diff --git a/bundle/config/engine/engine.go b/bundle/config/engine/engine.go
index c2c251e8f9b..70eb852d831 100644
--- a/bundle/config/engine/engine.go
+++ b/bundle/config/engine/engine.go
@@ -12,9 +12,10 @@ const EnvVar = "DATABRICKS_BUNDLE_ENGINE"
 type EngineType string
 
 const (
-	EngineDirect    EngineType = "direct"
-	EngineTerraform EngineType = "terraform"
-	EngineNotSet    EngineType = ""
+	EngineDirect           EngineType = "direct"
+	EngineDirectWithHistory EngineType = "direct_with_history"
+	EngineTerraform        EngineType = "terraform"
+	EngineNotSet           EngineType = ""
 )
 
 // Default is used for new bundles if user has not set the value
@@ -29,6 +30,8 @@ func Parse(engine string) (EngineType, bool) {
 		return EngineTerraform, true
 	case "direct":
 		return EngineDirect, true
+	case "direct_with_history":
+		return EngineDirectWithHistory, true
 	default:
 		return EngineNotSet, false
 	}
@@ -39,7 +42,7 @@ func FromEnv(ctx context.Context) (EngineType, error) {
 	value := env.Get(ctx, EnvVar)
 	engine, ok := Parse(value)
 	if !ok {
-		return EngineNotSet, fmt.Errorf("unexpected setting for %s=%#v (expected 'terraform' or 'direct')", EnvVar, value)
+		return EngineNotSet, fmt.Errorf("unexpected setting for %s=%#v (expected 'terraform', 'direct', or 'direct_with_history')", EnvVar, value)
 	}
 	return engine, nil
 }
@@ -58,6 +61,13 @@ func (e EngineType) ThisOrDefault() EngineType {
 	return e
 }
 
