diff --git a/crates/cli/src/subcommands/dev.rs b/crates/cli/src/subcommands/dev.rs
index 70acd76eadc..18012e47d6a 100644
--- a/crates/cli/src/subcommands/dev.rs
+++ b/crates/cli/src/subcommands/dev.rs
@@ -567,7 +567,9 @@ pub async fn exec(mut config: Config, args: &ArgMatches) -> Result<(), anyhow::E
         }
     }
 
-    if !module_bindings_dir.exists() {
+    let should_prepare_module_bindings_dir =
+        should_prepare_default_module_bindings_dir(skip_generate, using_spacetime_config);
+    if should_prepare_module_bindings_dir && !module_bindings_dir.exists() {
         // Create the module bindings directory if it doesn't exist
         std::fs::create_dir_all(&module_bindings_dir).with_context(|| {
             format!(
@@ -575,7 +577,7 @@ pub async fn exec(mut config: Config, args: &ArgMatches) -> Result<(), anyhow::E
                 module_bindings_dir.display()
             )
         })?;
-    } else if !module_bindings_dir.is_dir() {
+    } else if should_prepare_module_bindings_dir && !module_bindings_dir.is_dir() {
         anyhow::bail!(
             "Module bindings path {} exists but is not a directory.",
             module_bindings_path.display()
@@ -1617,6 +1619,10 @@ fn create_default_spacetime_config_if_missing(project_dir: &Path) -> anyhow::Res
     Ok(Some(config.save_to_dir(project_dir)?))
 }
 
+fn should_prepare_default_module_bindings_dir(skip_generate: bool, using_spacetime_config: bool) -> bool {
+    !skip_generate && !using_spacetime_config
+}
+
 fn create_local_spacetime_config_if_missing(
     project_dir: &Path,
     database_name: &str,
@@ -1985,6 +1991,14 @@ mod tests {
         );
     }
 
+    #[test]
+    fn test_default_module_bindings_dir_is_only_prepared_for_cli_generation() {
+        assert!(should_prepare_default_module_bindings_dir(false, false));
+        assert!(!should_prepare_default_module_bindings_dir(false, true));
+        assert!(!should_prepare_default_module_bindings_dir(true, false));
+        assert!(!should_prepare_default_module_bindings_dir(true, true));
+    }
+
     #[test]
     fn test_create_local_spacetime_config_if_missing_creates_database_override() {
         let temp = TempDir::new().unwrap();
@@ -2010,25 +2024,6 @@ mod tests {
         assert_eq!(obj.len(), 1, "local config should only contain database");
     }
 
-    #[test]
-    fn test_create_local_spacetime_config_if_missing_upserts_missing_database() {
-        let temp = TempDir::new().unwrap();
-        let project_path = temp.path();
-
-        std::fs::write(project_path.join("spacetime.json"), "{}").unwrap();
-        std::fs::write(project_path.join("spacetime.local.json"), r#"{ "server": "local" }"#).unwrap();
-
-        let updated = create_local_spacetime_config_if_missing(project_path, "my-cli-db")
-            .unwrap()
-            .expect("expected local config to be updated");
-        assert_eq!(updated, project_path.join("spacetime.local.json"));
-
-        let content = std::fs::read_to_string(project_path.join("spacetime.local.json")).unwrap();
-        let parsed: serde_json::Value = serde_json::from_str(&content).unwrap();
-        assert_eq!(parsed.get("server").and_then(|v| v.as_str()), Some("local"));
-        assert_eq!(parsed.get("database").and_then(|v| v.as_str()), Some("my-cli-db"));
-    }
-
     #[test]
     fn test_detect_and_save_merges_into_existing_file_when_no_existing_config_passed() {
         let temp = TempDir::new().unwrap();