diff --git a/prqlc/prqlc-parser/src/lexer/mod.rs b/prqlc/prqlc-parser/src/lexer/mod.rs
index b59753d8ceaa..9acc5c2700e1 100644
--- a/prqlc/prqlc-parser/src/lexer/mod.rs
+++ b/prqlc/prqlc-parser/src/lexer/mod.rs
@@ -222,7 +222,7 @@ fn param<'a>() -> impl Parser<'a, ParserInput<'a>, TokenKind, ParserError<'a>> {
 
 fn interpolation<'a>() -> impl Parser<'a, ParserInput<'a>, TokenKind, ParserError<'a>> {
     // For s-strings and f-strings, use the same multi-quote string parser
-    // No escaping for interpolated strings
+    // Enable escaping so that `\"` in the source becomes a literal `"` in the string
     //
     // NOTE: Known limitation in error reporting for unclosed interpolated strings:
     // When an f-string or s-string is unclosed (e.g., `f"{}`), the error is reported at the
@@ -231,7 +231,7 @@ fn interpolation<'a>() -> impl Parser<'a, ParserInput<'a>, TokenKind, ParserErro
     // modifies error spans during error recovery, and there's no way to prevent this from
     // custom parsers.
     one_of("sf")
-        .then(quoted_string(false))
+        .then(quoted_string(true))
         .map(|(c, s)| TokenKind::Interpolation(c, s))
 }
 
diff --git a/prqlc/prqlc-parser/src/lexer/test.rs b/prqlc/prqlc-parser/src/lexer/test.rs
index 6eb69616536f..59d909257dee 100644
--- a/prqlc/prqlc-parser/src/lexer/test.rs
+++ b/prqlc/prqlc-parser/src/lexer/test.rs
@@ -178,6 +178,15 @@ fn interpolated_strings() {
         ],
     )
     "#);
+
+    // Test s-string with escaped quotes (issue #5494 regression)
+    assert_debug_snapshot!(test_interpolation_tokens(r#"s"SELECT \"col1 foo\"""#), @r#"
+    Tokens(
+        [
+            0..22: Interpolation('s', "SELECT \"col1 foo\""),
+        ],
+    )
+    "#);
 }
 
 #[test]
diff --git a/prqlc/prqlc/src/codegen/ast.rs b/prqlc/prqlc/src/codegen/ast.rs
index fee2eed058c9..64aea84c8f6e 100644
--- a/prqlc/prqlc/src/codegen/ast.rs
+++ b/prqlc/prqlc/src/codegen/ast.rs
@@ -479,8 +479,15 @@ fn display_interpolation(
     r += "\"";
     for part in parts {
         match &part {
-            // We use double braces to escape braces
-            pr::InterpolateItem::String(s) => r += s.replace('{', "{{").replace('}', "}}").as_str(),
+            // We use double braces to escape braces and backslash-quote to escape quotes
+            pr::InterpolateItem::String(s) => {
+                r += s
+                    .replace('\\', "\\\\")
+                    .replace('"', "\\\"")
+                    .replace('{', "{{")
+                    .replace('}', "}}")
+                    .as_str()
+            }
             pr::InterpolateItem::Expr { expr, .. } => {
                 r += "{";
                 r += &expr.write(opt.clone())?;
@@ -578,6 +585,12 @@ mod test {
         );
     }
 
+    #[test]
+    fn test_sstring_escaped_quotes() {
+        // Test that escaped quotes in s-strings round-trip correctly (issue #5496)
+        assert_is_formatted(r#"from s"SELECT \"col1 foo\"""#);
+    }
+
     #[test]
     fn test_unary() {
         assert_is_formatted(r#"sort {-duration}"#);