diff --git a/src/dstack/_internal/cli/services/configurators/__init__.py b/src/dstack/_internal/cli/services/configurators/__init__.py
index cf0d7f08f..51191758a 100644
--- a/src/dstack/_internal/cli/services/configurators/__init__.py
+++ b/src/dstack/_internal/cli/services/configurators/__init__.py
@@ -85,4 +85,12 @@ def load_apply_configuration(
         raise ConfigurationError(f"Failed to load configuration from {configuration_path}")
     if isinstance(configuration_path, int):
         return APPLY_STDIN_NAME, conf
-    return str(configuration_path.absolute().relative_to(Path.cwd())), conf
+    absolute_path = configuration_path.absolute()
+    try:
+        return str(absolute_path.relative_to(Path.cwd())), conf
+    except ValueError:
+        # The configuration may live outside the current directory, e.g. when
+        # passed by absolute path. Fall back to the absolute path instead of
+        # failing; relative `repos` and `files` entries are resolved against
+        # the configuration's directory, so they keep working either way.
+        return str(absolute_path), conf
diff --git a/src/tests/_internal/cli/services/configurators/test_apply_configuration.py b/src/tests/_internal/cli/services/configurators/test_apply_configuration.py
new file mode 100644
index 000000000..aba9a5d70
--- /dev/null
+++ b/src/tests/_internal/cli/services/configurators/test_apply_configuration.py
@@ -0,0 +1,65 @@
+from pathlib import Path
+
+import pytest
+
+from dstack._internal.cli.services.configurators import load_apply_configuration
+from dstack._internal.core.errors import ConfigurationError
+from dstack._internal.core.models.configurations import TaskConfiguration
+
+CONFIG_YAML = "type: task\ncommands:\n  - echo hi\n"
+
+
+def write_config(path: Path) -> Path:
+    path.parent.mkdir(parents=True, exist_ok=True)
+    path.write_text(CONFIG_YAML)
+    return path
+
+
+def chdir_work_dir(tmp_path: Path, monkeypatch: pytest.MonkeyPatch) -> Path:
+    work_dir = tmp_path / "work"
+    work_dir.mkdir(exist_ok=True)
+    monkeypatch.chdir(work_dir)
+    return work_dir
+
+
+class TestLoadApplyConfiguration:
+    def test_configuration_outside_cwd_is_returned_as_absolute_path(
+        self, tmp_path: Path, monkeypatch: pytest.MonkeyPatch
+    ):
+        config_path = write_config(tmp_path / "conf" / ".dstack.yml")
+        chdir_work_dir(tmp_path, monkeypatch)
+
+        path, conf = load_apply_configuration(str(config_path))
+
+        assert isinstance(conf, TaskConfiguration)
+        assert conf.commands == ["echo hi"]
+        assert Path(path).is_absolute()
+        assert Path(path) == config_path
+
+    def test_configuration_inside_cwd_is_returned_as_relative_path(
+        self, tmp_path: Path, monkeypatch: pytest.MonkeyPatch
+    ):
+        write_config(tmp_path / "work" / "conf" / ".dstack.yml")
+        chdir_work_dir(tmp_path, monkeypatch)
+
+        path, conf = load_apply_configuration(str(Path("conf") / ".dstack.yml"))
+
+        assert isinstance(conf, TaskConfiguration)
+        assert path == str(Path("conf") / ".dstack.yml")
+
+    def test_relative_path_with_parent_segments_stays_relative(
+        self, tmp_path: Path, monkeypatch: pytest.MonkeyPatch
+    ):
+        write_config(tmp_path / "conf" / ".dstack.yml")
+        chdir_work_dir(tmp_path, monkeypatch)
+
+        path, conf = load_apply_configuration(str(Path("..") / "conf" / ".dstack.yml"))
+
+        assert isinstance(conf, TaskConfiguration)
+        assert path == str(Path("..") / "conf" / ".dstack.yml")
+
+    def test_missing_configuration_raises(self, tmp_path: Path, monkeypatch: pytest.MonkeyPatch):
+        chdir_work_dir(tmp_path, monkeypatch)
+
+        with pytest.raises(ConfigurationError):
+            load_apply_configuration(str(tmp_path / "missing.yml"))