diff --git a/acceptance/localenv/flag-conflict-json/out.test.toml b/acceptance/localenv/flag-conflict-json/out.test.toml
new file mode 100644
index 0000000000..d6187dcb04
--- /dev/null
+++ b/acceptance/localenv/flag-conflict-json/out.test.toml
@@ -0,0 +1,3 @@
+Local = true
+Cloud = false
+EnvMatrix.DATABRICKS_BUNDLE_ENGINE = []
diff --git a/acceptance/localenv/flag-conflict-json/output.txt b/acceptance/localenv/flag-conflict-json/output.txt
new file mode 100644
index 0000000000..84840872e3
--- /dev/null
+++ b/acceptance/localenv/flag-conflict-json/output.txt
@@ -0,0 +1,42 @@
+{
+  "schemaVersion": 1,
+  "command": "environments setup-local",
+  "ok": false,
+  "mode": "default",
+  "dryRun": false,
+  "greenfield": false,
+  "phases": [
+    {
+      "phase": "preflight",
+      "status": "error"
+    },
+    {
+      "phase": "resolve",
+      "status": "pending"
+    },
+    {
+      "phase": "fetch",
+      "status": "pending"
+    },
+    {
+      "phase": "merge",
+      "status": "pending"
+    },
+    {
+      "phase": "provision",
+      "status": "pending"
+    },
+    {
+      "phase": "validate",
+      "status": "pending"
+    }
+  ],
+  "warnings": [],
+  "error": {
+    "code": "E_USAGE",
+    "failurePhase": "preflight",
+    "message": "invalid compute target flags: flags --cluster-id and --serverless-version are mutually exclusive; specify at most one",
+    "diskMutated": false
+  },
+  "durationMs": 0
+}
diff --git a/acceptance/localenv/flag-conflict-json/script b/acceptance/localenv/flag-conflict-json/script
new file mode 100644
index 0000000000..a41f74e8de
--- /dev/null
+++ b/acceptance/localenv/flag-conflict-json/script
@@ -0,0 +1 @@
+musterr $CLI environments setup-local --cluster-id abc --serverless-version v4 --output json
diff --git a/acceptance/localenv/flag-conflict-json/test.toml b/acceptance/localenv/flag-conflict-json/test.toml
new file mode 100644
index 0000000000..c63fe3fe10
--- /dev/null
+++ b/acceptance/localenv/flag-conflict-json/test.toml
@@ -0,0 +1 @@
+EnvMatrix.DATABRICKS_BUNDLE_ENGINE = []
diff --git a/acceptance/localenv/flag-conflict/output.txt b/acceptance/localenv/flag-conflict/output.txt
index a6379fb10c..85a4bd285e 100644
--- a/acceptance/localenv/flag-conflict/output.txt
+++ b/acceptance/localenv/flag-conflict/output.txt
@@ -1 +1,7 @@
-Error: if any flags in the group [cluster-id cluster-name serverless-version job-id] are set none of the others can be; [cluster-id serverless-version] were all set
+preflight  error  invalid compute target flags: flags --cluster-id and --serverless-version are mutually exclusive; specify at most one
+resolve    pending
+fetch      pending
+merge      pending
+provision  pending
+validate   pending
+For more detail, re-run with --debug, or --output json to share a structured report.
diff --git a/cmd/environments/sync.go b/cmd/environments/sync.go
index cbe97da43d..fa2d450bcc 100644
--- a/cmd/environments/sync.go
+++ b/cmd/environments/sync.go
@@ -56,7 +56,10 @@ func addTargetFlags(cmd *cobra.Command) {
 	cmd.Flags().String("constraint-source-url", "", "URL for the constraint source (overrides "+envConstraintSource+")")
 	// Hide constraint-source-url from casual --help output; it is a power-user escape hatch.
 	_ = cmd.Flags().MarkHidden("constraint-source-url")
-	cmd.MarkFlagsMutuallyExclusive("cluster-id", "cluster-name", "serverless-version", "job-id")
+	// The mutual exclusivity of the target flags is enforced in the pipeline's
+	// preflight (as E_USAGE) rather than via cmd.MarkFlagsMutuallyExclusive, so
+	// the conflict is reported through the phase/JSON contract the --output json
+	// consumer relies on, instead of a bare pre-RunE Cobra error.
 }
 
