diff --git a/tests/integration/local/start_api/start_api_integ_base.py b/tests/integration/local/start_api/start_api_integ_base.py
index b1f9a6a785..77f755aec8 100644
--- a/tests/integration/local/start_api/start_api_integ_base.py
+++ b/tests/integration/local/start_api/start_api_integ_base.py
@@ -33,6 +33,9 @@ class StartApiIntegBaseClass(TestCase):
 
     do_collect_cmd_init_output: bool = False
 
+    command_list = None
+    project_directory = None
+
     @classmethod
     def setUpClass(cls):
         # This is the directory for tests/integration which will be used to file the testdata
@@ -84,7 +87,8 @@ def start_api_with_retry(cls, retries=3):
     def start_api(cls):
         command = get_sam_command()
 
-        command_list = [command, "local", "start-api", "-t", cls.template, "-p", cls.port]
+        command_list = cls.command_list or [command, "local", "start-api", "-t", cls.template]
+        command_list.extend(["-p", cls.port])
 
         if cls.container_mode:
             command_list += ["--warm-containers", cls.container_mode]
@@ -99,7 +103,11 @@ def start_api(cls):
             for image in cls.invoke_image:
                 command_list += ["--invoke-image", image]
 
-        cls.start_api_process = Popen(command_list, stderr=PIPE, stdout=PIPE)
+        cls.start_api_process = (
+            Popen(command_list, stderr=PIPE, stdout=PIPE)
+            if not cls.project_directory
+            else Popen(command_list, stderr=PIPE, stdout=PIPE, cwd=cls.project_directory)
+        )
         cls.start_api_process_output = wait_for_local_process(
             cls.start_api_process, cls.port, collect_output=cls.do_collect_cmd_init_output
         )
diff --git a/tests/integration/local/start_api/test_start_api_with_terraform_application.py b/tests/integration/local/start_api/test_start_api_with_terraform_application.py
new file mode 100644
index 0000000000..59b088b54b
--- /dev/null
+++ b/tests/integration/local/start_api/test_start_api_with_terraform_application.py
@@ -0,0 +1,56 @@
+import shutil
+import os
+from pathlib import Path
+from typing import Optional
+from unittest import skipIf
+from http.client import HTTPConnection
+
+import pytest
+import requests
+
+from tests.integration.local.start_api.start_api_integ_base import StartApiIntegBaseClass
+from tests.testing_utils import get_sam_command, CI_OVERRIDE
+
+
+class TerraformStartApiIntegrationBase(StartApiIntegBaseClass):
+    terraform_application: Optional[str] = None
+
+    @classmethod
+    def setUpClass(cls):
+        command = get_sam_command()
+        cls.template_path = ""
+        cls.build_before_invoke = False
+        cls.command_list = [command, "local", "start-api", "--hook-name", "terraform", "--beta-features"]
+        cls.test_data_path = Path(cls.get_integ_dir()) / "testdata" / "start_api"
+        cls.project_directory = cls.test_data_path / "terraform" / cls.terraform_application
+        super(TerraformStartApiIntegrationBase, cls).setUpClass()
+
+    @staticmethod
+    def get_integ_dir():
+        return Path(__file__).resolve().parents[2]
+
+    def tearDown(self) -> None:
+        shutil.rmtree(str(Path(self.project_directory / ".aws-sam-iacs")), ignore_errors=True)  # type: ignore
+        shutil.rmtree(str(Path(self.project_directory / ".terraform")), ignore_errors=True)  # type: ignore
+        try:
+            os.remove(str(Path(self.project_directory / ".terraform.lock.hcl")))  # type: ignore
+        except (FileNotFoundError, PermissionError):
+            pass
+
+
+@skipIf(
+    not CI_OVERRIDE,
+    "Skip Terraform test cases unless running in CI",
+)
+@pytest.mark.flaky(reruns=3)
+class TestStartApiTerraformApplication(TerraformStartApiIntegrationBase):
+    terraform_application = "terraform-v1-api-simple"
+
+    def setUp(self):
+        self.url = "http://127.0.0.1:{}".format(self.port)
+
+    def test_successful_request(self):
+        response = requests.get(self.url + "/hello", timeout=300)
+
+        self.assertEqual(response.status_code, 200)
+        self.assertEqual(response.json(), {"message": "hello world"})
