diff --git a/asterixdb/asterix-algebra/src/main/java/org/apache/asterix/translator/TypeTranslator.java b/asterixdb/asterix-algebra/src/main/java/org/apache/asterix/translator/TypeTranslator.java
index cdb6346..cb6515b 100644
--- a/asterixdb/asterix-algebra/src/main/java/org/apache/asterix/translator/TypeTranslator.java
+++ b/asterixdb/asterix-algebra/src/main/java/org/apache/asterix/translator/TypeTranslator.java
@@ -29,6 +29,8 @@
 
 import org.apache.asterix.common.annotations.IRecordFieldDataGen;
 import org.apache.asterix.common.annotations.RecordDataGenAnnotation;
+import org.apache.asterix.common.exceptions.CompilationException;
+import org.apache.asterix.common.exceptions.ErrorCode;
 import org.apache.asterix.lang.common.expression.OrderedListTypeDefinition;
 import org.apache.asterix.lang.common.expression.RecordTypeDefinition;
 import org.apache.asterix.lang.common.expression.RecordTypeDefinition.RecordKind;
@@ -50,6 +52,7 @@
 import org.apache.asterix.om.types.IAType;
 import org.apache.asterix.om.types.TypeSignature;
 import org.apache.hyracks.algebricks.common.exceptions.AlgebricksException;
+import org.apache.hyracks.api.exceptions.SourceLocation;
 
 public class TypeTranslator {
 
@@ -70,7 +73,7 @@
         firstPass(typeExpr, typeName, typeMap, incompleteFieldTypes, incompleteItemTypes,
                 incompleteTopLevelTypeReferences, typeDataverse);
         secondPass(mdTxnCtx, typeMap, incompleteFieldTypes, incompleteItemTypes, incompleteTopLevelTypeReferences,
-                typeDataverse);
+                typeDataverse, typeExpr.getSourceLocation());
 
         for (IAType type : typeMap.values()) {
             if (type.getTypeTag().isDerivedType()) {
@@ -87,7 +90,8 @@
             throws AlgebricksException {
 
