diff --git a/.bazelrc b/.bazelrc
index ada5c5a0a7..f20f38f6ee 100644
--- a/.bazelrc
+++ b/.bazelrc
@@ -4,8 +4,8 @@
 # (Note, we cannot use `common --deleted_packages` because the bazel version command doesn't support it)
 # To update these lines, execute
 # `bazel run @rules_bazel_integration_test//tools:update_deleted_packages`
-build --deleted_packages=examples/build_file_generation,examples/build_file_generation/random_number_generator,examples/bzlmod,examples/bzlmod_build_file_generation,examples/bzlmod_build_file_generation/other_module/other_module/pkg,examples/bzlmod_build_file_generation/runfiles,examples/bzlmod/entry_points,examples/bzlmod/entry_points/tests,examples/bzlmod/libs/my_lib,examples/bzlmod/other_module,examples/bzlmod/other_module/other_module/pkg,examples/bzlmod/patches,examples/bzlmod/py_proto_library,examples/bzlmod/py_proto_library/example.com/another_proto,examples/bzlmod/py_proto_library/example.com/proto,examples/bzlmod/runfiles,examples/bzlmod/tests,examples/bzlmod/tests/other_module,examples/bzlmod/whl_mods,examples/multi_python_versions/libs/my_lib,examples/multi_python_versions/requirements,examples/multi_python_versions/tests,examples/pip_parse,examples/pip_parse_vendored,examples/pip_repository_annotations,examples/py_proto_library,examples/py_proto_library/example.com/another_proto,examples/py_proto_library/example.com/proto,gazelle,gazelle/manifest,gazelle/manifest/generate,gazelle/manifest/hasher,gazelle/manifest/test,gazelle/modules_mapping,gazelle/python,gazelle/pythonconfig,gazelle/python/private,tests/integration/compile_pip_requirements,tests/integration/compile_pip_requirements_test_from_external_repo,tests/integration/custom_commands,tests/integration/ignore_root_user_error,tests/integration/ignore_root_user_error/submodule,tests/integration/local_toolchains,tests/integration/pip_parse,tests/integration/pip_parse/empty,tests/integration/py_cc_toolchain_registered
-query --deleted_packages=examples/build_file_generation,examples/build_file_generation/random_number_generator,examples/bzlmod,examples/bzlmod_build_file_generation,examples/bzlmod_build_file_generation/other_module/other_module/pkg,examples/bzlmod_build_file_generation/runfiles,examples/bzlmod/entry_points,examples/bzlmod/entry_points/tests,examples/bzlmod/libs/my_lib,examples/bzlmod/other_module,examples/bzlmod/other_module/other_module/pkg,examples/bzlmod/patches,examples/bzlmod/py_proto_library,examples/bzlmod/py_proto_library/example.com/another_proto,examples/bzlmod/py_proto_library/example.com/proto,examples/bzlmod/runfiles,examples/bzlmod/tests,examples/bzlmod/tests/other_module,examples/bzlmod/whl_mods,examples/multi_python_versions/libs/my_lib,examples/multi_python_versions/requirements,examples/multi_python_versions/tests,examples/pip_parse,examples/pip_parse_vendored,examples/pip_repository_annotations,examples/py_proto_library,examples/py_proto_library/example.com/another_proto,examples/py_proto_library/example.com/proto,gazelle,gazelle/manifest,gazelle/manifest/generate,gazelle/manifest/hasher,gazelle/manifest/test,gazelle/modules_mapping,gazelle/python,gazelle/pythonconfig,gazelle/python/private,tests/integration/compile_pip_requirements,tests/integration/compile_pip_requirements_test_from_external_repo,tests/integration/custom_commands,tests/integration/ignore_root_user_error,tests/integration/ignore_root_user_error/submodule,tests/integration/local_toolchains,tests/integration/pip_parse,tests/integration/pip_parse/empty,tests/integration/py_cc_toolchain_registered
