diff --git a/docs/release-notes/.FSharp.Compiler.Service/10.0.100.md b/docs/release-notes/.FSharp.Compiler.Service/10.0.100.md
index 73b0abc52e2..193d845ca0a 100644
--- a/docs/release-notes/.FSharp.Compiler.Service/10.0.100.md
+++ b/docs/release-notes/.FSharp.Compiler.Service/10.0.100.md
@@ -33,6 +33,7 @@
 * Tests: set test source for range debug printing ([PR #18879](https://github.com/dotnet/fsharp/pull/18879))
 * Checker: fix declaring type for abbreviated types extensions ([PR #18909](https://github.com/dotnet/fsharp/pull/18909))
 * Caches: type subsumption cache key perf regression ([Issue #18925](https://github.com/dotnet/fsharp/issues/18925) [PR #18926](https://github.com/dotnet/fsharp/pull/18926))
+* Ensure that line directives are applied to source identifiers (issue [#18908](https://github.com/dotnet/fsharp/issues/18908), PR [#18918](https://github.com/dotnet/fsharp/pull/18918))
 
 ### Changed
 * Use `errorR` instead of `error` in `CheckDeclarations.fs` when possible. ([PR #18645](https://github.com/dotnet/fsharp/pull/18645))
diff --git a/src/Compiler/Checking/Expressions/CheckExpressions.fs b/src/Compiler/Checking/Expressions/CheckExpressions.fs
index 9aaf8d472a8..ef5eae5c996 100644
--- a/src/Compiler/Checking/Expressions/CheckExpressions.fs
+++ b/src/Compiler/Checking/Expressions/CheckExpressions.fs
@@ -926,10 +926,13 @@ let TcConst (cenv: cenv) (overallTy: TType) m env synConst =
     | SynConst.Char c ->
         unif g.char_ty
         Const.Char c
-    | SynConst.String (s, _, _)
-    | SynConst.SourceIdentifier (_, s, _) ->
+    | SynConst.String (s, _, _) ->
         unif g.string_ty
         Const.String s
+    | SynConst.SourceIdentifier (i, s, m) ->
+        unif g.string_ty
+        let s = applyLineDirectivesToSourceIdentifier i s m
+        Const.String s
     | SynConst.UserNum _ -> error (InternalError(FSComp.SR.tcUnexpectedBigRationalConstant(), m))
     | SynConst.Measure _ -> error (Error(FSComp.SR.tcInvalidTypeForUnitsOfMeasure(), m))
     | SynConst.UInt16s _ -> error (InternalError(FSComp.SR.tcUnexpectedConstUint16Array(), m))
@@ -4890,8 +4893,10 @@ and TcStaticConstantParameter (cenv: cenv) (env: TcEnv) tpenv kind (StripParenTy
             | SynConst.Single n when typeEquiv g g.float32_ty kind -> record(g.float32_ty); box (n: single)
             | SynConst.Double n when typeEquiv g g.float_ty kind -> record(g.float_ty); box (n: double)
             | SynConst.Char n when typeEquiv g g.char_ty kind -> record(g.char_ty); box (n: char)
-            | SynConst.String (s, _, _)
-            | SynConst.SourceIdentifier (_, s, _) when typeEquiv g g.string_ty kind -> record(g.string_ty); box (s: string)
+            | SynConst.String (s, _, _) when typeEquiv g g.string_ty kind -> record(g.string_ty); box (s: string)
+            | SynConst.SourceIdentifier (i, s, m) when typeEquiv g g.string_ty kind ->
+                let s = applyLineDirectivesToSourceIdentifier i s m
+                record(g.string_ty); box (s: string)
             | SynConst.Bool b when typeEquiv g g.bool_ty kind -> record(g.bool_ty); box (b: bool)
             | _ -> fail()
         v, tpenv
diff --git a/src/Compiler/Driver/ParseAndCheckInputs.fs b/src/Compiler/Driver/ParseAndCheckInputs.fs
index fd6eabbf0f9..c6de5e776a1 100644
--- a/src/Compiler/Driver/ParseAndCheckInputs.fs
+++ b/src/Compiler/Driver/ParseAndCheckInputs.fs
@@ -215,7 +215,7 @@ let PostParseModuleSpec (_i, defaultNamespace, isLastCompiland, fileName, intf)
 
