diff --git a/sagemaker-serve/src/sagemaker/serve/model_builder.py b/sagemaker-serve/src/sagemaker/serve/model_builder.py
index b847939010..10db5a7d4a 100644
--- a/sagemaker-serve/src/sagemaker/serve/model_builder.py
+++ b/sagemaker-serve/src/sagemaker/serve/model_builder.py
@@ -3075,7 +3075,9 @@ def _build_single_modelbuilder(
         self.sagemaker_session = (
             sagemaker_session or self.sagemaker_session or self._create_session_with_region()
         )
-        self.sagemaker_session.settings._local_download_dir = self.model_path
+        if isinstance(self.model_path, str) and not self.model_path.startswith("s3://"):
+            os.makedirs(self.model_path, exist_ok=True)
+            self.sagemaker_session.settings._local_download_dir = self.model_path
 
         client = self.sagemaker_session.sagemaker_client
         client._user_agent_creator.to_string = self._user_agent_decorator(
diff --git a/sagemaker-serve/tests/unit/test_model_builder_core.py b/sagemaker-serve/tests/unit/test_model_builder_core.py
index 8e4a006749..58151af241 100644
--- a/sagemaker-serve/tests/unit/test_model_builder_core.py
+++ b/sagemaker-serve/tests/unit/test_model_builder_core.py
@@ -14,6 +14,7 @@
 from sagemaker.serve.spec.inference_spec import InferenceSpec
 from sagemaker.train.model_trainer import ModelTrainer
 from sagemaker.core.resources import TrainingJob, Model
+from sagemaker.core.session_settings import SessionSettings
 from sagemaker.core.training.configs import Compute, Networking, SourceCode
 
 
@@ -530,5 +531,58 @@ def test_prepare_for_mode_unsupported_mode(self):
         self.assertIn("Unsupported deployment mode", str(context.exception))
 
 
+class TestModelBuilderLocalDownloadDir(unittest.TestCase):
+    """Test that build wires model_path into settings.local_download_dir correctly."""
+
+    def setUp(self):
+        """Set up test fixtures."""
+        self.mock_session = Mock()
+        self.mock_session.boto_region_name = "us-west-2"
+        self.mock_session.settings = SessionSettings()
+
+    def _make_builder(self, model_path):
+        builder = ModelBuilder(
+            model=Mock(),
+            image_uri="123.dkr.ecr.us-west-2.amazonaws.com/custom:latest",
+            role_arn="arn:aws:iam::123456789012:role/TestRole",
+            sagemaker_session=self.mock_session,
+        )
+        builder.model_path = model_path
+        builder._passthrough = True
+        return builder
+
+    def _run(self, builder):
+        with patch.object(builder, "_get_serve_setting"), patch.object(
+            builder, "_is_model_customization", return_value=False
+        ), patch.object(
+            builder, "_get_client_translators", return_value=(Mock(), Mock())
+        ), patch.object(
+            builder, "_handle_mlflow_input"
+        ), patch.object(
+            builder, "_build_validations"
+        ), patch.object(
+            builder, "_build_for_passthrough", return_value=Mock()
+        ):
+            builder._build_single_modelbuilder()
+
+    def test_local_model_path_is_created_and_used(self):
+        """A local model_path is created on disk and set as local_download_dir."""
+        model_path = os.path.join(tempfile.mkdtemp(), "model-builder", "abc123")
+        self.assertFalse(os.path.exists(model_path))
+
+        builder = self._make_builder(model_path)
+        self._run(builder)
+
+        self.assertTrue(os.path.isdir(model_path))
+        self.assertEqual(self.mock_session.settings.local_download_dir, model_path)
+
+    def test_s3_model_path_leaves_local_download_dir_unset(self):
+        """An s3:// model_path is not treated as a local download dir."""
+        builder = self._make_builder("s3://my-bucket/my-model/")
+        self._run(builder)
+
+        self.assertIsNone(self.mock_session.settings.local_download_dir)
+
+
 if __name__ == "__main__":
     unittest.main()