diff --git a/01_getting_started/05_local_modules/.gitignore b/01_getting_started/05_local_modules/.gitignore
new file mode 100644
index 0000000..036e0e6
--- /dev/null
+++ b/01_getting_started/05_local_modules/.gitignore
@@ -0,0 +1,4 @@
+.flash/
+.venv/
+__pycache__/
+*.pyc
diff --git a/01_getting_started/05_local_modules/README.md b/01_getting_started/05_local_modules/README.md
new file mode 100644
index 0000000..52b83fe
--- /dev/null
+++ b/01_getting_started/05_local_modules/README.md
@@ -0,0 +1,146 @@
+# Local (non-pip) modules
+
+Factor a Flash endpoint across local Python files that are **not** pip-installable —
+a sibling module and a package that live next to the endpoint. This is the
+capability added by **SLS-360**.
+
+```
+05_local_modules/
+├── cpu_worker.py        # the @Endpoint — imports the local modules below
+├── text_utils.py        # local sibling module
+└── greetings/           # local package
+    ├── __init__.py      # re-exports render() from .messages (transitive import)
+    └── messages.py      # greeting templates
+```
+
+`cpu_worker.py` imports `text_utils` and `greetings` **inside the function body**.
+That is required on the live path (`flash dev` / `.run()`), where only the
+function source plus its local-module closure are shipped to the worker — so
+imports must resolve at call time. The same code works unchanged for
+`flash deploy`, where the whole project tree is bundled.
+
+## Requirements
+
+Local-module bundling landed in the SDK in **`runpod-flash>=1.19.0`** (runpod/flash#352).
+On 1.18.0 and earlier the modules are never collected, so every tier below fails.
+
+## Run it
+
+```bash
+# Live dev server (see the live-path note below re: worker image)
+flash dev
+# then: curl -s localhost:8888/cpu_worker/runsync -d '{"input": {"name": "Ada", "lang": "es"}}'
+
+# Or deploy to Runpod
+flash deploy
+```
+
+Expected result shape:
+
+```json
+{"status": "success", "greeting": "HOLA, ADA!", "timestamp": "..."}
+```
+
+`greeting` is produced by the local modules: `greetings.render()` builds
+`"Hola, Ada"`, then `text_utils.shout()` upper-cases and adds `!`.
+
+## Verifying SLS-360
+
+Three tiers, in increasing cost. Tier 1 needs no infra; Tier 2 uses a real
+Runpod endpoint; Tier 3 exercises the live inline-shipping path.
+
+### Tier 1 — build path (local, no infra)
+
+The build resolves each endpoint's local-import closure, force-includes those
+files even when the ignore filter would drop them, and fails loudly if an
+endpoint's local import can't be resolved.
+
+```bash
+flash build
+
+# (a) sibling + package (init AND submodule) are all bundled:
+tar tzf .flash/artifact.tar.gz | grep -E 'text_utils|greetings|cpu_worker'
+#   ./cpu_worker.py
+#   ./greetings/__init__.py
+#   ./greetings/messages.py
+#   ./text_utils.py
+```
+
+Force-include of an **ignore-dropped** module (this is the specific SLS-360 fix —
+a module the ignore rules would silently drop is still bundled because an
+endpoint imports it):
+
+```bash
+# a helper whose name matches the built-in test_*.py ignore rule
+printf 'SAMPLE_NAMES = ["Ada", "Alan", "Grace"]\n' > test_samples.py
+# make the endpoint import it (add `import test_samples` inside greet())
+flash build
+tar tzf .flash/artifact.tar.gz | grep test_samples.py   # -> ./test_samples.py  (rescued)
+rm test_samples.py   # revert the endpoint edit too
+```
+
+Loud failure on an unresolved endpoint import (clean error, exit 1, no traceback):
+
+```bash
+# temporarily add `from . import missing_sibling` to cpu_worker.py, then:
+flash build ; echo "exit=$?"
+#   ✗ .../cpu_worker.py: relative import (level=1, module='missing_sibling')
+#     could not be resolved to a local file under ...
+#   exit=1
+```
+
+### Tier 2 — deploy path (real endpoint) — verified
+
+The deploy path works with **any** worker image: the local modules are physically
+bundled into the artifact and unpacked onto the worker filesystem, so the
+endpoint imports them at runtime. This validates SLS-360's build/deploy half
+end-to-end on real infra today.
+
+```bash
+flash deploy
+curl -X POST https://api.runpod.ai/v2/<endpoint-id>/runsync \
+  -H "Authorization: Bearer $RUNPOD_API_KEY" \
+  -H "Content-Type: application/json" \
+  -d '{"input": {"name": "Ada", "lang": "es"}}'
+# -> {"output": {"greeting": "HOLA, ADA!", "status": "success", ...}, "status": "COMPLETED"}
+flash undeploy <name> --force   # tear down when done
+```
+
+Verified on a real CPU endpoint: the worker imported the local sibling
+(`text_utils`) and package (`greetings`) and returned `"HOLA, ADA!"`.
+
+> **Payload shape:** the generated queue handler calls the endpoint as
+> `greet(**job_input)`, so the function takes typed params (`name`, `lang`) and
+> the request nests them under `input`. A single `def greet(input_data: dict)`
+> would instead require `{"input": {"input_data": {...}}}`.
+>
+> **Worker turnover:** a warm worker keeps serving the previous build for a short
+> while after `flash deploy`. If a call returns stale behavior, retry until a
+> fresh worker (new `workerId`) picks up the new build.
+
+### Tier 3 — live path (`flash dev` / `.run()`)
+
+This is the genuinely new capability: local modules are shipped **inline** with
