diff --git a/.github/workflows/e2e.yaml b/.github/workflows/e2e.yaml
index 89a8cf3a..e3afbed0 100644
--- a/.github/workflows/e2e.yaml
+++ b/.github/workflows/e2e.yaml
@@ -11,7 +11,7 @@ permissions:
   contents: read
 
 jobs:
-  kubernetes:
+  k8s-modules:
     runs-on: ubuntu-latest
     services:
       registry:
@@ -62,3 +62,38 @@ jobs:
       - name: Uninstall module
         run: |
           timoni -n test delete nginx --wait
+
+  k8s-bundles:
+    runs-on: ubuntu-latest
+    steps:
+      - name: Checkout
+        uses: actions/checkout@b4ffde65f46336ab88eb53be808477a3936bae11 # v4.1.1
+      - name: Setup Go
+        uses: actions/setup-go@0c52d547c9bc32b1aa3301fd7a9cb496313a4491 # v5.0.0
+        with:
+          go-version: 1.22.x
+          cache-dependency-path: |
+            **/go.sum
+            **/go.mod
+      - name: Setup Kubernetes
+        uses: helm/kind-action@99576bfa6ddf9a8e612d83b513da5a75875caced # v1.9.0
+        with:
+          version: v0.22.0
+          cluster_name: kind
+      - name: Install
+        run: make install
+      - name: Vet bundle with local module
+        run: |
+          timoni bundle vet -f hack/tests/bundle_local.cue
+      - name: Build bundle with local module
+        run: |
+          timoni bundle build -f hack/tests/bundle_local.cue
+      - name: Apply bundle with local module
+        run: |
+          timoni bundle apply -f hack/tests/bundle_local.cue
+      - name: Inspect bundle
+        run: |
+          timoni bundle status local-test
+      - name: Delete bundle
+        run: |
+          timoni bundle delete local-test
diff --git a/cmd/timoni/bundle_build_test.go b/cmd/timoni/bundle_build_test.go
index a5c01cb2..1d7a5ce6 100644
--- a/cmd/timoni/bundle_build_test.go
+++ b/cmd/timoni/bundle_build_test.go
@@ -10,6 +10,8 @@ import (
 	ssautil "github.com/fluxcd/pkg/ssa/utils"
 	. "github.com/onsi/gomega"
 	"k8s.io/apimachinery/pkg/apis/meta/v1/unstructured"
+
+	"github.com/stefanprodan/timoni/internal/engine"
 )
 
 func Test_BundleBuild(t *testing.T) {
@@ -140,6 +142,56 @@ bundle:
 	})
 }
 
+func Test_BundleBuild_LocalModule(t *testing.T) {
+	g := NewWithT(t)
+
+	modPath := "testdata/module"
+	namespace := rnd("my-namespace", 5)
+
+	bundleCue := fmt.Sprintf(`
+bundle: {
+	apiVersion: "v1alpha1"
+	name: "my-bundle"
+	instances: {
+		backend: {
+			module: {
+				url:     "file://%[1]s"
+			}
+			namespace: "%[2]s"
+			values: client: enabled: true
+		}
+	}
+}
+`, modPath, namespace)
+
+	wd := t.TempDir()
+	cuePath := filepath.Join(wd, "bundle.cue")
+	g.Expect(os.WriteFile(cuePath, []byte(bundleCue), 0644)).ToNot(HaveOccurred())
+
+	err := engine.CopyModule(modPath, filepath.Join(wd, modPath))
+	g.Expect(err).ToNot(HaveOccurred())
+
+	output, err := executeCommand(fmt.Sprintf(
+		"bundle build -f %s -p main",
+		cuePath,
+	))
+	g.Expect(err).ToNot(HaveOccurred())
+
+	objects, err := ssautil.ReadObjects(strings.NewReader(output))
+	g.Expect(err).ToNot(HaveOccurred())
+
+	backendClientCm, err := getObjectByName(objects, "backend-server")
+	g.Expect(err).ToNot(HaveOccurred())
+	g.Expect(backendClientCm.GetKind()).To(BeEquivalentTo("ConfigMap"))
+	g.Expect(backendClientCm.GetNamespace()).To(ContainSubstring(namespace))
+
+	host, found, err := unstructured.NestedString(backendClientCm.Object, "data", "hostname")
+	g.Expect(err).ToNot(HaveOccurred())
+	g.Expect(found).To(BeTrue())
+	g.Expect(host).To(ContainSubstring("example.internal"))
+
+}
+
 func Test_BundleBuild_Runtime(t *testing.T) {
 	g := NewWithT(t)
 
diff --git a/hack/tests/bundle_local.cue b/hack/tests/bundle_local.cue
new file mode 100644
index 00000000..87b2dbd8
--- /dev/null
+++ b/hack/tests/bundle_local.cue
@@ -0,0 +1,18 @@
+bundle: {
+	apiVersion: "v1alpha1"
+	name:       "local-test"
+	instances: {
+		ngnix: {
+			module: {
+				url: "file://../../blueprints/starter"
+			}
+			namespace: "nginx"
+			values: {
+				resources: limits: {
+					cpu:    "100m"
+					memory: "128Mi"
+				}
+			}
+		}
+	}
+}
diff --git a/internal/engine/bundle_builder.go b/internal/engine/bundle_builder.go
index c5475ace..0868ae8e 100644
--- a/internal/engine/bundle_builder.go
+++ b/internal/engine/bundle_builder.go
@@ -165,7 +165,8 @@ func (b *BundleBuilder) getInstanceUrl(v cue.Value) string {
 			source = origin
 		}
 		url = filepath.Clean(filepath.Join(filepath.Dir(source), path))
-		url = "file://" + path // re-add prefix
+		url = "file://" + url // re-add prefix
+
 	}
 	return url
 }
diff --git a/internal/engine/fetcher/fetcher.go b/internal/engine/fetcher/fetcher.go
index 747b3e63..78c3264d 100644
--- a/internal/engine/fetcher/fetcher.go
+++ b/internal/engine/fetcher/fetcher.go
@@ -47,7 +47,7 @@ type Options struct {
 	DefaultLocal bool
 }
 
-// NewFetcher is a factory function that creates a new Fetcher based on the provided options.
+// New is a factory function that creates a new Fetcher based on the provided options.
 // If you know the type of fetcher you want to create, prefer using the specific factory function.
 func New(ctx context.Context, opts Options) (Fetcher, error) {
 	switch {
diff --git a/internal/engine/fetcher/local.go b/internal/engine/fetcher/local.go
index 1d2e672e..2429a2f7 100644
--- a/internal/engine/fetcher/local.go
+++ b/internal/engine/fetcher/local.go
@@ -21,6 +21,7 @@ import (
 	"os"
 	"path"
 	"path/filepath"
+	"strings"
 
 	apiv1 "github.com/stefanprodan/timoni/api/v1alpha1"
 	"github.com/stefanprodan/timoni/internal/engine"
@@ -34,6 +35,7 @@ type Local struct {
 
 // NewLocal creates a local Fetcher for the given module.
 func NewLocal(src, dst string) *Local {
+	src = strings.TrimPrefix(src, apiv1.LocalPrefix)
 	requiredFiles := []string{
 		path.Join(src, "cue.mod", "module.cue"),
 		path.Join(src, "timoni.cue"),