diff --git a/changelog.md b/changelog.md
index 3b0671acdf..fabdb85078 100644
--- a/changelog.md
+++ b/changelog.md
@@ -6,6 +6,7 @@
 
 - [#4108](https://github.com/ignite/cli/pull/4108) Add `xast` package (cherry-picked from [#3770](https://github.com/ignite/cli/pull/3770))
 - [#4110](https://github.com/ignite/cli/pull/4110) Scaffold a consumer chain with `interchain-security` v5.0.0-rc0.
+- [#4117](https://github.com/ignite/cli/pull/4117) Support relative path when installing local plugins
 
 ### Changes
 
diff --git a/ignite/config/plugins/config.go b/ignite/config/plugins/config.go
index e8b593f482..4e3ec9d494 100644
--- a/ignite/config/plugins/config.go
+++ b/ignite/config/plugins/config.go
@@ -83,7 +83,7 @@ func (p Plugin) IsGlobal() bool {
 
 // IsLocalPath returns true if the plugin path is a local directory.
 func (p Plugin) IsLocalPath() bool {
-	return strings.HasPrefix(p.Path, "/")
+	return strings.HasPrefix(p.Path, "/") || strings.HasPrefix(p.Path, ".")
 }
 
 // HasPath verifies if a plugin has the given path regardless of version.
diff --git a/ignite/config/plugins/config_test.go b/ignite/config/plugins/config_test.go
index 10a463f4b6..21c4004d1f 100644
--- a/ignite/config/plugins/config_test.go
+++ b/ignite/config/plugins/config_test.go
@@ -20,6 +20,8 @@ func TestPluginIsLocalPath(t *testing.T) {
 	assert.False(t, pluginsconfig.Plugin{}.IsLocalPath())
 	assert.False(t, pluginsconfig.Plugin{Path: "github.com/ignite/example"}.IsLocalPath())
 	assert.True(t, pluginsconfig.Plugin{Path: "/home/bob/example"}.IsLocalPath())
+	assert.True(t, pluginsconfig.Plugin{Path: "./example"}.IsLocalPath())
+	assert.True(t, pluginsconfig.Plugin{Path: "../example"}.IsLocalPath())
 }
 
 func TestPluginHasPath(t *testing.T) {
diff --git a/ignite/services/plugin/plugin.go b/ignite/services/plugin/plugin.go
index 17bc51934b..7db1b4ef3e 100644
--- a/ignite/services/plugin/plugin.go
+++ b/ignite/services/plugin/plugin.go
@@ -236,6 +236,23 @@ func (p *Plugin) load(ctx context.Context) {
 	}
 
 	if p.IsLocalPath() {
+		// if directory is relative, make it absolute
+		if !filepath.IsAbs(p.srcPath) {
+			wd, err := os.Getwd()
+			if err != nil {
+				p.Error = errors.Errorf("failed to get working directory: %w", err)
+				return
+			}
+
+			srcPathAbs, err := filepath.Abs(p.srcPath)
+			if err != nil {
+				p.Error = errors.Errorf("failed to get absolute path of %s: %w", p.srcPath, err)
+				return
+			}
+
+			p.srcPath = filepath.Join(wd, srcPathAbs)
+		}
+
 		// trigger rebuild for local plugin if binary is outdated
 		if p.outdatedBinary() {
 			p.build(ctx)