diff --git a/examples/tests/stacks/catalog/terraform/template-functions-test2/defaults.yaml b/examples/tests/stacks/catalog/terraform/template-functions-test2/defaults.yaml
index 71c90f590..0042836e7 100644
--- a/examples/tests/stacks/catalog/terraform/template-functions-test2/defaults.yaml
+++ b/examples/tests/stacks/catalog/terraform/template-functions-test2/defaults.yaml
@@ -6,7 +6,7 @@ components:
       metadata:
         # Point to the Terraform component
         component: "test/template-functions-test2"
-        terraform_workspace: '{{ .vars.tenant }}-{{ .vars.environment }}-{{ .vars.stage }}'
+        terraform_workspace: '{{ .vars.tenant }}-{{ .vars.environment }}-{{ .vars.stage }}-test'
       settings:
         spacelift:
           workspace_enabled: false
diff --git a/internal/exec/terraform.go b/internal/exec/terraform.go
index 0c0021ff8..4747cda29 100644
--- a/internal/exec/terraform.go
+++ b/internal/exec/terraform.go
@@ -121,8 +121,10 @@ func ExecuteTerraform(info schema.ConfigAndStacksInfo) error {
 		}
 		return nil
 	}
+
 	varFile := constructTerraformComponentVarfileName(info)
 	planFile := constructTerraformComponentPlanfileName(info)
+
 	// Print component variables and write to file
 	// Don't process variables when executing `terraform workspace` commands
 	if info.SubCommand != "workspace" {
diff --git a/internal/exec/utils.go b/internal/exec/utils.go
index 6dea676bb..0d0b327bc 100644
--- a/internal/exec/utils.go
+++ b/internal/exec/utils.go
@@ -563,6 +563,10 @@ func ProcessStacks(
 		if i, ok := configAndStacksInfo.ComponentSection[cfg.CommandSectionName].(string); ok {
 			configAndStacksInfo.Command = i
 		}
+
+		if i, ok := configAndStacksInfo.ComponentSection[cfg.WorkspaceSectionName].(string); ok {
+			configAndStacksInfo.TerraformWorkspace = i
+		}
 	}
 
 	// Spacelift stack