diff --git a/build.sbt b/build.sbt
index cbbd89382..753c18884 100644
--- a/build.sbt
+++ b/build.sbt
@@ -717,6 +717,7 @@ lazy val mainProj = (project in file("main"))
     mimaSettings,
     mimaBinaryIssueFilters ++= Vector(
       exclude[DirectMissingMethodProblem]("sbt.internal.ConsoleProject.*"),
+      exclude[DirectMissingMethodProblem]("sbt.coursierint.LMCoursier.coursierConfiguration"),
     ),
   )
   .dependsOn(lmCore, lmIvy, lmCoursierShadedPublishing)
diff --git a/lm-coursier/definitions/src/main/scala/lmcoursier/CoursierConfiguration.scala b/lm-coursier/definitions/src/main/scala/lmcoursier/CoursierConfiguration.scala
index 0d2173a20..7cd8af77b 100644
--- a/lm-coursier/definitions/src/main/scala/lmcoursier/CoursierConfiguration.scala
+++ b/lm-coursier/definitions/src/main/scala/lmcoursier/CoursierConfiguration.scala
@@ -69,4 +69,6 @@ import scala.concurrent.duration.{ Duration, FiniteDuration }
     protocolHandlerDependencies: Seq[ModuleID] = Vector.empty,
     retry: Option[(FiniteDuration, Int)] = None,
     sameVersions: Seq[Set[InclExclRule]] = Nil,
+    @since
+    localArtifactsShouldBeCached: Boolean = false,
 )
diff --git a/lm-coursier/src/main/scala/lmcoursier/CoursierDependencyResolution.scala b/lm-coursier/src/main/scala/lmcoursier/CoursierDependencyResolution.scala
index 80a035586..43433f76d 100644
--- a/lm-coursier/src/main/scala/lmcoursier/CoursierDependencyResolution.scala
+++ b/lm-coursier/src/main/scala/lmcoursier/CoursierDependencyResolution.scala
@@ -240,6 +240,7 @@ class CoursierDependencyResolution(
       .withChecksums(checksums)
       .withCredentials(conf.credentials.map(ToCoursier.credentials))
       .withFollowHttpToHttpsRedirections(conf.followHttpToHttpsRedirections.getOrElse(true))
+      .withLocalArtifactsShouldBeCached(conf.localArtifactsShouldBeCached)
 
     val excludeDependencies = conf.excludeDependencies.map { (strOrg, strName) =>
       (coursier.Organization(strOrg), coursier.ModuleName(strName))
diff --git a/lm-coursier/src/main/scala/lmcoursier/syntax/package.scala b/lm-coursier/src/main/scala/lmcoursier/syntax/package.scala
index b77df4268..922a3d9ea 100644
--- a/lm-coursier/src/main/scala/lmcoursier/syntax/package.scala
+++ b/lm-coursier/src/main/scala/lmcoursier/syntax/package.scala
@@ -77,6 +77,7 @@ package object syntax {
         protocolHandlerDependencies = Vector.empty,
         retry = None,
         sameVersions = Nil,
+        localArtifactsShouldBeCached = false,
       )
   }
 
diff --git a/main/src/main/scala/sbt/Defaults.scala b/main/src/main/scala/sbt/Defaults.scala
index 1ec5c34b1..5e3809fee 100644
--- a/main/src/main/scala/sbt/Defaults.scala
+++ b/main/src/main/scala/sbt/Defaults.scala
@@ -287,6 +287,7 @@ object Defaults extends BuildCommon {
       csrMavenProfiles :== Set.empty,
       csrReconciliations :== LMCoursier.relaxedForAllModules,
       csrMavenDependencyOverride :== false,
+      csrLocalArtifactsShouldBeCached :== false,
       csrCacheDirectory := LMCoursier.defaultCacheLocation,
       csrSameVersions :== Nil,
       stagingDirectory := (ThisBuild / baseDirectory).value / "target" / "sona-staging",
diff --git a/main/src/main/scala/sbt/Keys.scala b/main/src/main/scala/sbt/Keys.scala
index 6582cf51e..395d4890e 100644
--- a/main/src/main/scala/sbt/Keys.scala
+++ b/main/src/main/scala/sbt/Keys.scala
@@ -494,6 +494,8 @@ object Keys {
   val csrReconciliations = settingKey[Seq[(ModuleMatchers, Reconciliation)]]("Strategy to reconcile version conflicts.")
   val csrSameVersions = settingKey[Seq[Set[InclExclRule]]]("Modules to keep at the same version.")
   val csrMavenDependencyOverride = settingKey[Boolean]("Enables Maven dependency override (bill of materials) support")
+  val csrLocalArtifactsShouldBeCached =
+    settingKey[Boolean]("When true, local file:// artifacts are copied to the cache directory.")
 
