diff --git a/misc/debug-adapter/modules/debug-adapter-core/src/main/java/org/ballerinalang/debugadapter/utils/PackageUtils.java b/misc/debug-adapter/modules/debug-adapter-core/src/main/java/org/ballerinalang/debugadapter/utils/PackageUtils.java
index 7b127501a7f8..0ee0b4a8eba6 100644
--- a/misc/debug-adapter/modules/debug-adapter-core/src/main/java/org/ballerinalang/debugadapter/utils/PackageUtils.java
+++ b/misc/debug-adapter/modules/debug-adapter-core/src/main/java/org/ballerinalang/debugadapter/utils/PackageUtils.java
@@ -34,16 +34,18 @@
 import java.io.File;
 import java.net.URI;
 import java.net.URISyntaxException;
-import java.nio.file.Files;
 import java.nio.file.InvalidPathException;
 import java.nio.file.Path;
 import java.util.AbstractMap;
 import java.util.ArrayList;
 import java.util.List;
 import java.util.Map;
+import java.util.Objects;
 import java.util.Optional;
 import java.util.StringJoiner;
 
+import static io.ballerina.projects.util.ProjectConstants.BALLERINA_TOML;
+import static io.ballerina.projects.util.ProjectPaths.isBalFile;
 import static org.ballerinalang.debugadapter.DebugSourceType.DEPENDENCY;
 import static org.ballerinalang.debugadapter.DebugSourceType.PACKAGE;
 import static org.ballerinalang.debugadapter.evaluation.IdentifierModifier.encodeModuleName;
@@ -60,6 +62,7 @@ public final class PackageUtils {
     public static final String GENERATED_VAR_PREFIX = "$";
     static final String USER_MODULE_DIR = "modules";
     static final String GEN_MODULE_DIR = "generated";
+    static final String PERSIST_DIR = "persist";
     static final String TEST_PKG_POSTFIX = "$test";
     private static final String URI_SCHEME_FILE = "file";
     private static final String URI_SCHEME_BALA = "bala";
@@ -111,15 +114,57 @@ public static Optional<Map.Entry<Path, DebugSourceType>> getStackFrameSourcePath
      * @return A pair of project kind and the project root.
      */
     public static Map.Entry<ProjectKind, Path> computeProjectKindAndRoot(Path path) {
-        if (ProjectPaths.isStandaloneBalFile(path)) {
+        if (ProjectPaths.isStandaloneBalFile(path) && !isBalToolSpecificFile(path)) {
             return new AbstractMap.SimpleEntry<>(ProjectKind.SINGLE_FILE_PROJECT, path);
         }
-        // Following is a temp fix to distinguish Bala and Build projects.
-        Path tomlPath = ProjectPaths.packageRoot(path).resolve(ProjectConstants.BALLERINA_TOML);
-        if (Files.exists(tomlPath)) {
-            return new AbstractMap.SimpleEntry<>(ProjectKind.BUILD_PROJECT, ProjectPaths.packageRoot(path));
+        // TODO: Revert 'findProjectRoot()' to `ProjectPaths.packageRoot()` API once
+        //  https://github.com/ballerina-platform/ballerina-lang/issues/43538#issuecomment-2469488458
+        //  is addressed from the Ballerina platform side.
+        Optional<Path> packageRoot = findProjectRoot(path);
+        if (packageRoot.isEmpty()) {
+            return new AbstractMap.SimpleEntry<>(ProjectKind.SINGLE_FILE_PROJECT, path);
+        } else if (hasBallerinaToml(packageRoot.get())) {
+            return new AbstractMap.SimpleEntry<>(ProjectKind.BUILD_PROJECT, packageRoot.get());
+        } else {
+            return new AbstractMap.SimpleEntry<>(ProjectKind.BALA_PROJECT, packageRoot.get());
         }
-        return new AbstractMap.SimpleEntry<>(ProjectKind.BALA_PROJECT, ProjectPaths.packageRoot(path));
+    }
+
+    private static boolean isBalToolSpecificFile(Path filePath) {
+        // TODO: Remove after https://github.com/ballerina-platform/ballerina-lang/issues/43538#issuecomment-2469488458
+        //  is addressed from the Ballerina platform side.
+        Path parentPath = filePath.toAbsolutePath().normalize().getParent();
+        return isBalFile(filePath)
+                && parentPath.toFile().isDirectory()
+                && parentPath.toFile().getName().equals(PERSIST_DIR)
+                && hasBallerinaToml(parentPath.getParent());
+    }
+
+    private static boolean hasBallerinaToml(Path filePath) {
+        if (Objects.isNull(filePath)) {
+            return false;
+        }
+        Path absFilePath = filePath.toAbsolutePath().normalize();
+        return absFilePath.resolve(BALLERINA_TOML).toFile().exists();
+    }
+
+    private static Optional<Path> findProjectRoot(Path filePath) {
+        if (filePath == null) {
+            return Optional.empty();
+        }
+
+        filePath = filePath.toAbsolutePath().normalize();
+        if (filePath.toFile().isDirectory()) {
+            if (hasBallerinaToml(filePath) || hasPackageJson(filePath)) {
+                return Optional.of(filePath);
+            }
+        }
+        return findProjectRoot(filePath.getParent());
+    }
+
+    private static boolean hasPackageJson(Path filePath) {
+        Path absFilePath = filePath.toAbsolutePath().normalize();
+        return absFilePath.resolve(ProjectConstants.PACKAGE_JSON).toFile().exists();
     }
 
