diff --git a/cmd/timoni/bundle_apply_test.go b/cmd/timoni/bundle_apply_test.go
index 31b480d9..b50f8016 100644
--- a/cmd/timoni/bundle_apply_test.go
+++ b/cmd/timoni/bundle_apply_test.go
@@ -592,3 +592,61 @@ runtime: {
 		g.Expect(err.Error()).To(ContainSubstring("no cluster found"))
 	})
 }
+
+func Test_BundleApply_Runtime_LocalModule(t *testing.T) {
+	g := NewWithT(t)
+
+	bundleName := "my-bundle"
+	modPath := "testdata/module"
+	namespace := rnd("my-ns", 5)
+	modVer := "1.0.0"
+
+	bundleData := fmt.Sprintf(`
+bundle: {
+	apiVersion: "v1alpha1"
+	name: "%[1]s"
+	instances: {
+		app: {
+			module: {
+				url:     "file://%[2]s"
+				version: "%[3]s"
+			}
+			namespace: "%[4]s"
+		}
+	}
+}
+`, bundleName, modPath, modVer, namespace)
+
+	runtimeData := `
+runtime: {
+	apiVersion: "v1alpha1"
+	name:       "test"
+	clusters: {
+		"test": {
+			group:       "testing"
+			kubeContext: "envtest"
+		}
+		"staging": {
+			group:       "staging"
+			kubeContext: "envtest"
+		}
+	}
+}
+`
+
+	runtimePath := filepath.Join(t.TempDir(), "runtime.cue")
+	err := os.WriteFile(runtimePath, []byte(runtimeData), 0644)
+	g.Expect(err).ToNot(HaveOccurred())
+
+	t.Run("creates instances from bundle and runtime", func(t *testing.T) {
+		g := NewWithT(t)
+
+		cmd := fmt.Sprintf("bundle apply -p main --wait -f- -r=%s",
+			runtimePath,
+		)
+
+		output, err := executeCommandWithIn(cmd, strings.NewReader(bundleData))
+		g.Expect(err).ToNot(HaveOccurred())
+		t.Log("\n", output)
+	})
+}