   val internalConfigurationMap = settingKey[Configuration => Configuration]("Maps configurations to the actual configuration used to define the classpath.").withRank(CSetting)
   val classpathConfiguration = taskKey[Configuration]("The configuration used to define the classpath.").withRank(CTask)
diff --git a/main/src/main/scala/sbt/coursierint/LMCoursier.scala b/main/src/main/scala/sbt/coursierint/LMCoursier.scala
index b10cb8a90..adef537fb 100644
--- a/main/src/main/scala/sbt/coursierint/LMCoursier.scala
+++ b/main/src/main/scala/sbt/coursierint/LMCoursier.scala
@@ -92,6 +92,7 @@ object LMCoursier {
       updateConfig: Option[UpdateConfiguration],
       sameVersions: Seq[Set[InclExclRule]],
       enableDependencyOverrides: Option[Boolean],
+      localArtifactsShouldBeCached: Boolean,
       log: Logger
   ): CoursierConfiguration = {
     val coursierExcludeDeps = Inputs
@@ -143,7 +144,7 @@ object LMCoursier {
       .withForceVersions(userForceVersions.toVector)
       .withMissingOk(missingOk)
       .withSameVersions(sameVersions)
-    // .withEnableDependencyOverrides(enableDependencyOverrides)
+      .withLocalArtifactsShouldBeCached(localArtifactsShouldBeCached)
   }
 
   def coursierConfigurationTask: Def.Initialize[Task[CoursierConfiguration]] = Def.task {
@@ -171,6 +172,7 @@ object LMCoursier {
       Some(updateConfiguration.value),
       csrSameVersions.value,
       Some(csrMavenDependencyOverride.value),
+      csrLocalArtifactsShouldBeCached.value,
       streams.value.log
     )
   }
@@ -207,6 +209,7 @@ object LMCoursier {
       Some(updateConfiguration.value),
       csrSameVersions.value,
       Some(csrMavenDependencyOverride.value),
+      csrLocalArtifactsShouldBeCached.value,
       streams.value.log
     )
   }
@@ -236,6 +239,7 @@ object LMCoursier {
       Some(updateConfiguration.value),
       csrSameVersions.value,
       Some(csrMavenDependencyOverride.value),
+      csrLocalArtifactsShouldBeCached.value,
       streams.value.log
     )
   }
diff --git a/sbt-app/src/sbt-test/dependency-management/local-artifacts-cache/build.sbt b/sbt-app/src/sbt-test/dependency-management/local-artifacts-cache/build.sbt
new file mode 100644
index 000000000..dfda5d289
--- /dev/null
+++ b/sbt-app/src/sbt-test/dependency-management/local-artifacts-cache/build.sbt
@@ -0,0 +1,7 @@
+ThisBuild / scalaVersion := "2.13.16"
+
+lazy val root = (project in file("."))
+  .settings(
+    name := "local-artifacts-cache-test",
+    csrLocalArtifactsShouldBeCached := true,
+  )
diff --git a/sbt-app/src/sbt-test/dependency-management/local-artifacts-cache/test b/sbt-app/src/sbt-test/dependency-management/local-artifacts-cache/test
new file mode 100644
index 000000000..e42e6722c
--- /dev/null
+++ b/sbt-app/src/sbt-test/dependency-management/local-artifacts-cache/test
@@ -0,0 +1 @@
+> show csrLocalArtifactsShouldBeCached