diff --git a/src/formatCurrentFile.ts b/src/formatCurrentFile.ts
index 41a02d8c..4f4ac422 100644
--- a/src/formatCurrentFile.ts
+++ b/src/formatCurrentFile.ts
@@ -8,6 +8,45 @@ import {sqlFileToFormatPath} from './constants';
 import { SqlxBlockMetadata } from './types';
 import { logger } from './logger';
 
+interface TemplateReplacement {
+    placeholder: string;
+    original: string;
+}
+
+function preprocessSqlForSqlfluff(sqlText: string): { processedSql: string; replacements: TemplateReplacement[] } {
+    const replacements: TemplateReplacement[] = [];
+    let processedSql = sqlText;
+    let placeholderCounter = 1;
+
+    const templateRegex = /\$\{[^}]+\}/g;
+    let match;
+    
+    while ((match = templateRegex.exec(sqlText)) !== null) {
+        const original = match[0];
+        const placeholder = `DATAFORM_PLACEHOLDER_${placeholderCounter}`;
+        
+        replacements.push({
+            placeholder,
+            original
+        });
+        
+        processedSql = processedSql.replace(original, placeholder);
+        placeholderCounter++;
+    }
+    
+    return { processedSql, replacements };
+}
+
+function restoreDataformSyntax(formattedSql: string, replacements: TemplateReplacement[]): string {
+    let restoredSql = formattedSql;
+    
+    for (const replacement of replacements) {
+        restoredSql = restoredSql.replace(replacement.placeholder, replacement.original);
+    }
+    
+    return restoredSql;
+}
+
 export async function formatDataformSqlxFile(document:vscode.TextDocument){
     let formattingCli = vscode.workspace.getConfiguration("vscode-dataform-tools").get("formattingCli");
     if (formattingCli === "sqlfluff") {
@@ -50,7 +89,9 @@ export async function formatSqlxFile(document:vscode.TextDocument, currentActive
     let spaceBetweenSameOps = '\n\n';
 
     let sqlBlockText = await getTextForBlock(document, sqlBlockMeta);
-    writeCompiledSqlToFile(sqlBlockText, sqlFileToFormatPath);
+    
+    const { processedSql, replacements } = preprocessSqlForSqlfluff(sqlBlockText);
+    writeCompiledSqlToFile(processedSql, sqlFileToFormatPath);
 
     let [jsBlockText] = await Promise.all([ getTextForBlock(document, jsBlockMeta) ]);
     try {
@@ -95,6 +136,11 @@ export async function formatSqlxFile(document:vscode.TextDocument, currentActive
     try {
         await getStdoutFromCliRun(exec, formatCmd);
         let formattedSql = await readFile(sqlFileToFormatPath);
+        
+        if (typeof formattedSql === 'string') {
+            formattedSql = restoreDataformSyntax(formattedSql, replacements);
+        }
+        
         (formattedSql === "") ? formattedSql: formattedSql = spaceBetweenBlocks + formattedSql;
 
         if (typeof formattedSql === 'string'){
diff --git a/src/test/test-workspace/.sqlfluff b/src/test/test-workspace/.sqlfluff
index 953ecfd4..e07dd456 100644
--- a/src/test/test-workspace/.sqlfluff
+++ b/src/test/test-workspace/.sqlfluff
@@ -122,9 +122,10 @@ unquoted_identifiers_policy = all
 quoted_identifiers_policy = none
 
 [sqlfluff:templater:placeholder]
-param_regex = (?s)\${\s*(?P<param_name>[\w_]+)(?P<rec>(?:[^{}]+|{(?&rec)})*+)}|(?P<param_name>config|pre_operations|post_operations)\s*{(?&rec)}
+param_regex = (?s)\${\s*(?P<param_name>[\w_]+)(?P<rec>(?:[^{}]+|{(?&rec)})*+)}|(?P<param_name>config|pre_operations|post_operations|js)\s*{(?&rec)}
 ref = ref_table_placeholder
 self = self_table_placeholder
 when =
 config =
 pre_operations =
+js =