+the function and materialized on the worker's `sys.path` before the function
+runs. It requires the worker runtime that materializes `FunctionRequest.modules`
+(flash-worker PR runpod-workers/flash#100).
+
+- **Against stock Runpod workers**: the inline modules are ignored by the worker,
+  so `import text_utils` fails on the worker. This is expected until #100 is
+  released — as of this writing no published `runpod/flash-cpu` tag carries it
+  (newest stock tags date to 2026-04-22; #100 merged 2026-07-14).
+- **To test now:** build the flash-worker image locally with #100
+  (`make build` in the worker repo) and exercise it via the worker's
+  `make smoketest` with a request carrying `modules`, or via
+  `flash deploy --preview` (docker-compose) pointed at the local image.
+- **After #100 ships:** `flash dev` + a POST to `/cpu_worker/runsync` works
+  directly, and the greeting is computed by the shipped local modules on the
+  worker.
+
+## Why in-function imports
+
+On the live path only the function's own source is extracted and shipped. Module
+top-level imports/constants are not sent (that is the older AE-2308 behavior).
+Keeping `import text_utils` / `from greetings import render` inside `greet()`
+ensures the resolver discovers them and the worker can import them at call time —
+and it stays correct for `flash deploy` too.
diff --git a/01_getting_started/05_local_modules/cpu_worker.py b/01_getting_started/05_local_modules/cpu_worker.py
new file mode 100644
index 0000000..bdd283f
--- /dev/null
+++ b/01_getting_started/05_local_modules/cpu_worker.py
@@ -0,0 +1,34 @@
+# CPU serverless worker that factors its logic across local (non-pip) modules.
+# run locally with: flash dev   |   deploy with: flash deploy
+from runpod_flash import CpuInstanceType, Endpoint
+
+
+@Endpoint(
+    name="01_05_local_modules",
+    cpu=CpuInstanceType.CPU3C_1_2,
+)
+async def greet(name: str = "world", lang: str = "en") -> dict:
+    """Greeting endpoint whose logic lives in local sibling + package modules.
+
+    The imports are inside the function body on purpose. On the live path
+    (`flash dev` / `.run()`) only the function source plus its local-module
+    closure are shipped to the worker, so imports must resolve at call time.
+    The same code works unchanged for `flash deploy` (the whole tree is bundled).
+    """
+    from datetime import datetime
+
+    import text_utils
+    from greetings import render
+
+    return {
+        "status": "success",
+        "greeting": text_utils.shout(render(name, lang)),
+        "timestamp": datetime.now().isoformat(),
+    }
+
+
+if __name__ == "__main__":
+    import asyncio
+
+    result = asyncio.run(greet(name="Flash", lang="es"))
+    print(result)
diff --git a/01_getting_started/05_local_modules/greetings/__init__.py b/01_getting_started/05_local_modules/greetings/__init__.py
new file mode 100644
index 0000000..b94e541
--- /dev/null
+++ b/01_getting_started/05_local_modules/greetings/__init__.py
@@ -0,0 +1,10 @@
+"""Local package whose __init__ re-exports from a submodule.
+
+Exercises transitive local-import resolution: the endpoint imports ``greetings``,
+whose ``__init__`` imports ``greetings.messages`` — the resolver must pull in both
+``greetings/__init__.py`` and ``greetings/messages.py``.
+"""
+
+from .messages import render
+
+__all__ = ["render"]
diff --git a/01_getting_started/05_local_modules/greetings/messages.py b/01_getting_started/05_local_modules/greetings/messages.py
new file mode 100644
index 0000000..cf1ae58
--- /dev/null
+++ b/01_getting_started/05_local_modules/greetings/messages.py
@@ -0,0 +1,12 @@
+"""Package submodule with greeting templates."""
+
+TEMPLATES = {
+    "en": "Hello, {name}",
+    "es": "Hola, {name}",
+    "fr": "Bonjour, {name}",
+}
+
+
+def render(name: str, lang: str = "en") -> str:
+    template = TEMPLATES.get(lang, TEMPLATES["en"])
+    return template.format(name=name)
diff --git a/01_getting_started/05_local_modules/pyproject.toml b/01_getting_started/05_local_modules/pyproject.toml
new file mode 100644
index 0000000..f8db563
--- /dev/null
+++ b/01_getting_started/05_local_modules/pyproject.toml
@@ -0,0 +1,8 @@
+[project]
+name = "05_local_modules"
+version = "0.1.0"
+description = "Factor a Flash endpoint across local (non-pip) modules (SLS-360)"
+requires-python = ">=3.10"
+dependencies = [
+    "runpod-flash>=1.19.0",
+]
diff --git a/01_getting_started/05_local_modules/text_utils.py b/01_getting_started/05_local_modules/text_utils.py
new file mode 100644
index 0000000..05c68da
--- /dev/null
+++ b/01_getting_started/05_local_modules/text_utils.py
@@ -0,0 +1,10 @@
+"""Local sibling module (not pip-installable) that lives next to the endpoint.
+
+Demonstrates SLS-360: a Flash endpoint can factor logic into local files and
+have them ship to the worker.
+"""
+
+
+def shout(text: str) -> str:
+    """Uppercase with emphasis."""
+    return f"{text.upper()}!"
diff --git a/01_getting_started/README.md b/01_getting_started/README.md
index 4a18ac3..906e67f 100644
--- a/01_getting_started/README.md
+++ b/01_getting_started/README.md
@@ -56,12 +56,27 @@ Managing Python packages and system dependencies.
 - Version pinning for reproducibility
 - Dependency optimization strategies
 