         SynModuleOrNamespaceSig(lid, isRecursive, kind, decls, xmlDoc, attributes, None, range, trivia)
 
-let private finishPreprocessing lexbuf diagnosticOptions isScript submoduleRanges =
+let FinishPreprocessing lexbuf diagnosticOptions isScript submoduleRanges =
     WarnScopes.MergeInto diagnosticOptions isScript submoduleRanges lexbuf
     LineDirectives.add lexbuf.StartPos.FileIndex (LineDirectiveStore.GetLineDirectives lexbuf)
 
@@ -276,7 +276,7 @@ let PostParseModuleImpls
 
     let isScript = IsScript fileName
 
-    finishPreprocessing lexbuf diagnosticOptions isScript (getImplSubmoduleRanges impls)
+    FinishPreprocessing lexbuf diagnosticOptions isScript (getImplSubmoduleRanges impls)
 
     let trivia = collectParsedInputTrivia lexbuf
 
@@ -310,7 +310,7 @@ let PostParseModuleSpecs
         identifiers: Set<string>
     ) =
 
-    finishPreprocessing lexbuf diagnosticOptions false (getSpecSubmoduleRanges specs)
+    FinishPreprocessing lexbuf diagnosticOptions false (getSpecSubmoduleRanges specs)
 
     let trivia = collectParsedInputTrivia lexbuf
 
diff --git a/src/Compiler/Driver/ParseAndCheckInputs.fsi b/src/Compiler/Driver/ParseAndCheckInputs.fsi
index 281638b5685..36f3493724c 100644
--- a/src/Compiler/Driver/ParseAndCheckInputs.fsi
+++ b/src/Compiler/Driver/ParseAndCheckInputs.fsi
@@ -136,6 +136,9 @@ val ParseInputFiles:
     retryLocked: bool ->
         (ParsedInput * string) list
 
+/// Process collected directives
+val FinishPreprocessing: Lexbuf -> FSharpDiagnosticOptions -> bool -> range list -> unit
+
 /// Get the initial type checking environment including the loading of mscorlib/System.Core, FSharp.Core
 /// applying the InternalsVisibleTo in referenced assemblies and opening 'Checked' if requested.
 val GetInitialTcEnv: assemblyName: string * range * TcConfig * TcImports * TcGlobals -> TcEnv * OpenDeclaration list
diff --git a/src/Compiler/Interactive/fsi.fs b/src/Compiler/Interactive/fsi.fs
index 8b09f86fb4d..a4202ddbb62 100644
--- a/src/Compiler/Interactive/fsi.fs
+++ b/src/Compiler/Interactive/fsi.fs
@@ -3692,7 +3692,7 @@ type FsiInteractionProcessor
 
                     Parser.interaction lexerWhichSavesLastToken tokenizer.LexBuffer)
 
-            WarnScopes.MergeInto diagnosticOptions false [] tokenizer.LexBuffer
+            FinishPreprocessing tokenizer.LexBuffer diagnosticOptions true []
 
             Some input
         with e ->
diff --git a/src/Compiler/SyntaxTree/LexHelpers.fs b/src/Compiler/SyntaxTree/LexHelpers.fs
index dddaaa37a94..a4c222720ac 100644
--- a/src/Compiler/SyntaxTree/LexHelpers.fs
+++ b/src/Compiler/SyntaxTree/LexHelpers.fs
@@ -16,14 +16,11 @@ open FSharp.Compiler.ParseHelpers
 open FSharp.Compiler.Parser
 open FSharp.Compiler.Syntax
 open FSharp.Compiler.Syntax.PrettyNaming
+open FSharp.Compiler.SyntaxTreeOps
 open FSharp.Compiler.Text
 open FSharp.Compiler.Text.Range
 open FSharp.Compiler.UnicodeLexing
 
