diff --git a/pkg/api/kpm_run.go b/pkg/api/kpm_run.go
index 28aa30d8..7f607ab2 100644
--- a/pkg/api/kpm_run.go
+++ b/pkg/api/kpm_run.go
@@ -143,6 +143,8 @@ func RunPkgInPath(opts *opt.CompileOptions) (string, error) {
 		// no entry
 		opts.Merge(kcl.WithKFilenames(opts.PkgPath()))
 	}
+	// set the 'kcl.mod' path as the work dir.
+	opts.Merge(kcl.WithWorkDir(opts.PkgPath()))
 
 	// Calculate the absolute path of entry file described by '--input'.
 	compiler := runner.NewCompilerWithOpts(opts)
diff --git a/pkg/api/kpm_run_test.go b/pkg/api/kpm_run_test.go
index 0f01e4a6..76568ae4 100644
--- a/pkg/api/kpm_run_test.go
+++ b/pkg/api/kpm_run_test.go
@@ -113,3 +113,12 @@ func TestRunTar(t *testing.T) {
 		os.RemoveAll(untarPath)
 	}
 }
+
+func TestRunWithWorkdir(t *testing.T) {
+	pkgPath := getTestDir(filepath.Join("test_work_dir", "dev"))
+	opts := opt.DefaultCompileOptions()
+	opts.SetPkgPath(pkgPath)
+	result, err := RunPkgInPath(opts)
+	assert.Equal(t, err, nil)
+	assert.Equal(t, result, "base: base\nmain: main")
+}
diff --git a/pkg/api/test_data/test_work_dir/base/base.k b/pkg/api/test_data/test_work_dir/base/base.k
new file mode 100644
index 00000000..36c04d8f
--- /dev/null
+++ b/pkg/api/test_data/test_work_dir/base/base.k
@@ -0,0 +1 @@
+base = "base"
\ No newline at end of file
diff --git a/pkg/api/test_data/test_work_dir/dev/kcl.mod b/pkg/api/test_data/test_work_dir/dev/kcl.mod
new file mode 100644
index 00000000..38c7e776
--- /dev/null
+++ b/pkg/api/test_data/test_work_dir/dev/kcl.mod
@@ -0,0 +1,8 @@
+[package]
+name = "helloworld"
+edition = "0.5.0"
+version = "0.1.0"
+
+[profile]
+entries = ["../base/base.k", "main.k"]
+
diff --git a/pkg/api/test_data/test_work_dir/dev/kcl.mod.lock b/pkg/api/test_data/test_work_dir/dev/kcl.mod.lock
new file mode 100644
index 00000000..e69de29b
diff --git a/pkg/api/test_data/test_work_dir/dev/main.k b/pkg/api/test_data/test_work_dir/dev/main.k
new file mode 100644
index 00000000..cc7380ab
--- /dev/null
+++ b/pkg/api/test_data/test_work_dir/dev/main.k
@@ -0,0 +1 @@
+main = "main"
\ No newline at end of file
diff --git a/test/e2e/kpm_test.go b/test/e2e/kpm_test.go
index 97f9671c..f09aeadc 100644
--- a/test/e2e/kpm_test.go
+++ b/test/e2e/kpm_test.go
@@ -125,7 +125,9 @@ var _ = ginkgo.Describe("Kpm CLI Testing", func() {
 
 				CopyDir(filepath.Join(testDataRoot, ts.Name), filepath.Join(workspace, ts.Name))
 
-				stdout, stderr, err := ExecKpmWithWorkDir(ts.Input, filepath.Join(workspace, ts.Name))
+				input := ReplaceAllKeyByValue(ts.Input, "<workspace>", filepath.Join(workspace, ts.Name))
+
+				stdout, stderr, err := ExecKpmWithWorkDir(input, filepath.Join(workspace, ts.Name))
 
 				expectedStdout := ReplaceAllKeyByValue(ts.ExpectStdout, "<workspace>", workspace)
 				expectedStderr := ReplaceAllKeyByValue(ts.ExpectStderr, "<workspace>", workspace)
diff --git a/test/e2e/test_suites/kpm/kpm_run/test_kpm_run_with_local_dep/test_suite.input b/test/e2e/test_suites/kpm/kpm_run/test_kpm_run_with_local_dep/test_suite.input
index 08b5f923..41ece571 100644
--- a/test/e2e/test_suites/kpm/kpm_run/test_kpm_run_with_local_dep/test_suite.input
+++ b/test/e2e/test_suites/kpm/kpm_run/test_kpm_run_with_local_dep/test_suite.input
@@ -1 +1 @@
-kpm run ./kcl1
\ No newline at end of file
+kpm run <workspace>/kcl1
\ No newline at end of file