+build --deleted_packages=examples/build_file_generation,examples/build_file_generation/random_number_generator,examples/bzlmod,examples/bzlmod_build_file_generation,examples/bzlmod_build_file_generation/other_module/other_module/pkg,examples/bzlmod_build_file_generation/runfiles,examples/bzlmod/entry_points,examples/bzlmod/entry_points/tests,examples/bzlmod/libs/my_lib,examples/bzlmod/other_module,examples/bzlmod/other_module/other_module/pkg,examples/bzlmod/patches,examples/bzlmod/py_proto_library,examples/bzlmod/py_proto_library/example.com/another_proto,examples/bzlmod/py_proto_library/example.com/proto,examples/bzlmod/runfiles,examples/bzlmod/tests,examples/bzlmod/tests/other_module,examples/bzlmod/whl_mods,examples/multi_python_versions/libs/my_lib,examples/multi_python_versions/requirements,examples/multi_python_versions/tests,examples/pip_parse,examples/pip_parse_local_package,examples/pip_parse_local_package/hello,examples/pip_parse_vendored,examples/pip_repository_annotations,examples/py_proto_library,examples/py_proto_library/example.com/another_proto,examples/py_proto_library/example.com/proto,gazelle,gazelle/manifest,gazelle/manifest/generate,gazelle/manifest/hasher,gazelle/manifest/test,gazelle/modules_mapping,gazelle/python,gazelle/pythonconfig,gazelle/python/private,tests/integration/compile_pip_requirements,tests/integration/compile_pip_requirements_test_from_external_repo,tests/integration/custom_commands,tests/integration/ignore_root_user_error,tests/integration/ignore_root_user_error/submodule,tests/integration/local_toolchains,tests/integration/pip_parse,tests/integration/pip_parse/empty,tests/integration/py_cc_toolchain_registered
+query --deleted_packages=examples/build_file_generation,examples/build_file_generation/random_number_generator,examples/bzlmod,examples/bzlmod_build_file_generation,examples/bzlmod_build_file_generation/other_module/other_module/pkg,examples/bzlmod_build_file_generation/runfiles,examples/bzlmod/entry_points,examples/bzlmod/entry_points/tests,examples/bzlmod/libs/my_lib,examples/bzlmod/other_module,examples/bzlmod/other_module/other_module/pkg,examples/bzlmod/patches,examples/bzlmod/py_proto_library,examples/bzlmod/py_proto_library/example.com/another_proto,examples/bzlmod/py_proto_library/example.com/proto,examples/bzlmod/runfiles,examples/bzlmod/tests,examples/bzlmod/tests/other_module,examples/bzlmod/whl_mods,examples/multi_python_versions/libs/my_lib,examples/multi_python_versions/requirements,examples/multi_python_versions/tests,examples/pip_parse,examples/pip_parse_local_package,examples/pip_parse_local_package/hello,examples/pip_parse_vendored,examples/pip_repository_annotations,examples/py_proto_library,examples/py_proto_library/example.com/another_proto,examples/py_proto_library/example.com/proto,gazelle,gazelle/manifest,gazelle/manifest/generate,gazelle/manifest/hasher,gazelle/manifest/test,gazelle/modules_mapping,gazelle/python,gazelle/pythonconfig,gazelle/python/private,tests/integration/compile_pip_requirements,tests/integration/compile_pip_requirements_test_from_external_repo,tests/integration/custom_commands,tests/integration/ignore_root_user_error,tests/integration/ignore_root_user_error/submodule,tests/integration/local_toolchains,tests/integration/pip_parse,tests/integration/pip_parse/empty,tests/integration/py_cc_toolchain_registered
 
 test --test_output=errors
 
diff --git a/examples/pip_parse_local_package/BUILD.bazel b/examples/pip_parse_local_package/BUILD.bazel
