diff --git a/llmfoundry/utils/data_prep_utils.py b/llmfoundry/utils/data_prep_utils.py
index 75e27b504f..a88e65ee94 100644
--- a/llmfoundry/utils/data_prep_utils.py
+++ b/llmfoundry/utils/data_prep_utils.py
@@ -96,15 +96,16 @@ def __init__(
 
     def __iter__(self):
         for object_name in self.object_names:
-            object_name = object_name.strip('/')
-            output_filename = os.path.join(self.output_folder, object_name)
+            # Default output_filename, used for local paths.
+            output_filename = object_name
+
+            # Download objects if remote path.
             if self.object_store is not None:
+                output_filename = os.path.join(self.output_folder,
+                                               object_name.strip('/'))
                 self.object_store.download_object(object_name=object_name,
                                                   filename=output_filename,
                                                   overwrite=True)
-            else:
-                # Inputs are local so we do not need to download them.
-                output_filename = object_name
 
             with open(output_filename) as _txt_file:
                 txt = _txt_file.read()
diff --git a/tests/test_convert_text_to_mds.py b/tests/test_convert_text_to_mds.py
index 2d4878ebbb..ab8c25bc2d 100644
--- a/tests/test_convert_text_to_mds.py
+++ b/tests/test_convert_text_to_mds.py
@@ -188,6 +188,37 @@ def test_single_and_multi_process(merge_shard_groups: Mock,
     assert n_tokens == expected_n_tokens
 
 
+def test_local_path(tmp_path: pathlib.Path):
+    # Input/output folders
+    input_folder = tmp_path / 'input'
+    output_folder = tmp_path / 'output'
+
+    # Create input text data
+    os.makedirs(input_folder, exist_ok=True)
+    with open(input_folder / 'test.txt', 'w') as f:
+        f.write('test')
+
+    # Convert text data to mds
+    convert_text_to_mds(
+        tokenizer_name='mosaicml/mpt-7b',
+        output_folder=str(output_folder),
+        input_folder=str(input_folder),
+        concat_tokens=1,
+        eos_text='',
+        bos_text='',
+        no_wrap=False,
+        compression='zstd',
+        processes=1,
+        args_str='Namespace()',
+        reprocess=False,
+    )
+
+    # Make sure all the files exist as expected.
+    assert os.path.exists(output_folder / '.text_to_mds_conversion_done')
+    assert os.path.exists(output_folder / 'index.json')
+    assert os.path.exists(output_folder / 'shard.00000.mds.zstd')
+
+
 def test_is_already_processed(tmp_path: pathlib.Path):
     tmp_path_str = str(tmp_path)
     args_str = 'Namespace(x = 5)'