         if (BuiltinTypeMap.getBuiltinType(typeName) != null) {
-            throw new AlgebricksException("Cannot redefine builtin type " + typeName + " .");
+            throw new CompilationException(ErrorCode.COMPILATION_ERROR, typeExpr.getSourceLocation(),
+                    "Cannot redefine builtin type " + typeName);
         }
         TypeSignature typeSignature = new TypeSignature(typeDataverse, typeName);
         switch (typeExpr.getTypeKind()) {
@@ -133,15 +137,15 @@
     private static void secondPass(MetadataTransactionContext mdTxnCtx, Map<TypeSignature, IAType> typeMap,
             Map<String, Map<ARecordType, List<Integer>>> incompleteFieldTypes,
             Map<TypeSignature, List<AbstractCollectionType>> incompleteItemTypes,
-            Map<TypeSignature, List<TypeSignature>> incompleteTopLevelTypeReferences, String typeDataverse)
-            throws AlgebricksException {
+            Map<TypeSignature, List<TypeSignature>> incompleteTopLevelTypeReferences, String typeDataverse,
+            SourceLocation sourceLoc) throws AlgebricksException {
         // solve remaining top level references
         for (TypeSignature typeSignature : incompleteTopLevelTypeReferences.keySet()) {
             IAType t;
             Datatype dt = MetadataManager.INSTANCE.getDatatype(mdTxnCtx, typeSignature.getNamespace(),
                     typeSignature.getName());
             if (dt == null) {
-                throw new AlgebricksException("Could not resolve type " + typeSignature);
+                throw new CompilationException(ErrorCode.UNKNOWN_TYPE, sourceLoc, typeSignature.getName());
             } else {
                 t = dt.getDatatype();
             }
@@ -158,7 +162,7 @@
                         trefName);
             }
             if (dt == null) {
-                throw new AlgebricksException("Could not resolve type " + trefName);
+                throw new CompilationException(ErrorCode.UNKNOWN_TYPE, sourceLoc, trefName);
             } else {
                 t = dt.getDatatype();
             }
@@ -185,7 +189,7 @@
                 dt = MetadataManager.INSTANCE.getDatatype(mdTxnCtx, typeSignature.getNamespace(),
                         typeSignature.getName());
                 if (dt == null) {
-                    throw new AlgebricksException("Could not resolve type " + typeSignature);
+                    throw new CompilationException(ErrorCode.UNKNOWN_TYPE, sourceLoc, typeSignature.getName());
                 }
                 t = dt.getDatatype();
             } else {
diff --git a/asterixdb/asterix-app/src/main/java/org/apache/asterix/app/translator/QueryTranslator.java b/asterixdb/asterix-app/src/main/java/org/apache/asterix/app/translator/QueryTranslator.java
index 1be3894..f6536ac 100644
--- a/asterixdb/asterix-app/src/main/java/org/apache/asterix/app/translator/QueryTranslator.java
+++ b/asterixdb/asterix-app/src/main/java/org/apache/asterix/app/translator/QueryTranslator.java
@@ -649,10 +649,11 @@
                     throw new CompilationException(ErrorCode.DATASET_EXISTS, sourceLoc, datasetName, dataverseName);
                 }
             }
+            Datatype itemTypeEntity;
             IAType itemType;
             switch (itemTypeExpr.getTypeKind()) {
                 case TYPEREFERENCE:
-                    Datatype itemTypeEntity = metadataProvider.findTypeEntity(itemTypeDataverseName, itemTypeName);
+                    itemTypeEntity = metadataProvider.findTypeEntity(itemTypeDataverseName, itemTypeName);
                     if (itemTypeEntity == null || itemTypeEntity.getIsAnonymous()) {
                         // anonymous types cannot be referred from CREATE DATASET
                         throw new AsterixException(ErrorCode.UNKNOWN_TYPE, sourceLoc, itemTypeFullyQualifiedName);
@@ -663,8 +664,8 @@
                 case RECORD:
                     itemType = translateType(itemTypeDataverseName, itemTypeName, itemTypeExpr, mdTxnCtx);
                     validateDatasetItemType(dsType, itemType, false, sourceLoc);
-                    MetadataManager.INSTANCE.addDatatype(mdTxnCtx,
-                            new Datatype(itemTypeDataverseName, itemTypeName, itemType, true));
+                    itemTypeEntity = new Datatype(itemTypeDataverseName, itemTypeName, itemType, true);
+                    MetadataManager.INSTANCE.addDatatype(mdTxnCtx, itemTypeEntity);
                     break;
                 default:
                     throw new CompilationException(ErrorCode.COMPILATION_ILLEGAL_STATE, sourceLoc,
@@ -740,7 +741,8 @@
                             createExternalDatasetProperties(dataverseName, dd, metadataProvider, mdTxnCtx);
                     ExternalDataUtils.normalize(properties);
                     ExternalDataUtils.validate(properties);
-                    validateExternalDatasetProperties(externalDetails, properties, dd.getSourceLocation(), mdTxnCtx);
+                    validateExternalDatasetProperties(externalDetails, properties, itemTypeEntity,
+                            dd.getSourceLocation(), mdTxnCtx);
                     datasetDetails = new ExternalDatasetDetails(externalDetails.getAdapter(), properties, new Date(),
                             TransactionState.COMMIT);
                     break;
@@ -3238,8 +3240,8 @@
     }
 