     /**
diff --git a/tests/jballerina-debugger-integration-test/src/test/java/org/ballerinalang/debugger/test/adapter/run/DebugEngageTest.java b/tests/jballerina-debugger-integration-test/src/test/java/org/ballerinalang/debugger/test/adapter/run/DebugEngageTest.java
index ed6c1d2ffc9c..9d9e6388e76e 100644
--- a/tests/jballerina-debugger-integration-test/src/test/java/org/ballerinalang/debugger/test/adapter/run/DebugEngageTest.java
+++ b/tests/jballerina-debugger-integration-test/src/test/java/org/ballerinalang/debugger/test/adapter/run/DebugEngageTest.java
@@ -40,20 +40,20 @@
 public class DebugEngageTest extends BaseTestCase {
 
     DebugTestRunner debugTestRunner;
+    private static final String TEST_PROJECT_NAME = "basic-project";
 
     @Override
     @BeforeClass
     public void setup() {
-        String testProjectName = "breakpoint-tests";
-        String testModuleFileName = "Ballerina.toml";
-        debugTestRunner = new DebugTestRunner(testProjectName, testModuleFileName, true);
     }
 
-    @Test(description = "Debug engage test for launch mode, with special ballerina project files as input(i.e. " +
-            "Ballerina.toml, Dependencies.toml, etc.)")
-    public void testNonBallerinaInputSource() throws BallerinaTestException {
-        Path breakpointFilePath = debugTestRunner.testProjectPath.resolve("main.bal");
-        debugTestRunner.addBreakPoint(new BallerinaTestDebugPoint(breakpointFilePath, 22));
+    @Test(description = "Debug engage test (launch mode), with special ballerina project files as inputs" +
+            "(i.e. Ballerina.toml, Dependencies.toml, etc.)")
+    public void testDebugLaunchWithNonBallerinaFiles() throws BallerinaTestException {
+        String balTomlFile = "Ballerina.toml";
+        debugTestRunner = new DebugTestRunner(TEST_PROJECT_NAME, balTomlFile, true);
+        Path breakpointFilePath = debugTestRunner.testProjectPath.resolve("hello_world.bal");
+        debugTestRunner.addBreakPoint(new BallerinaTestDebugPoint(breakpointFilePath, 19));
         debugTestRunner.initDebugSession(DebugUtils.DebuggeeExecutionKind.RUN);
 
         // Test for debug engage
@@ -61,6 +61,19 @@ public void testNonBallerinaInputSource() throws BallerinaTestException {
         Assert.assertEquals(debugHitInfo.getLeft(), debugTestRunner.testBreakpoints.get(0));
     }
 
+    @Test(description = "Debug engage test (launch mode), with special Ballerina project files as inputs " +
+            "(i.e. persist/model.bal, etc.)")
+    public void testDebugLaunchWithBallerinaToolFiles() throws BallerinaTestException {
+        String balPersistModelFile = "persist/model.bal";
+        debugTestRunner = new DebugTestRunner(TEST_PROJECT_NAME, balPersistModelFile, true);
+        Path breakpointFilePath = debugTestRunner.testProjectPath.resolve("hello_world.bal");
+        debugTestRunner.addBreakPoint(new BallerinaTestDebugPoint(breakpointFilePath, 19));
+        debugTestRunner.initDebugSession(DebugUtils.DebuggeeExecutionKind.RUN);
+        // Test for debug engage
+        Pair<BallerinaTestDebugPoint, StoppedEventArguments> debugHitInfo = debugTestRunner.waitForDebugHit(25000);
+        Assert.assertEquals(debugHitInfo.getLeft(), debugTestRunner.testBreakpoints.get(0));
+    }
+
     @Override
     @AfterMethod(alwaysRun = true)
     public void cleanUp() {