+// IsDirect reports whether the engine is a direct engine (with or without history).
 func (e EngineType) IsDirect() bool {
-	return e.ThisOrDefault() == EngineDirect
+	t := e.ThisOrDefault()
+	return t == EngineDirect || t == EngineDirectWithHistory
+}
+
+// IsDirectWithHistory reports whether the engine is direct with deployment history enabled.
+func (e EngineType) IsDirectWithHistory() bool {
+	return e.ThisOrDefault() == EngineDirectWithHistory
 }
diff --git a/bundle/direct_with_history.go b/bundle/direct_with_history.go
new file mode 100644
index 00000000000..a708183a69b
--- /dev/null
+++ b/bundle/direct_with_history.go
@@ -0,0 +1,19 @@
+package bundle
+
+import (
+	"context"
+
+	"github.com/databricks/cli/bundle/config/engine"
+)
+
+// IsDirectWithHistory reports whether the bundle uses the direct engine with
+// deployment history enabled (engine: direct_with_history).
+// Configuration takes priority over the DATABRICKS_BUNDLE_ENGINE environment variable.
+func IsDirectWithHistory(ctx context.Context, b *Bundle) bool {
+	engineType := b.Config.Bundle.Engine
+	if engineType == engine.EngineNotSet {
+		envEngine, _ := engine.FromEnv(ctx)
+		engineType = envEngine
+	}
+	return engineType.IsDirectWithHistory()
+}
diff --git a/bundle/direct_with_history_test.go b/bundle/direct_with_history_test.go
new file mode 100644
index 00000000000..448e91b4b3f
--- /dev/null
+++ b/bundle/direct_with_history_test.go
@@ -0,0 +1,60 @@
+package bundle_test
+
+import (
+	"testing"
+
+	"github.com/databricks/cli/bundle"
+	"github.com/databricks/cli/bundle/config"
+	"github.com/databricks/cli/bundle/config/engine"
+	"github.com/databricks/cli/internal/testutil"
+	"github.com/stretchr/testify/assert"
+)
+
+func TestIsDirectWithHistoryEnvVar(t *testing.T) {
+	testutil.CleanupEnvironment(t)
+	t.Setenv("DATABRICKS_BUNDLE_ENGINE", "direct_with_history")
+	b := &bundle.Bundle{}
+	assert.True(t, bundle.IsDirectWithHistory(t.Context(), b))
+}
+
+func TestIsDirectWithHistoryOtherEngines(t *testing.T) {
+	for _, v := range []string{"direct", "terraform", ""} {
+		t.Run(v, func(t *testing.T) {
+			testutil.CleanupEnvironment(t)
+			t.Setenv("DATABRICKS_BUNDLE_ENGINE", v)
+			b := &bundle.Bundle{}
+			assert.False(t, bundle.IsDirectWithHistory(t.Context(), b))
+		})
+	}
+}
+
+func TestIsDirectWithHistoryConfig(t *testing.T) {
+	testutil.CleanupEnvironment(t)
+	b := &bundle.Bundle{
+		Config: config.Root{
+			Bundle: config.Bundle{
+				Engine: engine.EngineDirectWithHistory,
+			},
+		},
+	}
+	assert.True(t, bundle.IsDirectWithHistory(t.Context(), b))
+}
+
+func TestIsDirectWithHistoryConfigTakesPriority(t *testing.T) {
+	testutil.CleanupEnvironment(t)
+	t.Setenv("DATABRICKS_BUNDLE_ENGINE", "direct_with_history")
+	b := &bundle.Bundle{
+		Config: config.Root{
+			Bundle: config.Bundle{
+				Engine: engine.EngineDirect,
+			},
+		},
+	}
+	assert.False(t, bundle.IsDirectWithHistory(t.Context(), b))
+}
+
+func TestIsDirectWithHistoryUnset(t *testing.T) {
+	testutil.CleanupEnvironment(t)
+	b := &bundle.Bundle{}
+	assert.False(t, bundle.IsDirectWithHistory(t.Context(), b))
+}
diff --git a/bundle/internal/schema/annotations.yml b/bundle/internal/schema/annotations.yml
index 6a1070ddcd4..933ed9342ac 100644
--- a/bundle/internal/schema/annotations.yml
+++ b/bundle/internal/schema/annotations.yml
@@ -44,7 +44,7 @@ github.com/databricks/cli/bundle/config.Bundle:
       The definition of the bundle deployment. For supported attributes see [\_](/dev-tools/bundles/deployment-modes.md).
   "engine":
     "description": |-
-      The deployment engine to use. Valid values are `terraform` and `direct`. Takes priority over `DATABRICKS_BUNDLE_ENGINE` environment variable. Default is "terraform".
+      The deployment engine to use. Valid values are `terraform`, `direct`, and `direct_with_history`. Takes priority over `DATABRICKS_BUNDLE_ENGINE` environment variable. Default is "terraform".
   "git":
     "description": |-
       The Git version control details that are associated with your bundle.
@@ -63,6 +63,9 @@ github.com/databricks/cli/bundle/config.Deployment:
   "lock":
     "description": |-
       The deployment lock attributes.
+  "managed_state":
+    "description": |-
+      PLACEHOLDER
 github.com/databricks/cli/bundle/config.Experimental:
   "pydabs":
     "description": |-
@@ -491,6 +494,8 @@ github.com/databricks/cli/bundle/config/engine.EngineType:
         terraform
       - |-
         direct
+      - |-
+        direct_with_history
 github.com/databricks/cli/bundle/config/resources.Alert:
   "create_time":
     "description": |-
diff --git a/bundle/schema/jsonschema.json b/bundle/schema/jsonschema.json
index c2026fc43bc..afc68033eb3 100644
--- a/bundle/schema/jsonschema.json
+++ b/bundle/schema/jsonschema.json
@@ -65,7 +65,8 @@
                     "type": "string",
                     "enum": [
                       "terraform",
-                      "direct"
+                      "direct",
+                      "direct_with_history"
                     ]
                   },
                   {
@@ -2367,7 +2368,7 @@
                       "markdownDescription": "The definition of the bundle deployment. For supported attributes see [link](https://docs.databricks.com/dev-tools/bundles/deployment-modes.html)."
                     },
                     "engine": {
-                      "description": "The deployment engine to use. Valid values are `terraform` and `direct`. Takes priority over `DATABRICKS_BUNDLE_ENGINE` environment variable. Default is \"terraform\".",
+                      "description": "The deployment engine to use. Valid values are `terraform`, `direct`, and `direct_with_history`. Takes priority over `DATABRICKS_BUNDLE_ENGINE` environment variable. Default is \"terraform\".",
                       "$ref": "#/$defs/github.com/databricks/cli/bundle/config/engine.EngineType"
                     },
                     "git": {