diff --git a/.dockerignore b/.dockerignore
new file mode 100644
index 000000000..04dc2e0d4
--- /dev/null
+++ b/.dockerignore
@@ -0,0 +1,3 @@
+.git
+.idea
+bin
diff --git a/Makefile b/Makefile
old mode 100644
new mode 100755
index 20ca199c1..1d18a3e4d
--- a/Makefile
+++ b/Makefile
@@ -20,12 +20,12 @@ install-serverless-latest-release:## Install serverless from latest release
 	make -C ${OPERATOR_ROOT} check-serverless-installation
 
 .PHONY: install-serverless-local-sources
-install-serverless-local-sources: ## Install serverless from local sources
+install-serverless-local-sources: ## Install serverless from local sources.
 	$(eval IMG_VERSION=local-$(shell date +'%Y%m%d-%H%M%S'))
 	IMG_VERSION=${IMG_VERSION} ./hack/build_all.sh
 
 	$(eval IMG=europe-docker.pkg.dev/kyma-project/dev/serverless-operator:${IMG_VERSION})
-	IMG_DIRECTORY="dev" IMG_VERSION=${IMG_VERSION} IMG=${IMG} make -C ${OPERATOR_ROOT} docker-build-local
+	IMG_DIRECTORY="kyma-project" IMG_VERSION=${IMG_VERSION} IMG=${IMG} make -C ${OPERATOR_ROOT} docker-build-local
 
 	k3d image import "${IMG}" -c kyma
 	IMG=${IMG} make install-serverless-custom-operator
diff --git a/README.md b/README.md
index e4d4f3e36..1d083fb3b 100644
--- a/README.md
+++ b/README.md
@@ -40,6 +40,7 @@ kubectl apply -f https://github.com/kyma-project/serverless/releases/latest/down
 - [Docker](https://www.docker.com/)
 - [kubectl](https://kubernetes.io/docs/tasks/tools/)
 - [Kubebuilder](https://book.kubebuilder.io/)
+- [yq](https://mikefarah.gitbook.io/yq)
 
 
 ## Installation in the k3d Cluster Using Make Targets
@@ -50,7 +51,7 @@ kubectl apply -f https://github.com/kyma-project/serverless/releases/latest/down
     git clone https://github.com/kyma-project/serverless.git && cd serverless/
     ```
 
-2. Build Serverless Operator locally and run it in the k3d cluster.
+2. Create a new k3d cluster and run Serverless from the main branch:
 
     ```bash
     make run-main
@@ -58,7 +59,7 @@ kubectl apply -f https://github.com/kyma-project/serverless/releases/latest/down
 
 > **NOTE:** To clean up the k3d cluster, use the `make delete-k3d` make target.
 
-> **NOTE:** If you have k3d already running you can use `install-*` target to install Serverless in different flavors.
+> **NOTE:** If you have k3d already running, you can use the `install-*` targets to install Serverless in different flavors.
 
 ## Using Serverless Operator
 
diff --git a/config/serverless/charts/docker-registry/templates/deployment.yaml b/config/serverless/charts/docker-registry/templates/deployment.yaml
index 2ee14955f..2a1410efe 100644
--- a/config/serverless/charts/docker-registry/templates/deployment.yaml
+++ b/config/serverless/charts/docker-registry/templates/deployment.yaml
@@ -47,7 +47,7 @@ spec:
       hostIPC: false # Optional. The default is false if the entry is not there.
       initContainers:
         - name: generate-htpasswd
-          image: "{{ include "imageurl" (dict "reg" .Values.global.containerRegistry "img" .Values.global.images.registry) }}"
+          image: "{{ include "imageurl" (dict "reg" .Values.global.tpiContainerRegistry "img" .Values.global.images.registry) }}"
 {{- if .Values.initContainers.securityContext }}
           securityContext:
             {{- include "tplValue" ( dict "value" .Values.initContainers.securityContext "context" . ) | nindent 12 }}
@@ -75,7 +75,7 @@ spec:
 