     protected void validateExternalDatasetProperties(ExternalDetailsDecl externalDetails,
-            Map<String, String> properties, SourceLocation srcLoc, MetadataTransactionContext mdTxnCtx)
-            throws AlgebricksException, HyracksDataException {
+            Map<String, String> properties, Datatype itemType, SourceLocation srcLoc,
+            MetadataTransactionContext mdTxnCtx) throws AlgebricksException, HyracksDataException {
         // Validate adapter specific properties
         String adapter = externalDetails.getAdapter();
         Map<String, String> details = new HashMap<>(properties);
diff --git a/asterixdb/asterix-app/src/test/resources/runtimets/queries_sqlpp/ddl/create-dataset-inline-type-2/create-dataset-inline-type-2.5.ddl.sqlpp b/asterixdb/asterix-app/src/test/resources/runtimets/queries_sqlpp/ddl/create-dataset-inline-type-2/create-dataset-inline-type-2.5.ddl.sqlpp
new file mode 100644
index 0000000..62c0694
--- /dev/null
+++ b/asterixdb/asterix-app/src/test/resources/runtimets/queries_sqlpp/ddl/create-dataset-inline-type-2/create-dataset-inline-type-2.5.ddl.sqlpp
@@ -0,0 +1,28 @@
+/*
+ * Licensed to the Apache Software Foundation (ASF) under one
+ * or more contributor license agreements.  See the NOTICE file
+ * distributed with this work for additional information
+ * regarding copyright ownership.  The ASF licenses this file
+ * to you under the Apache License, Version 2.0 (the
+ * "License"); you may not use this file except in compliance
+ * with the License.  You may obtain a copy of the License at
+ *
+ *   http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing,
+ * software distributed under the License is distributed on an
+ * "AS IS" BASIS, WITHOUT WARRANTIES OR CONDITIONS OF ANY
+ * KIND, either express or implied.  See the License for the
+ * specific language governing permissions and limitations
+ * under the License.
+ */
+
+/* Create dataset that attempts to use unknown type
+   in inline type definition */
+
+USE test;
+
+CREATE DATASET Cust3X(
+  c_custkey integer not unknown,
+  c_name my_unknown_type
+) PRIMARY KEY c_custkey;
diff --git a/asterixdb/asterix-app/src/test/resources/runtimets/testsuite_sqlpp.xml b/asterixdb/asterix-app/src/test/resources/runtimets/testsuite_sqlpp.xml
index 44e2bff..63773dd 100644
--- a/asterixdb/asterix-app/src/test/resources/runtimets/testsuite_sqlpp.xml
+++ b/asterixdb/asterix-app/src/test/resources/runtimets/testsuite_sqlpp.xml
@@ -3888,6 +3888,7 @@
         <output-dir compare="Text">create-dataset-inline-type-2</output-dir>
         <expected-error>ASX1082: Cannot find datatype with name test.$d$t$i$Cust1</expected-error>
         <expected-error>ASX1082: Cannot find datatype with name test.$d$t$i$Cust2</expected-error>
+        <expected-error>ASX1082: Cannot find datatype with name my_unknown_type</expected-error>
       </compilation-unit>
     </test-case>
     <test-case FilePath="ddl">
diff --git a/asterixdb/asterix-lang-sqlpp/src/main/javacc/SQLPP.jj b/asterixdb/asterix-lang-sqlpp/src/main/javacc/SQLPP.jj
index 7538887..f4061e1 100644
--- a/asterixdb/asterix-lang-sqlpp/src/main/javacc/SQLPP.jj
+++ b/asterixdb/asterix-lang-sqlpp/src/main/javacc/SQLPP.jj
@@ -773,10 +773,10 @@
 {
   RecordTypeDefinition recordTypeDef = null;
   RecordTypeDefinition.RecordKind recordKind = null;
-  Token recordKindToken = null;
+  Token startToken = null, recordKindToken = null;
 }
 {
-   <LEFTPAREN> recordTypeDef = DatasetRecordTypeDef() <RIGHTPAREN>
+   <LEFTPAREN> { startToken = token; } recordTypeDef = DatasetRecordTypeDef() <RIGHTPAREN>
    ( recordKind = RecordTypeKind() { recordKindToken = token; } <TYPE> )?
    {
      if (recordKind == null) {
@@ -785,7 +785,7 @@
        throw createUnexpectedTokenError(recordKindToken);
      }
      recordTypeDef.setRecordKind(recordKind);
-     return recordTypeDef;
+     return addSourceLocation(recordTypeDef, startToken);
    }
 }