diff --git a/site/netlify/functions/error-reporting.ts b/site/netlify/functions/error-reporting.ts
index 7ffc344948e..4b5d6629a79 100755
--- a/site/netlify/functions/error-reporting.ts
+++ b/site/netlify/functions/error-reporting.ts
@@ -21,6 +21,40 @@ const USER_INPUT_ERROR_MESSAGE_PATTERNS: string[] = [
 const isUserInputError = (message: unknown): boolean =>
   typeof message === 'string' && USER_INPUT_ERROR_MESSAGE_PATTERNS.some((pattern) => message.includes(pattern))
 
+// `Bugsnag.notify()` discards the `stack` property of plain objects and substitutes a
+// stacktrace captured here, inside this function. Rebuilding a real Error and assigning
+// the stack sent by the CLI preserves the original frames from the user's machine.
+const toError = ({
+  cause,
+  message,
+  name,
+  stack,
+}: {
+  cause?: unknown
+  message?: unknown
+  name?: unknown
+  stack?: unknown
+}): Error => {
+  const error = new Error(typeof message === 'string' ? message : String(message))
+  if (typeof name === 'string' && name !== '') {
+    error.name = name
+  }
+  if (typeof stack === 'string' && stack !== '') {
+    error.stack = stack
+  }
+  if (cause !== undefined) {
+    error.cause = cause
+  }
+  return error
+}
+
+// Stack frames arrive with machine-specific install prefixes, e.g.
+// file:///C:/Users/jane/AppData/Roaming/npm/node_modules/netlify-cli/dist/utils/x.js.
+// Stripping everything up to the last `node_modules` makes the same frame identical
+// across machines and install layouts (npm, npx, pnpm) so Bugsnag groups on it.
+const normalizeFrameFile = (file: string): string =>
+  file.replace(/^.*node_modules[/\\]/, '').replace(/\\/g, '/')
+
 export const handler: Handler = async ({ body }) => {
   try {
     if (typeof body !== 'string') {
@@ -43,13 +77,22 @@ export const handler: Handler = async ({ body }) => {
       return { statusCode: 200 }
     }
 
-    Bugsnag.notify({ name, message, stack, cause }, (event) => {
+    Bugsnag.notify(toError({ cause, message, name, stack }), (event) => {
       event.app = {
         releaseStage: 'production',
         version: cliVersion,
         type: 'netlify-cli',
       }
 
+      for (const error of event.errors) {
+        for (const frame of error.stacktrace) {
+          if (typeof frame.file === 'string') {
+            frame.file = normalizeFrameFile(frame.file)
+            frame.inProject = frame.file.startsWith('netlify-cli/')
+          }
+        }
+      }
+
       for (const [section, values] of Object.entries(metadata)) {
         event.addMetadata(section, values as Record<string, any>)
       }