-/// The "mock" file name used by fsi.exe when reading from stdin.
-/// Has special treatment by the lexer, i.e. __SOURCE_DIRECTORY__ becomes GetCurrentDirectory()
-let stdinMockFileName = "stdin"
-
 /// Lexer args: status of #light processing.  Mutated when a #light
 /// directive is processed. This alters the behaviour of the lexfilter.
 [<Sealed>]
@@ -472,27 +469,9 @@ module Keywords =
                 v
         | _ ->
             match s with
-            | "__SOURCE_DIRECTORY__" ->
-                let fileName = FileIndex.fileOfFileIndex lexbuf.StartPos.FileIndex
-
-                let dirname =
-                    if String.IsNullOrWhiteSpace(fileName) then
-                        String.Empty
-                    else if fileName = stdinMockFileName then
-                        System.IO.Directory.GetCurrentDirectory()
-                    else
-                        fileName
-                        |> FileSystem.GetFullPathShim (* asserts that path is already absolute *)
-                        |> System.IO.Path.GetDirectoryName
-                        |> (!!)
-
-                if String.IsNullOrEmpty dirname then
-                    dirname
-                else
-                    PathMap.applyDir args.pathMap dirname
-                |> fun dir -> KEYWORD_STRING(s, dir)
-            | "__SOURCE_FILE__" -> KEYWORD_STRING(s, !!System.IO.Path.GetFileName(FileIndex.fileOfFileIndex lexbuf.StartPos.FileIndex))
-            | "__LINE__" -> KEYWORD_STRING(s, string lexbuf.StartPos.Line)
+            | "__SOURCE_DIRECTORY__"
+            | "__SOURCE_FILE__"
+            | "__LINE__" -> KEYWORD_STRING(s, getSourceIdentifierValue args.pathMap s lexbuf.LexemeRange)
             | _ -> IdentifierToken args lexbuf s
 
 /// Arbitrary value
diff --git a/src/Compiler/SyntaxTree/LexHelpers.fsi b/src/Compiler/SyntaxTree/LexHelpers.fsi
index 63997f08988..2fe067d244a 100644
--- a/src/Compiler/SyntaxTree/LexHelpers.fsi
+++ b/src/Compiler/SyntaxTree/LexHelpers.fsi
@@ -13,8 +13,6 @@ open FSharp.Compiler.UnicodeLexing
 open FSharp.Compiler.Parser
 open FSharp.Compiler.Text
 
-val stdinMockFileName: string
-
 /// Lexer args: status of #light processing.  Mutated when a #light
 /// directive is processed. This alters the behaviour of the lexfilter.
 [<Sealed>]
diff --git a/src/Compiler/SyntaxTree/SyntaxTreeOps.fs b/src/Compiler/SyntaxTree/SyntaxTreeOps.fs
index 020dc50bebf..5669b0cd087 100644
--- a/src/Compiler/SyntaxTree/SyntaxTreeOps.fs
+++ b/src/Compiler/SyntaxTree/SyntaxTreeOps.fs
@@ -2,15 +2,18 @@
 
 module FSharp.Compiler.SyntaxTreeOps
 
+open Internal.Utilities
 open Internal.Utilities.Library
 open FSharp.Compiler.DiagnosticsLogger
 open FSharp.Compiler.Features
+open FSharp.Compiler.IO
 open FSharp.Compiler.Syntax
 open FSharp.Compiler.SyntaxTrivia
 open FSharp.Compiler.Syntax.PrettyNaming
 open FSharp.Compiler.Text
 open FSharp.Compiler.Text.Range
 open FSharp.Compiler.Xml
+open System
 