       containers:
         - name: {{ .Chart.Name }}
-          image: "{{ include "imageurl" (dict "reg" .Values.global.containerRegistry "img" .Values.global.images.registry) }}"
+          image: "{{ include "imageurl" (dict "reg" .Values.global.tpiContainerRegistry "img" .Values.global.images.registry) }}"
           imagePullPolicy: {{ .Values.image.pullPolicy }}
 {{- if .Values.containers.securityContext }}
           securityContext:
diff --git a/config/serverless/templates/deployment.yaml b/config/serverless/templates/deployment.yaml
index a505f82df..7e318ef14 100644
--- a/config/serverless/templates/deployment.yaml
+++ b/config/serverless/templates/deployment.yaml
@@ -140,7 +140,7 @@ spec:
             - name: APP_FUNCTION_BUILD_EXECUTOR_ARGS
               value: "{{.Values.containers.manager.configuration.data.functionBuildExecutorArgs }}"
             - name: APP_FUNCTION_BUILD_EXECUTOR_IMAGE
-              value: "{{ include "imageurl" (dict "reg" .Values.global.containerRegistry "img" .Values.global.images.kaniko_executor) }}"
+              value: "{{ include "imageurl" (dict "reg" .Values.global.tpiContainerRegistry "img" .Values.global.images.kaniko_executor) }}"
             - name: APP_FUNCTION_TARGET_CPU_UTILIZATION_PERCENTAGE
               value: "{{.Values.containers.manager.configuration.data.targetCPUUtilizationPercentage }}"
             - name: APP_FUNCTION_BUILD_REPO_FETCHER_IMAGE
diff --git a/config/serverless/values.yaml b/config/serverless/values.yaml
index 384a6e9f1..968ca4600 100644
--- a/config/serverless/values.yaml
+++ b/config/serverless/values.yaml
@@ -69,6 +69,8 @@ global:
     domainName:
   containerRegistry:
     path: europe-docker.pkg.dev/kyma-project
+  tpiContainerRegistry:
+    path: europe-docker.pkg.dev/kyma-project
   images:
     function_controller:
       name: "function-controller"
diff --git a/hack/build_all.sh b/hack/build_all.sh
index 3a0f5c92b..99172ceb8 100755
--- a/hack/build_all.sh
+++ b/hack/build_all.sh
@@ -6,10 +6,10 @@ echo "New tag: $IMG_VERSION"
 (cd "${HACK_DIR}" && pwd && docker compose build)
 
 for i in $(yq '.services[].image' ${HACK_DIR}/docker-compose.yaml); do
-  IMAGE_NAME=$(echo "${i}" | cut -d ":" -f 1)
+  IMAGE_NAME=$(echo "${i}" | cut -d ":" -f 1,2)
   NEW_IMAGE_NAME="${IMAGE_NAME}:${IMG_VERSION}"
   docker tag "${i}" "${NEW_IMAGE_NAME}"
   set -x
-  k3d image import "${NEW_IMAGE_NAME}" -c kyma
+  docker push "${NEW_IMAGE_NAME}"
   set +x
 done
diff --git a/hack/docker-compose.yaml b/hack/docker-compose.yaml
old mode 100644
new mode 100755
index 367fb6630..7094ce6b6
--- a/hack/docker-compose.yaml
+++ b/hack/docker-compose.yaml
@@ -1,38 +1,38 @@
 services:
   # serverless
   function_controller:
-    image: europe-docker.pkg.dev/kyma-project/dev/function-controller:local
+    image: localhost:5000/kyma-project/function-controller:local
     platform: "linux/amd64"
     build:
       context: ../
       dockerfile: components/serverless/deploy/manager/Dockerfile
   function_build_init:
-    image: europe-docker.pkg.dev/kyma-project/dev/function-build-init:local
+    image: localhost:5000/kyma-project/function-build-init:local
     platform: "linux/amd64"
     build:
       context: ../
       dockerfile: components/serverless/deploy/jobinit/Dockerfile
   # runtimes
   function_runtime_nodejs18:
-    image: europe-docker.pkg.dev/kyma-project/dev/function-runtime-nodejs18:local
+    image: localhost:5000/kyma-project/function-runtime-nodejs18:local
     platform: "linux/amd64"
     build:
       context: ../components/runtimes/nodejs
       dockerfile: nodejs18/Dockerfile
   function_runtime_nodejs20:
-    image: europe-docker.pkg.dev/kyma-project/dev/function-runtime-nodejs20:local
+    image: localhost:5000/kyma-project/function-runtime-nodejs20:local
     platform: "linux/amd64"
     build:
       context: ../components/runtimes/nodejs
       dockerfile: nodejs20/Dockerfile
   function_runtime_python39:
-    image: europe-docker.pkg.dev/kyma-project/dev/function-runtime-python39:local
+    image: localhost:5000/kyma-project/function-runtime-python39:local
     platform: "linux/amd64"
     build:
       context: ../components/runtimes/python
       dockerfile: python39/Dockerfile
   function_runtime_python312:
-    image: europe-docker.pkg.dev/kyma-project/dev/function-runtime-python312:local
+    image: localhost:5000/kyma-project/function-runtime-python312:local
     platform: "linux/amd64"
     build:
       context: ../components/runtimes/python
diff --git a/hack/k3d.mk b/hack/k3d.mk
old mode 100644
new mode 100755
index 7eab3ad02..eaec9da47
--- a/hack/k3d.mk
+++ b/hack/k3d.mk
@@ -1,17 +1,17 @@
 CLUSTER_NAME ?= kyma
 REGISTRY_PORT ?= 5001
-REGISTRY_NAME ?= ${CLUSTER_NAME}-registry
+REGISTRY_NAME ?= ${CLUSTER_NAME}-registry.localhost
 
