diff --git a/.changeset/fix-escape-double-quotes-ai-prompts.md b/.changeset/fix-escape-double-quotes-ai-prompts.md
new file mode 100644
index 000000000..2073372b5
--- /dev/null
+++ b/.changeset/fix-escape-double-quotes-ai-prompts.md
@@ -0,0 +1,7 @@
+---
+"@aws-amplify/data-schema": patch
+---
+
+fix: escape double quotes and backslashes in AI directive string arguments
+
+`@conversation` and `@generation` directives interpolate user-supplied strings (`systemPrompt`, tool `description`) directly into GraphQL SDL without escaping special characters. Any prompt containing a double quote or backslash produces invalid SDL, breaking schema compilation. This fix escapes all GraphQL special characters before interpolation.
diff --git a/packages/data-schema/__tests__/ai/ConversationSchemaProcessor.test.ts b/packages/data-schema/__tests__/ai/ConversationSchemaProcessor.test.ts
new file mode 100644
index 000000000..18f8d783d
--- /dev/null
+++ b/packages/data-schema/__tests__/ai/ConversationSchemaProcessor.test.ts
@@ -0,0 +1,95 @@
+// Copyright Amazon.com, Inc. or its affiliates. All Rights Reserved.
+// SPDX-License-Identifier: Apache-2.0
+
+import { a } from '../../src/index';
+import { defineFunctionStub } from '../utils';
+
+describe('GraphQL string escaping in AI schema directives', () => {
+  describe('@generation', () => {
+    test('escapes double quotes in systemPrompt', () => {
+      const schema = a.schema({
+        Result: a.customType({ value: a.string() }),
+        makeResult: a
+          .generation({
+            aiModel: a.ai.model('Claude 3 Haiku'),
+            systemPrompt: 'Always say "yes" or "no".',
+          })
+          .returns(a.ref('Result')),
+      });
+
+      const { schema: graphql } = schema.transform();
+
+      expect(graphql).toContain('systemPrompt: "Always say \\"yes\\" or \\"no\\"."');
+    });
+  });
+
+  describe('@conversation', () => {
+    test('escapes double quotes in systemPrompt', () => {
+      const schema = a.schema({
+        ChatBot: a.conversation({
+          aiModel: a.ai.model('Claude 3 Haiku'),
+          systemPrompt: 'Say "hello" and "goodbye" to users.',
+        }).authorization((allow) => allow.owner()),
+      });
+
+      const { schema: graphql } = schema.transform();
+
+      expect(graphql).toContain('systemPrompt: "Say \\"hello\\" and \\"goodbye\\" to users."');
+    });
+
+    test('escapes double quotes in tool description', () => {
+      const handler = defineFunctionStub({});
+      const schema = a.schema({
+        Profile: a.customType({ value: a.integer() }),
+        infoQuery: a
+          .query()
+          .returns(a.ref('Profile'))
+          .authorization((allow) => allow.publicApiKey())
+          .handler(a.handler.function(handler)),
+
+        ChatBot: a.conversation({
+          aiModel: a.ai.model('Claude 3 Haiku'),
+          systemPrompt: 'You are helpful.',
+          tools: [
+            a.ai.dataTool({
+              query: a.ref('infoQuery'),
+              name: 'infoQuery',
+              description: 'Fetches "live" profile data.',
+            }),
+          ],
+        }).authorization((allow) => allow.owner()),
+      });
+
+      const { schema: graphql } = schema.transform();
+
+      expect(graphql).toContain('description: "Fetches \\"live\\" profile data."');
+    });
+
+    test('escapes backslashes in systemPrompt', () => {
+      const schema = a.schema({
+        ChatBot: a.conversation({
+          aiModel: a.ai.model('Claude 3 Haiku'),
+          systemPrompt: 'Use path C:\\\\docs for all outputs.',
+        }).authorization((allow) => allow.owner()),
+      });
+
+      const { schema: graphql } = schema.transform();
+
+      expect(graphql).toContain('systemPrompt: "Use path C:\\\\\\\\docs for all outputs."');
+    });
+
+    test('preserves newline escaping in multiline systemPrompt', () => {
+      const schema = a.schema({
+        ChatBot: a.conversation({
+          aiModel: a.ai.model('Claude 3 Haiku'),
+          systemPrompt: `You are helpful.
+Respond in haiku.`,
+        }).authorization((allow) => allow.owner()),
+      });
+
+      const { schema: graphql } = schema.transform();
+
+      expect(graphql).toContain('systemPrompt: "You are helpful.\\nRespond in haiku."');
+    });
+  });
+});
diff --git a/packages/data-schema/src/SchemaProcessor.ts b/packages/data-schema/src/SchemaProcessor.ts
index bb2a31dc7..56636cf2d 100644
--- a/packages/data-schema/src/SchemaProcessor.ts
+++ b/packages/data-schema/src/SchemaProcessor.ts
@@ -539,16 +539,6 @@ function customOperationToGql(
     const { aiModel, systemPrompt, inferenceConfiguration } =
       typeDef.data.input;
 