 /// Generate implicit argument names in parsing
 type SynArgNameGenerator() =
@@ -992,11 +995,47 @@ let rec synExprContainsError inpExpr =
 let longIdentToString (ident: SynLongIdent) =
     System.String.Join(".", ident.LongIdent |> List.map (fun ident -> ident.idText.ToString()))
 
+/// The "mock" file name used by fsi.exe when reading from stdin.
+/// Has special treatment, i.e. __SOURCE_DIRECTORY__ becomes GetCurrentDirectory()
+let stdinMockFileName = "stdin"
+
+let getSourceIdentifierValue pathMap s (m: range) =
+    match s with
+    | "__SOURCE_DIRECTORY__" ->
+        let fileName = FileIndex.fileOfFileIndex m.FileIndex
+
+        let dirname =
+            if String.IsNullOrWhiteSpace fileName then
+                String.Empty
+            else if fileName = stdinMockFileName then
+                System.IO.Directory.GetCurrentDirectory()
+            else
+                fileName
+                |> FileSystem.GetFullPathShim (* asserts that path is already absolute *)
+                |> System.IO.Path.GetDirectoryName
+                |> (!!)
+
+        if String.IsNullOrEmpty dirname then
+            dirname
+        else
+            PathMap.applyDir pathMap dirname
+    | "__SOURCE_FILE__" -> !!System.IO.Path.GetFileName(FileIndex.fileOfFileIndex m.FileIndex)
+    | "__LINE__" -> string m.StartLine
+    | _ -> failwith "getSourceIdentifierValue: unexpected identifier"
+
+let applyLineDirectivesToSourceIdentifier s value (m: range) =
+    let mm = m.ApplyLineDirectives()
+
+    if mm = m then
+        value // keep the value that was assigned during lexing (when line directives were not yet evaluated)
+    else
+        getSourceIdentifierValue PathMap.empty s mm // update because of line directive
+
 let parsedHashDirectiveArguments (input: ParsedHashDirectiveArgument list) (langVersion: LanguageVersion) =
     List.choose
         (function
         | ParsedHashDirectiveArgument.String(s, _, _) -> Some s
-        | ParsedHashDirectiveArgument.SourceIdentifier(_, v, _) -> Some v
+        | ParsedHashDirectiveArgument.SourceIdentifier(s, v, m) -> Some(applyLineDirectivesToSourceIdentifier s v m)
         | ParsedHashDirectiveArgument.Int32(n, m) ->
             match tryCheckLanguageFeatureAndRecover langVersion LanguageFeature.ParsedHashDirectiveArgumentNonQuotes m with
             | true -> Some(string n)
@@ -1015,7 +1054,7 @@ let parsedHashDirectiveArgumentsNoCheck (input: ParsedHashDirectiveArgument list
     List.map
         (function
         | ParsedHashDirectiveArgument.String(s, _, _) -> s
-        | ParsedHashDirectiveArgument.SourceIdentifier(_, v, _) -> v
+        | ParsedHashDirectiveArgument.SourceIdentifier(s, v, m) -> applyLineDirectivesToSourceIdentifier s v m
         | ParsedHashDirectiveArgument.Int32(n, _) -> string n
         | ParsedHashDirectiveArgument.Ident(ident, _) -> ident.idText
         | ParsedHashDirectiveArgument.LongIdent(ident, _) -> longIdentToString ident)
@@ -1028,7 +1067,7 @@ let parsedHashDirectiveStringArguments (input: ParsedHashDirectiveArgument list)
         | ParsedHashDirectiveArgument.Int32(n, m) ->
             errorR (Error(FSComp.SR.featureParsedHashDirectiveUnexpectedInteger (n), m))
             None
-        | ParsedHashDirectiveArgument.SourceIdentifier(_, v, _) -> Some v
+        | ParsedHashDirectiveArgument.SourceIdentifier(s, v, m) -> Some(applyLineDirectivesToSourceIdentifier s v m)
         | ParsedHashDirectiveArgument.Ident(ident, m) ->
             errorR (Error(FSComp.SR.featureParsedHashDirectiveUnexpectedIdentifier (ident.idText), m))
             None
diff --git a/src/Compiler/SyntaxTree/SyntaxTreeOps.fsi b/src/Compiler/SyntaxTree/SyntaxTreeOps.fsi
index 49190452b4f..3365349bdb0 100644
--- a/src/Compiler/SyntaxTree/SyntaxTreeOps.fsi
+++ b/src/Compiler/SyntaxTree/SyntaxTreeOps.fsi
@@ -7,6 +7,7 @@ open FSharp.Compiler.Text
 open FSharp.Compiler.Xml
 open FSharp.Compiler.Syntax
 open FSharp.Compiler.SyntaxTrivia
+open Internal.Utilities
 