diff --git a/tests/integration/testdata/start_api/terraform/terraform-v1-api-simple/HelloWorldFunction.zip b/tests/integration/testdata/start_api/terraform/terraform-v1-api-simple/HelloWorldFunction.zip
new file mode 100644
index 0000000000..4daa6de02d
Binary files /dev/null and b/tests/integration/testdata/start_api/terraform/terraform-v1-api-simple/HelloWorldFunction.zip differ
diff --git a/tests/integration/testdata/start_api/terraform/terraform-v1-api-simple/main.tf b/tests/integration/testdata/start_api/terraform/terraform-v1-api-simple/main.tf
new file mode 100644
index 0000000000..7f64aca6ad
--- /dev/null
+++ b/tests/integration/testdata/start_api/terraform/terraform-v1-api-simple/main.tf
@@ -0,0 +1,112 @@
+provider "aws" {
+}
+
+resource "aws_iam_role" "iam_for_lambda" {
+  name = "iam_for_lambda"
+
+  assume_role_policy = <<EOF
+{
+  "Version": "2012-10-17",
+  "Statement": [
+    {
+      "Action": "sts:AssumeRole",
+      "Principal": {
+        "Service": "lambda.amazonaws.com"
+      },
+      "Effect": "Allow",
+      "Sid": ""
+    }
+  ]
+}
+EOF
+}
+
+resource "aws_s3_bucket" "lambda_code_bucket" {
+  bucket = "lambda_code_bucket"
+}
+
+resource "aws_s3_object" "s3_lambda_code" {
+  bucket = "lambda_code_bucket"
+  key    = "s3_lambda_code_key"
+  source = "HelloWorldFunction.zip"
+}
+
+resource "aws_lambda_layer_version" "MyAwesomeLayer" {
+  filename            = "HelloWorldFunction.zip"
+  layer_name          = "MyAwesomeLayer"
+  compatible_runtimes = ["python3.8"]
+}
+
+resource "aws_lambda_function" "HelloWorldFunction" {
+  s3_bucket     = "lambda_code_bucket"
+  s3_key        = "s3_lambda_code_key"
+  handler       = "app.lambda_handler"
+  runtime       = "python3.8"
+  function_name = "HelloWorldFunction"
+  timeout       = 500
+  role          = aws_iam_role.iam_for_lambda.arn
+  layers        = [aws_lambda_layer_version.MyAwesomeLayer.arn]
+}
+
+resource "aws_lambda_function" "HelloWorldFunction2" {
+  s3_bucket     = "lambda_code_bucket"
+  s3_key        = "s3_lambda_code_key"
+  handler       = "app.lambda_handler"
+  runtime       = "python3.8"
+  function_name = "HelloWorldFunction2"
+  timeout       = 500
+  role          = aws_iam_role.iam_for_lambda.arn
+  layers        = ["arn:aws:lambda:us-east-1:178733185316:layer:01383708b0:1"]
+}
+
+resource "aws_api_gateway_rest_api" "MyDemoAPI" {
+  name               = "MyDemoAPI"
+  binary_media_types = [ "utf-8" ]
+}
+
+resource "aws_api_gateway_resource" "MyDemoResource" {
+  rest_api_id = aws_api_gateway_rest_api.MyDemoAPI.id
+  parent_id   = aws_api_gateway_rest_api.MyDemoAPI.root_resource_id
+  path_part   = "hello"
+}
+
+resource "aws_api_gateway_method" "GetMethod" {
+  rest_api_id    = aws_api_gateway_rest_api.MyDemoAPI.id
+  resource_id    = aws_api_gateway_resource.MyDemoResource.id
+  http_method    = "GET"
+  authorization  = "NONE"
+}
+
+resource "aws_api_gateway_method" "PostMethod" {
+  rest_api_id    = aws_api_gateway_rest_api.MyDemoAPI.id
+  resource_id    = aws_api_gateway_resource.MyDemoResource.id
+  http_method    = "POST"
+  authorization  = "NONE"
+}
+
+resource "aws_api_gateway_stage" "MyDemoStage" {
+  stage_name    = "prod"
+  rest_api_id   = aws_api_gateway_rest_api.MyDemoAPI.id
+  deployment_id = aws_api_gateway_deployment.MyDemoDeployment.id
+}
+
+resource "aws_api_gateway_deployment" "MyDemoDeployment" {
+  rest_api_id = aws_api_gateway_rest_api.MyDemoAPI.id
+  stage_name  = "prod"
+}
+
+resource "aws_api_gateway_integration" "MyDemoIntegration" {
+  rest_api_id      = aws_api_gateway_rest_api.MyDemoAPI.id
+  resource_id      = aws_api_gateway_resource.MyDemoResource.id
+  http_method      = aws_api_gateway_method.GetMethod.http_method
+  type             = "AWS_PROXY"
+  content_handling = "CONVERT_TO_TEXT"
+  uri              = aws_lambda_function.HelloWorldFunction.invoke_arn
+}
+
+resource "aws_api_gateway_integration" "MyDemoIntegrationMock" {
+  rest_api_id      = aws_api_gateway_rest_api.MyDemoAPI.id
+  resource_id      = aws_api_gateway_resource.MyDemoResource.id
+  http_method      = aws_api_gateway_method.PostMethod.http_method
+  type             = "MOCK"
+}