 ifndef PROJECT_ROOT
 $(error PROJECT_ROOT is undefined)
 endif
-include $(PROJECT_ROOT)/hack/tools.mk
 
 ##@ K3D
 
 .PHONY: create-k3d
-create-k3d: kyma ## Create k3d with kyma CRDs.
-	${KYMA} provision k3d --registry-port ${REGISTRY_PORT} --name ${CLUSTER_NAME} --ci -p 6080:8080@loadbalancer -p 6433:8433@loadbalancer
+create-k3d: delete-k3d ## Delete old k3d registry and cluster. Create preconfigured k3d with registry
+	k3d registry create ${REGISTRY_NAME} --port 5000
+	k3d cluster create ${CLUSTER_NAME} --registry-use "k3d-${REGISTRY_NAME}:5000"
 	kubectl create namespace kyma-system
 
 .PHONY: delete-k3d
diff --git a/hack/replace_serverless_chart_images.sh b/hack/replace_serverless_chart_images.sh
index 73bad3932..5f8eefdc7 100755
--- a/hack/replace_serverless_chart_images.sh
+++ b/hack/replace_serverless_chart_images.sh
@@ -2,6 +2,7 @@
 
 # if you only need replace images with version set to "main" specify "main-only" argument
 REPLACE_SCOPE=$1
+VALUES_FILE=${PROJECT_ROOT}/config/serverless/values.yaml
 
 REQUIRED_ENV_VARIABLES=('IMG_DIRECTORY' 'IMG_VERSION' 'PROJECT_ROOT')
 for VAR in "${REQUIRED_ENV_VARIABLES[@]}"; do
@@ -16,11 +17,16 @@ if [[ ${REPLACE_SCOPE} == "main-only" ]]; then
   MAIN_ONLY_SELECTOR="| select(.version == \"main\")"
 fi
 
-IMAGES_SELECTOR=".global.images[] | select(key == \"function_*\") ${MAIN_ONLY_SELECTOR}"
-VALUES_FILE=${PROJECT_ROOT}/config/serverless/values.yaml
 
-yq -i "(${IMAGES_SELECTOR} | .directory) = \"${IMG_DIRECTORY}\"" ${VALUES_FILE}
-yq -i "(${IMAGES_SELECTOR} | .version) = \"${IMG_VERSION}\"" ${VALUES_FILE}
+if [[ ${PURPOSE} == "local" ]]; then
+  echo "Changing container registry"
+  yq -i '.global.containerRegistry.path="k3d-kyma-registry.localhost:5000"' "${VALUES_FILE}"
+fi
+
+IMAGES_SELECTOR=".global.images[] | select(key == \"function_*\") ${MAIN_ONLY_SELECTOR}"
+yq --inplace "(${IMAGES_SELECTOR} | .directory) = \"${IMG_DIRECTORY}\"" ${VALUES_FILE}
+yq --inplace "(${IMAGES_SELECTOR} | .version) = \"${IMG_VERSION}\"" ${VALUES_FILE}
 echo "==== Local Changes ===="
-yq '.global.images' ${VALUES_FILE}
+yq '.global.images' "${VALUES_FILE}"
+yq '.global.containerRegistry' "${VALUES_FILE}"
 echo "==== End of Local Changes ===="