("can detect orderly directory", {
-  path <- test_prepare_orderly_example("explicit")
-  envir <- new.env()
-  id <- orderly_run_quietly("explicit", root = path, envir = envir)
+  root <- test_prepare_orderly_example("explicit")
+  detected_root <- detect_orderly_interactive_path(file.path(root, "src", "explicit"))
+  expect_equal(detected_root)
+})
+
+test_that("errors when working directory is not report", {
+  root <- test_prepare_orderly_example("explicit")
 
   expect_error(
-    detect_orderly_interactive_path(path),
-    "Failed to detect orderly path at")
+    detect_orderly_interactive_path(root),
+    "Working directory .* is not a valid orderly report.")
+
   expect_error(
-    detect_orderly_interactive_path(file.path(path, "src")),
-    "Failed to detect orderly path at")
-  root <- detect_orderly_interactive_path(file.path(path, "src", "explicit"))
-  expect_equal(path, root)
+    detect_orderly_interactive_path(file.path(root, "src")),
+    "Working directory .* is not a valid orderly report.")
+})
+
+test_that("suggests changing working directory", {
+  # Make matching simpler by avoiding line-wrapping.
+  withr::local_options(cli.width=Inf)
+
+  root <- test_prepare_orderly_example(c("explicit", "implicit"))
+
+  e <- expect_error(detect_orderly_interactive_path(
+    path = file.path(root, "src"),
+    editor_path = file.path(root, "src", "implicit", "orderly.R")),
+    "Working directory .* is not a valid orderly report")
+  expect_match(e$body[[1]], "Use `setwd(.*)` to set the working directory to the report currently open in RStudio")
+
+  w <- expect_warning(detect_orderly_interactive_path(
+    path = file.path(root, "src", "explicit"),
+    editor_path = file.path(root, "src", "implicit", "orderly.R")),
+    "Working directory .* does not match the report currently open in RStudio")
+  expect_match(w$body[[1]], "Use `setwd(.*)` to switch working directories")
 })
 
+test_that("does not unnecessarily suggest changing working directory", {
+  root <- test_prepare_orderly_example("explicit")
+
+  expect_no_warning(detect_orderly_interactive_path(
+    path = file.path(root, "src", "explicit"),
+    editor_path = "Untitled"
+  ))
+
+  expect_no_warning(detect_orderly_interactive_path(
+    path = file.path(root, "src", "explicit"),
+    editor_path = file.path(root, "src", "explicit", "orderly.R")
+  ))
+
+  expect_no_warning(detect_orderly_interactive_path(
+    path = file.path(root, "src", "explicit"),
+    editor_path = file.path(root, "orderly_config.yml")
+  ))
+})
 
 test_that("can validate interactive parameters", {
   mock_readline <- mockery::mock("TRUE", "100", "1.23", '"string"')