diff --git a/runtime/local/git/git.go b/runtime/local/git/git.go
index 956f02e7..dbb282be 100644
--- a/runtime/local/git/git.go
+++ b/runtime/local/git/git.go
@@ -274,20 +274,35 @@ func ParseSource(source string) (*Source, error) {
 }
 
 // ParseSourceLocal detects and handles local pathes too
-// workdir should be used only from the CLI @todo better interface for this function
-func ParseSourceLocal(workDir, source string) (*Source, error) {
+// workdir should be used only from the CLI @todo better interface for this function.
+// PathExistsFunc exists only for testing purposes, to make the function side effect free.
+func ParseSourceLocal(workDir, source string, pathExistsFunc ...func(path string) (bool, error)) (*Source, error) {
+	var pexists func(string) (bool, error)
+	if len(pathExistsFunc) == 0 {
+		pexists = pathExists
+	} else {
+		pexists = pathExistsFunc[0]
+	}
 	var localFullPath string
 	if len(workDir) > 0 {
 		localFullPath = filepath.Join(workDir, source)
 	} else {
 		localFullPath = source
 	}
-	if exists, err := pathExists(localFullPath); err == nil && exists {
+	if exists, err := pexists(localFullPath); err == nil && exists {
 		localRepoRoot, err := GetRepoRoot(localFullPath)
 		if err != nil {
 			return nil, err
 		}
-		folder := strings.ReplaceAll(localFullPath, localRepoRoot+string(filepath.Separator), "")
+		var folder string
+		// If the local repo root is a top level folder, we are not in a git repo.
+		// In this case, we should take the last folder as folder name.
+		if localRepoRoot == "" {
+			folder = filepath.Base(localFullPath)
+		} else {
+			folder = strings.ReplaceAll(localFullPath, localRepoRoot+string(filepath.Separator), "")
+		}
+
 		return &Source{
 			Local:         true,
 			Folder:        folder,
diff --git a/runtime/local/git/git_test.go b/runtime/local/git/git_test.go
index 79561b80..aed18f89 100644
--- a/runtime/local/git/git_test.go
+++ b/runtime/local/git/git_test.go
@@ -5,14 +5,14 @@ import (
 )
 
 type parseCase struct {
-	url      string
+	source   string
 	expected *Source
 }
 
 func TestParseSource(t *testing.T) {
 	cases := []parseCase{
 		{
-			url: "helloworld",
+			source: "helloworld",
 			expected: &Source{
 				Repo:   "github.com/micro/services",
 				Folder: "helloworld",
@@ -20,7 +20,7 @@ func TestParseSource(t *testing.T) {
 			},
 		},
 		{
-			url: "github.com/micro/services/helloworld",
+			source: "github.com/micro/services/helloworld",
 			expected: &Source{
 				Repo:   "github.com/micro/services",
 				Folder: "helloworld",
@@ -28,7 +28,7 @@ func TestParseSource(t *testing.T) {
 			},
 		},
 		{
-			url: "github.com/micro/services/helloworld@v1.12.1",
+			source: "github.com/micro/services/helloworld@v1.12.1",
 			expected: &Source{
 				Repo:   "github.com/micro/services",
 				Folder: "helloworld",
@@ -36,7 +36,7 @@ func TestParseSource(t *testing.T) {
 			},
 		},
 		{
-			url: "github.com/micro/services/helloworld@branchname",
+			source: "github.com/micro/services/helloworld@branchname",
 			expected: &Source{
 				Repo:   "github.com/micro/services",
 				Folder: "helloworld",
@@ -44,7 +44,7 @@ func TestParseSource(t *testing.T) {
 			},
 		},
 		{
-			url: "github.com/crufter/reponame/helloworld@branchname",
+			source: "github.com/crufter/reponame/helloworld@branchname",
 			expected: &Source{
 				Repo:   "github.com/crufter/reponame",
 				Folder: "helloworld",
@@ -53,7 +53,45 @@ func TestParseSource(t *testing.T) {
 		},
 	}
 	for i, c := range cases {
-		result, err := ParseSource(c.url)
+		result, err := ParseSource(c.source)
+		if err != nil {
+			t.Fatalf("Failed case %v: %v", i, err)
+		}
+		if result.Folder != c.expected.Folder {
+			t.Fatalf("Folder does not match for '%v', expected '%v', got '%v'", i, c.expected.Folder, result.Folder)
+		}
+		if result.Repo != c.expected.Repo {
+			t.Fatalf("Repo address does not match for '%v', expected '%v', got '%v'", i, c.expected.Repo, result.Repo)
+		}
+		if result.Ref != c.expected.Ref {
+			t.Fatalf("Ref does not match for '%v', expected '%v', got '%v'", i, c.expected.Ref, result.Ref)
+		}
+	}
+}
+
+type localParseCase struct {
+	source     string
+	expected   *Source
+	workDir    string
+	pathExists bool
+}
+
+func TestLocalParseSource(t *testing.T) {
+	cases := []localParseCase{
+		{
+			source: ".",
+			expected: &Source{
+				Folder: "folder2",
+				Ref:    "latest",
+			},
+			workDir:    "/folder1/folder2",
+			pathExists: true,
+		},
+	}
+	for i, c := range cases {
+		result, err := ParseSourceLocal(c.workDir, c.source, func(s string) (bool, error) {
+			return c.pathExists, nil
+		})
 		if err != nil {
 			t.Fatalf("Failed case %v: %v", i, err)
 		}