diff --git a/extensions/json-language-features/client/src/jsonClient.ts b/extensions/json-language-features/client/src/jsonClient.ts
index 598daf78f93..f208747da94 100644
--- a/extensions/json-language-features/client/src/jsonClient.ts
+++ b/extensions/json-language-features/client/src/jsonClient.ts
@@ -545,11 +545,10 @@ function getSettings(): Settings {
 		}
 	};
 
-	const collectSchemaSettings = (schemaSettings: JSONSchemaSettings[] | undefined, folderUri?: Uri) => {
-
+	const collectSchemaSettings = (schemaSettings: JSONSchemaSettings[] | undefined, folderUri: Uri | undefined = undefined, settingsLocation = folderUri) => {
 		if (schemaSettings) {
 			for (const setting of schemaSettings) {
-				const url = getSchemaId(setting, folderUri);
+				const url = getSchemaId(setting, settingsLocation);
 				if (url) {
 					const schemaSetting: JSONSchemaSettings = { url, fileMatch: setting.fileMatch, folderUri: folderUri?.toString(false), schema: setting.schema };
 					schemas.push(schemaSetting);
@@ -558,15 +557,19 @@ function getSettings(): Settings {
 		}
 	};
 
+	const folders = workspace.workspaceFolders;
+
 	const schemaConfigInfo = workspace.getConfiguration('json', null).inspect<JSONSchemaSettings[]>('schemas');
 	if (schemaConfigInfo) {
-		if (workspace.workspaceFile) {
-			collectSchemaSettings(schemaConfigInfo.workspaceValue, workspace.workspaceFile);
+		if (schemaConfigInfo.workspaceValue && workspace.workspaceFile && folders && folders.length) {
+			const settingsLocation = Uri.joinPath(workspace.workspaceFile, '..');
+			for (const folder of folders) {
+				collectSchemaSettings(schemaConfigInfo.workspaceValue, folder.uri, settingsLocation);
+			}
 		}
 		collectSchemaSettings(schemaConfigInfo.globalValue);
 	}
 
-	const folders = workspace.workspaceFolders;
 	if (folders) {
 		for (const folder of folders) {
 			const schemaConfigInfo = workspace.getConfiguration('json', folder.uri).inspect<JSONSchemaSettings[]>('schemas');
@@ -576,14 +579,14 @@ function getSettings(): Settings {
 	return settings;
 }
 
-function getSchemaId(schema: JSONSchemaSettings, folderUri?: Uri): string | undefined {
+function getSchemaId(schema: JSONSchemaSettings, settingsLocation?: Uri): string | undefined {
 	let url = schema.url;
 	if (!url) {
 		if (schema.schema) {
 			url = schema.schema.id || `vscode://schemas/custom/${encodeURIComponent(hash(schema.schema).toString(16))}`;
 		}
-	} else if (folderUri && (url[0] === '.' || url[0] === '/')) {
-		url = Uri.joinPath(folderUri, url).toString(false);
+	} else if (settingsLocation && (url[0] === '.' || url[0] === '/')) {
+		url = Uri.joinPath(settingsLocation, url).toString(false);
 	}
 	return url;
 }