Seems like an unlikely story - almost every post I've ever seen about Morrowind on Steam is that it's impossible to run via Steam, and that you have to do it via an added external shortcut.

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Anyhow, in case you're telling the truth; grab (and back up) your saved games from (e.g):

your_steam_library_location\SteamLibrary\SteamApps\common\Morrowind\Saves\

Make a shortcut to the EXE file:

Copy a shortcut from the EXE in your steam library (G:\Games\ is where I keep mine). Path to the EXE will look something like:

G:\Games\SteamLibrary\SteamApps\common\Morrowind\Morrowind.exe

to (e.g.) your desktop.

Set "Start in" to the same directory

G:\Games\SteamLibrary\SteamApps\common\Morrowind

Set compatibility mode to "Win XP Service Pack 3", and Privilege "Run as Administrator."

Run from the shortcut, not through Steam.