 // runPipeline builds and runs the setup-local Pipeline.
@@ -77,12 +80,9 @@ func runPipeline(cmd *cobra.Command) error {
 		Serverless:  serverless,
 		Job:         job,
 	}
-	// ValidateTargetFlags is kept despite MarkFlagsMutuallyExclusive above:
-	// it also validates the library path (no Cobra equivalent) and guards
-	// non-Cobra call paths such as tests that invoke runPipeline directly.
-	if err := libslocalenv.ValidateTargetFlags(targetFlags); err != nil {
-		return err
-	}
+	// Flag validation (including mutual exclusivity) happens in the pipeline's
+	// preflight, so a conflict is reported as E_USAGE through the phase/JSON
+	// contract rather than as a bare error here.
 
 	mode := libslocalenv.ModeDefault
 	if constraintsOnly {
diff --git a/libs/localenv/pipeline.go b/libs/localenv/pipeline.go
index c6f6f547d3..5f36c6caa7 100644
--- a/libs/localenv/pipeline.go
+++ b/libs/localenv/pipeline.go
@@ -90,7 +90,22 @@ func (p *Pipeline) Run(ctx context.Context) (*Result, error) {
 // run drives the phases and returns the first phase error. Result bookkeeping
 // (phase status, error object) is handled by fail / markOK.
 func (p *Pipeline) run(ctx context.Context) error {
-	// Phase: preflight — manager detection, writability, package-manager availability.
+	// Phase: preflight — flag validation, manager detection, writability,
+	// package-manager availability.
+	//
+	// Incompatible target flags are a usage error (E_USAGE), reported at preflight
+	// before any other work so the failure flows through the phase/JSON reporting
+	// (a plain Cobra mutual-exclusion error would print no command JSON object,
+	// which the --output json consumer needs).
+	if err := ValidateTargetFlags(p.Flags); err != nil {
+		// Put the validation detail in Msg (which is serialized) and do not wrap
+		// err: PipelineError.Error() appends a non-nil Err, which would duplicate
+		// the detail in text output, and E_USAGE — not the raw error — is the
+		// stable contract callers match on. Without this the --output json
+		// consumer would see only "invalid compute target flags" (Err is
+		// json:"-") and lose which flags conflict.
+		return p.fail(PhasePreflight, false, NewError(ErrUsage, nil, "invalid compute target flags: %s", err))
+	}
 	// P0 supports only uv; any other detected manager is a clean, non-blaming exit.
 	if m := detectManager(p.ProjectDir); m != managerUv {
 		return p.fail(PhasePreflight, false, NewError(ErrManagerUnsupported, nil, "%s", managerGuidance(m)))
diff --git a/libs/localenv/pipeline_test.go b/libs/localenv/pipeline_test.go
index 1823bcdcc9..5c55ecbca2 100644
--- a/libs/localenv/pipeline_test.go
+++ b/libs/localenv/pipeline_test.go
@@ -78,6 +78,25 @@ func newTestServer(t *testing.T) *httptest.Server {
 	}))
 }
 
+func TestPipelineRejectsConflictingTargetFlagsAtPreflight(t *testing.T) {
+	// Incompatible target flags are a usage error surfaced as E_USAGE at
+	// preflight, before any manager/writability/fetch work.
+	dir := writeProject(t)
+	p := &Pipeline{
+		Mode: ModeDefault, Check: true, ProjectDir: dir, CacheDir: t.TempDir(),
+		Flags:   TargetFlags{Cluster: "abc", Serverless: "v4"},
+		Compute: stubCompute{}, PM: fakePM{py: "3.12", dbc: "17.2.0"},
+	}
+	res, err := p.Run(t.Context())
+	var pe *PipelineError
+	require.ErrorAs(t, err, &pe)
+	assert.Equal(t, ErrUsage, pe.Code)
+	assert.Equal(t, PhasePreflight, pe.FailurePhase)
+	assert.False(t, pe.DiskMutated)
+	require.NotNil(t, res.Error)
+	assert.Equal(t, ErrUsage, res.Error.Code)
+}
+
 func TestPipelineCheckMutatesNothing(t *testing.T) {
 	dir := writeProject(t)
 	before, _ := os.ReadFile(filepath.Join(dir, "pyproject.toml"))
diff --git a/libs/localenv/result.go b/libs/localenv/result.go
index f8d4919ad7..9e0ef43e5d 100644
--- a/libs/localenv/result.go
+++ b/libs/localenv/result.go
@@ -64,6 +64,7 @@ const (
 type ErrorCode string
 
 const (
+	ErrUsage              ErrorCode = "E_USAGE"
 	ErrNoTarget           ErrorCode = "E_NO_TARGET"
 	ErrManagerUnsupported ErrorCode = "E_MANAGER_UNSUPPORTED"
 	ErrUvMissing          ErrorCode = "E_UV_MISSING"