-    // This is done to escape newlines in potentially multi-line system prompts
-    // e.g.
-    // generateStuff: a.generation({
-    //   aiModel: a.ai.model('Claude 3 Haiku'),
-    //   systemPrompt: `Generate a haiku
-    //   make it multiline`,
-    // }),
-    //
-    // It doesn't affect non multi-line string inputs for system prompts
-    const escapedSystemPrompt = systemPrompt.replace(/\r?\n/g, '\\n');
     const inferenceConfigurationEntries = Object.entries(
       inferenceConfiguration ?? {},
     );
@@ -558,7 +548,7 @@ function customOperationToGql(
             .map(([key, value]) => `${key}: ${value}`)
             .join(', ')} }`
         : '';
-    gqlHandlerContent += `@generation(aiModel: "${aiModel.resourcePath}", systemPrompt: "${escapedSystemPrompt}"${inferenceConfigurationGql}) `;
+    gqlHandlerContent += `@generation(aiModel: "${aiModel.resourcePath}", systemPrompt: ${escapeGraphQlString(systemPrompt)}${inferenceConfigurationGql}) `;
   }
 
   const gqlField = `${callSignature}: ${returnTypeName} ${gqlHandlerContent}${authString}`;
diff --git a/packages/data-schema/src/ai/ConversationSchemaProcessor.ts b/packages/data-schema/src/ai/ConversationSchemaProcessor.ts
index 8d4e52a55..7b9f5fe36 100644
--- a/packages/data-schema/src/ai/ConversationSchemaProcessor.ts
+++ b/packages/data-schema/src/ai/ConversationSchemaProcessor.ts
@@ -8,6 +8,9 @@ import type {
 } from './ConversationType';
 import type { InferenceConfiguration } from './ModelType';
 
+const escapeGraphQLString = (str: string): string =>
+  JSON.stringify(str).slice(1, -1);
+
 export const createConversationField = (
   typeDef: InternalConversationType,
   typeName: string,
@@ -18,16 +21,7 @@ export const createConversationField = (
 
   const args: Record<string, string> = {
     aiModel: aiModel.resourcePath,
-    // This is done to escape newlines in potentially multi-line system prompts
-    // e.g.
-    // realtorChat: a.conversation({
-    //   aiModel: a.ai.model('Claude 3 Haiku'),
-    //   systemPrompt: `You are a helpful real estate assistant
-    //   Respond in the poetic form of haiku.`,
-    // }),
-    //
-    // It doesn't affect non multi-line string inputs for system prompts
-    systemPrompt: systemPrompt.replace(/\r?\n/g, '\\n'),
+    systemPrompt: escapeGraphQLString(systemPrompt),
   };
 
   // Add each arg with quotes (aiModel and systemPrompt)
@@ -126,7 +120,7 @@ const getConversationToolsString = (tools: DataToolDefinition[]) =>
         );
       }
       const toolDefinition = extractToolDefinition(tool);
-      return `{ name: "${name}", description: "${description}", ${toolDefinition} }`;
+      return `{ name: "${name}", description: "${escapeGraphQLString(description)}", ${toolDefinition} }`;
     })
     .join(', ');