+### [05_local_modules](./05_local_modules/)
+Factoring endpoint logic across local (non-pip) Python files.
+
+**What you'll learn:**
+- Importing a local sibling module from an endpoint
+- Importing a local package whose `__init__` re-exports from a submodule
+- Why endpoint imports belong inside the function body
+- How the build path resolves and bundles local modules
+
+**Concepts:**
+- Local-module resolution: the endpoint's import closure ships alongside the function
+- In-function imports as a requirement on the live path, and a no-op on the deploy path
+- Endpoint imports override the build's ignore filter
+
 ## Learning Path
 
 1. Start with **01_hello_world** to understand the basics
 2. Explore **03_mixed_workers** for cost optimization and validation patterns
 3. Move to **02_cpu_worker** to learn CPU-only patterns
 4. Master **04_dependencies** for production readiness
+5. Finish with **05_local_modules** to split an endpoint across your own files
 
 ## Next Steps
 
diff --git a/README.md b/README.md
index 487ce16..40e9343 100644
--- a/README.md
+++ b/README.md
@@ -61,6 +61,7 @@ Open **http://localhost:8888/docs** to explore all endpoints.
 | | [02_cpu_worker](./01_getting_started/02_cpu_worker/) | CPU-only worker |
 | | [03_mixed_workers](./01_getting_started/03_mixed_workers/) | GPU + CPU pipeline |
 | | [04_dependencies](./01_getting_started/04_dependencies/) | Dependency management |
+| | [05_local_modules](./01_getting_started/05_local_modules/) | Local (non-pip) modules and packages |
 | **ML Inference** | [01_text_to_speech](./02_ml_inference/01_text_to_speech/) | Qwen3-TTS model serving |
 | **Advanced** | [05_load_balancer](./03_advanced_workers/05_load_balancer/) | HTTP routing with load balancer |
 | **Scaling** | [01_autoscaling](./04_scaling_performance/01_autoscaling/) | Worker autoscaling configuration |
diff --git a/pyproject.toml b/pyproject.toml
index 3be2308..5dce648 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -20,7 +20,9 @@ dependencies = [
 
 [dependency-groups]
 dev = [
-    "ruff>=0.8.0",
+    # Cap below 0.16: ruff 0.16 formats Python code blocks in Markdown by
+    # default, which reflows all existing docs and breaks the format check.
+    "ruff>=0.8.0,<0.16",
 ]
 
 [build-system]