 [<Class>]
 type SynArgNameGenerator =
@@ -322,6 +323,12 @@ val unionBindingAndMembers: bindings: SynBinding list -> members: SynMemberDefn
 
 val synExprContainsError: inpExpr: SynExpr -> bool
 
+val stdinMockFileName: string
+
+val getSourceIdentifierValue: PathMap -> string -> range -> string
+
+val applyLineDirectivesToSourceIdentifier: string -> string -> range -> string
+
 val parsedHashDirectiveArguments: ParsedHashDirectiveArgument list -> LanguageVersion -> string list
 
 val parsedHashDirectiveArgumentsNoCheck: ParsedHashDirectiveArgument list -> string list
diff --git a/tests/FSharp.Compiler.ComponentTests/CompilerDirectives/Line.fs b/tests/FSharp.Compiler.ComponentTests/CompilerDirectives/Line.fs
index 334c6985d87..882e116ceb1 100644
--- a/tests/FSharp.Compiler.ComponentTests/CompilerDirectives/Line.fs
+++ b/tests/FSharp.Compiler.ComponentTests/CompilerDirectives/Line.fs
@@ -350,3 +350,26 @@ namespace CSharpLib
         |> compileExeAndRun
         |> shouldSucceed
     
+    let sourceIdSource = """
+#line 100 "/temp/target.fs"
+let dir = __SOURCE_DIRECTORY__
+let d = dir[dir.Length - 4 ..]
+printf $"{__LINE__} in {__SOURCE_FILE__} in {d}"
+"""    
+
+    [<Fact>]
+    let ``LineDirectivesAreAppliedToSourceIdentifiers`` () =
+        let result = 
+            sourceIdSource
+            |> FSharp
+            |> withFileName "original.fs"
+            |> compileExeAndRun
+            |> shouldSucceed
+        let expected = "102 in target.fs in temp"
+        match result.RunOutput with
+        | Some (ExecutionOutput r) ->
+            Assert.Equal(expected, r.StdOut)
+        | _ ->
+            Assert.Fail "unexpected: no execution output"
+
+        
\ No newline at end of file
diff --git a/tests/FSharp.Compiler.Service.Tests/FsiTests.fs b/tests/FSharp.Compiler.Service.Tests/FsiTests.fs
index 208f7a465a6..30f67d97de7 100644
--- a/tests/FSharp.Compiler.Service.Tests/FsiTests.fs
+++ b/tests/FSharp.Compiler.Service.Tests/FsiTests.fs
@@ -662,4 +662,12 @@ module FsiTests =
             printfn "value: %A" v
         | Choice2Of2 e ->
             printfn "exception: %A" e
-            raise e
\ No newline at end of file
+            raise e
+            
+    [<Fact>]
+    let ``LineDirectivesWork`` () =
+        use fsiSession = createFsiSession false
+        fsiSession.EvalInteraction("""#line 100
+        let y = __LINE__""")
+        let boundValue = fsiSession.GetBoundValues() |> List.exactlyOne
+        Assert.shouldBe "100" boundValue.Value.ReflectionValue