new file mode 100644
index 0000000000..fbb15c884c
--- /dev/null
+++ b/examples/pip_parse_local_package/BUILD.bazel
@@ -0,0 +1,25 @@
+load("@rules_python//python:defs.bzl", "py_test")
+load("@rules_python//python/entry_points:py_console_script_binary.bzl", "py_console_script_binary")
+
+py_test(
+    name = "test_hello",
+    srcs = ["test_hello.py"],
+    deps = [
+        "@pypi//hello",
+    ],
+)
+
+py_console_script_binary(
+    name = "hello_parse",
+    pkg = "@pypi//hello",
+    script = "parse",
+)
+
+sh_test(
+    name = "test_hello_script",
+    srcs = ["test_hello_script.sh"],
+    data = [":hello_parse"],
+    env = {
+        "HELLO_PARSE": "$(rootpaths :hello_parse)",
+    },
+)
diff --git a/examples/pip_parse_local_package/MODULE.bazel b/examples/pip_parse_local_package/MODULE.bazel
new file mode 100644
index 0000000000..987385adf0
--- /dev/null
+++ b/examples/pip_parse_local_package/MODULE.bazel
@@ -0,0 +1,25 @@
+module(name = "rules_python_pip_parse_local_package_example")
+
+bazel_dep(name = "rules_python", version = "0.0.0")
+local_path_override(
+    module_name = "rules_python",
+    path = "../..",
+)
+
+python = use_extension("@rules_python//python/extensions:python.bzl", "python")
+python.toolchain(
+    # We can specify the exact version.
+    python_version = "3.9.13",
+)
+
+pip = use_extension("@rules_python//python/extensions:pip.bzl", "pip")
+pip.parse(
+    hub_name = "pypi",
+    # If we want to expand the PROJECT_ROOT variable in the requirement lock file,
+    # we need to pass a label to the file defining the project root.
+    project_root = "//:pyproject.toml",
+    # We need to use the same version here as in the `python.toolchain` call.
+    python_version = "3.9.13",
+    requirements_lock = "//:requirements_lock.txt",
+)
+use_repo(pip, "pypi", "pypi_39_hello")
diff --git a/examples/pip_parse_local_package/pyproject.toml b/examples/pip_parse_local_package/pyproject.toml
new file mode 100644
index 0000000000..dee2e36534
--- /dev/null
+++ b/examples/pip_parse_local_package/pyproject.toml
@@ -0,0 +1,7 @@
+[project]
+name = "test"
+version = "0.0.0"
+dependencies = [
+  # Test
+  "hello @ file://${PROJECT_ROOT}/hello",
+]
diff --git a/examples/pip_parse_local_package/requirements_lock.txt b/examples/pip_parse_local_package/requirements_lock.txt
new file mode 100644
index 0000000000..b4fcabc39d
--- /dev/null
+++ b/examples/pip_parse_local_package/requirements_lock.txt
@@ -0,0 +1,6 @@
+# This file was autogenerated by uv via the following command:
+#    uv pip compile pyproject.toml -o requirements_lock.txt
+hello @ file://${PROJECT_ROOT}/hello
+    # via test (pyproject.toml)
+hjson==3.1.0
+    # via hello
diff --git a/examples/pip_parse_local_package/test_hello.py b/examples/pip_parse_local_package/test_hello.py
new file mode 100644
index 0000000000..5b1df56df7
--- /dev/null
+++ b/examples/pip_parse_local_package/test_hello.py
@@ -0,0 +1,13 @@
+import hello
+
+EXAMPLE_HJSON = """
+{
+  # TL;DR
+  human:   Hjson
+  machine: JSON
+}
+"""
+
+res = hello.parse(EXAMPLE_HJSON)
+assert res["human"] == "Hjson"
+assert res["machine"] == "JSON"
diff --git a/examples/pip_parse_local_package/test_hello_script.sh b/examples/pip_parse_local_package/test_hello_script.sh
new file mode 100755
index 0000000000..66f5ae19c6
--- /dev/null
+++ b/examples/pip_parse_local_package/test_hello_script.sh
@@ -0,0 +1,9 @@
+TEST_HJSON=$(mktemp)
+
+echo "{
+  # TL;DR
+  human:   Hjson
+  machine: JSON
+}" > $TEST_HJSON
+
+$HELLO_PARSE $TEST_HJSON