diff --git a/extensions/sql-database-projects/src/common/constants.ts b/extensions/sql-database-projects/src/common/constants.ts
index 1b3f65ee1f..5a8ea17292 100644
--- a/extensions/sql-database-projects/src/common/constants.ts
+++ b/extensions/sql-database-projects/src/common/constants.ts
@@ -109,7 +109,7 @@ export const sameDatabase = localize('sameDatabase', "Same database");
 export const differentDbSameServer = localize('differentDbSameServer', "Different database, same server");
 export const differentDbDifferentServer = localize('differentDbDifferentServer', "Different database, different server");
 export const systemDbLocationDropdownValues = [differentDbSameServer];
-export const locationDropdownValues = [sameDatabase, differentDbSameServer, differentDbDifferentServer];
+export const locationDropdownValues = [differentDbSameServer, differentDbDifferentServer];
 export const databaseName = localize('databaseName', "Database name");
 export const databaseVariable = localize('databaseVariable', "Database variable");
 export const serverName = localize('serverName', "Server name");
diff --git a/extensions/sql-database-projects/src/dialogs/addDatabaseReferenceDialog.ts b/extensions/sql-database-projects/src/dialogs/addDatabaseReferenceDialog.ts
index e5db5ca839..565926e1ad 100644
--- a/extensions/sql-database-projects/src/dialogs/addDatabaseReferenceDialog.ts
+++ b/extensions/sql-database-projects/src/dialogs/addDatabaseReferenceDialog.ts
@@ -257,6 +257,10 @@ export class AddDatabaseReferenceDialog {
 			ariaLabel: constants.databaseProject
 		}).component();
 
+		this.projectDropdown.onValueChanged(() => {
+			this.setDefaultDatabaseValues();
+		});
+
 		// get projects in workspace
 		const workspaceFolders = vscode.workspace.workspaceFolders;
 		if (workspaceFolders?.length) {