diff --git a/sqlmesh/utils/jinja.py b/sqlmesh/utils/jinja.py
index fc9d898159..d2d830c521 100644
--- a/sqlmesh/utils/jinja.py
+++ b/sqlmesh/utils/jinja.py
@@ -200,6 +200,14 @@ def _extract(node: nodes.Node, parent: t.Optional[nodes.Node] = None) -> None:
     return extracted
 
 
+def is_variable_node(n: nodes.Node) -> bool:
+    return (
+        isinstance(n, nodes.Call)
+        and isinstance(n.node, nodes.Name)
+        and n.node.name in (c.VAR, c.BLUEPRINT_VAR)
+    )
+
+
 def extract_macro_references_and_variables(
     *jinja_strs: str, dbt_target_name: t.Optional[str] = None
 ) -> t.Tuple[t.Set[MacroReference], t.Set[str]]:
@@ -230,7 +238,15 @@ def extract_macro_references_and_variables(
 
         for call_name, node in extract_call_names(jinja_str):
             if call_name[0] in (c.VAR, c.BLUEPRINT_VAR):
-                assert isinstance(node, nodes.Call)
+                if not is_variable_node(node):
+                    # Find the variable node which could be nested
+                    for n in node.find_all(nodes.Call):
+                        if is_variable_node(n):
+                            node = n
+                            break
+                    else:
+                        raise ValueError(f"Could not find variable name in {jinja_str}")
+                node = t.cast(nodes.Call, node)
                 args = [jinja_call_arg_name(arg) for arg in node.args]
                 if args and args[0]:
                     variable_name = args[0].lower()
diff --git a/tests/dbt/converter/test_jinja.py b/tests/dbt/converter/test_jinja.py
index 5d9e8f3d73..5d3e4508d3 100644
--- a/tests/dbt/converter/test_jinja.py
+++ b/tests/dbt/converter/test_jinja.py
@@ -1,5 +1,9 @@
 import pytest
-from sqlmesh.utils.jinja import JinjaMacroRegistry, MacroExtractor
+from sqlmesh.utils.jinja import (
+    JinjaMacroRegistry,
+    MacroExtractor,
+    extract_macro_references_and_variables,
+)
 from sqlmesh.dbt.converter.jinja import JinjaGenerator, convert_jinja_query, convert_jinja_macro
 import sqlmesh.dbt.converter.jinja_transforms as jt
 from pathlib import Path
@@ -437,3 +441,10 @@ def test_convert_jinja_macro(input: str, expected: str, sushi_dbt_context: Conte
     result = convert_jinja_macro(sushi_dbt_context, input.strip())
 
     assert " ".join(result.split()) == " ".join(expected.strip().split())
+
+
+def test_extract_macro_references_and_variables() -> None:
+    input = """JINJA_QUERY('{%- set something = "'"~var("variable").split("|") -%}"""
+    _, variables = extract_macro_references_and_variables(input)
+    assert len(variables) == 1
+    assert variables == {"variable"}