diff --git a/apps/cli/src/commands/self/index.ts b/apps/cli/src/commands/self/index.ts
index 649bd754..8ab7ad2a 100644
--- a/apps/cli/src/commands/self/index.ts
+++ b/apps/cli/src/commands/self/index.ts
@@ -1,9 +1,14 @@
 import { command, flag, subcommands } from 'cmd-ts';
 import packageJson from '../../../package.json' with { type: 'json' };
-import { detectPackageManager, fetchLatestVersion, performSelfUpdate } from '../../self-update.js';
+import {
+  detectInstallScope,
+  detectPackageManager,
+  fetchLatestVersion,
+  performSelfUpdate,
+} from '../../self-update.js';
 
 // Re-export for existing tests
-export { detectPackageManagerFromPath } from '../../self-update.js';
+export { detectInstallScopeFromPath, detectPackageManagerFromPath } from '../../self-update.js';
 
 const updateCommand = command({
   name: 'update',
@@ -40,9 +45,11 @@ const updateCommand = command({
     if (latestVersion) {
       console.log(`Update available: ${currentVersion} → ${latestVersion}`);
     }
-    console.log(`Updating agentv using ${pm}...\n`);
+    const scope = detectInstallScope();
+    const scopeLabel = scope === 'local' ? 'local project install' : 'global install';
+    console.log(`Updating agentv using ${pm} (${scopeLabel})...\n`);
 
-    const result = await performSelfUpdate({ pm, currentVersion });
+    const result = await performSelfUpdate({ pm, currentVersion, scope });
 
     if (!result.success) {
       console.error('\nUpdate failed.');
diff --git a/apps/cli/src/self-update.ts b/apps/cli/src/self-update.ts
index e2720496..2da2bf16 100644
--- a/apps/cli/src/self-update.ts
+++ b/apps/cli/src/self-update.ts
@@ -11,6 +11,11 @@
  *
  * When called from `agentv self update` (no range), it installs `@latest`.
  *
+ * Install scope detection: if `process.argv[1]` contains `node_modules`,
+ * agentv was invoked from a local project dependency (e.g. `npx agentv` or
+ * `node_modules/.bin/agentv`); update the local dep instead of the global
+ * install. Otherwise, update globally (default).
+ *
  * To add a new package manager: add a case to `detectPackageManagerFromPath()`
  * and a corresponding install-args entry in `getInstallArgs()`.
  */
@@ -35,6 +40,24 @@ export function detectPackageManager(): 'bun' | 'npm' {
   return detectPackageManagerFromPath(process.argv[1] ?? '');
 }
 
+/**
+ * Detect whether agentv was invoked from a local project install.
+ * A path containing a `node_modules` segment indicates a local dependency;
+ * anything else (system binary, `.bun/bin`, `.nvm/.../bin`) is treated as
+ * global. Matches both POSIX and Windows path separators so a directory
+ * that merely embeds the substring (e.g., `/opt/my_node_modules_tool/`)
+ * isn't misclassified.
+ */
+export function detectInstallScopeFromPath(scriptPath: string): 'local' | 'global' {
+  const hasSegment =
+    scriptPath.includes('/node_modules/') || scriptPath.includes('\\node_modules\\');
+  return hasSegment ? 'local' : 'global';
+}
+
+export function detectInstallScope(): 'local' | 'global' {
+  return detectInstallScopeFromPath(process.argv[1] ?? '');
+}
+
 function runCommand(cmd: string, args: string[]): Promise<{ exitCode: number; stdout: string }> {
   return new Promise((resolve, reject) => {
     // No shell: true — args are passed directly to execvp, avoiding shell
@@ -83,37 +106,52 @@ export function fetchLatestVersion(): Promise<string | null> {
   });
 }
 
-function getInstallArgs(pm: 'bun' | 'npm', versionSpec: string): string[] {
+export function getInstallArgs(
+  pm: 'bun' | 'npm',
+  versionSpec: string,
+  scope: 'local' | 'global',
+): string[] {
   const pkg = `agentv@${versionSpec}`;
-  return pm === 'npm' ? ['install', '-g', pkg] : ['add', '-g', pkg];
+  const baseCmd = pm === 'npm' ? 'install' : 'add';
+  return scope === 'global' ? [baseCmd, '-g', pkg] : [baseCmd, pkg];
 }
 
 /**
- * Run the self-update flow: install agentv globally using the detected
- * (or specified) package manager.
+ * Run the self-update flow: install agentv using the detected (or specified)
+ * package manager, scoped to the detected install location (global by default,
+ * local when invoked from a project's `node_modules`).
  *
  * @param options.pm - Force a specific package manager
  * @param options.currentVersion - Current installed version (for display)
  * @param options.versionRange - Semver range from config (e.g., ">=4.1.0").
  *   When provided, used as the npm/bun version specifier so the update
  *   stays within the project's constraints. When omitted, installs `@latest`.
+ * @param options.scope - Force local or global install. Defaults to
+ *   auto-detection based on `process.argv[1]`.
  */
 export async function performSelfUpdate(options?: {
   pm?: 'bun' | 'npm';
   currentVersion?: string;
   versionRange?: string;
-}): Promise<{ success: boolean; currentVersion: string; newVersion?: string }> {
+  scope?: 'local' | 'global';
+}): Promise<{
+  success: boolean;
+  currentVersion: string;
+  newVersion?: string;
+  scope: 'local' | 'global';
+}> {
   const pm = options?.pm ?? detectPackageManager();
   const currentVersion = options?.currentVersion ?? 'unknown';
   const versionSpec = options?.versionRange ?? 'latest';
+  const scope = options?.scope ?? detectInstallScope();
 
-  const args = getInstallArgs(pm, versionSpec);
+  const args = getInstallArgs(pm, versionSpec, scope);
 
   try {
     const result = await runCommand(pm, args);
 
     if (result.exitCode !== 0) {
-      return { success: false, currentVersion };
+      return { success: false, currentVersion, scope };
     }
 
     // Best-effort version check after update
@@ -125,7 +163,7 @@ export async function performSelfUpdate(options?: {
       // Ignore - version check is best-effort
     }
 
-    return { success: true, currentVersion, newVersion };
+    return { success: true, currentVersion, newVersion, scope };
   } catch (error) {
     if (error instanceof Error) {
       if (error.message.includes('ENOENT') || error.message.includes('not found')) {
@@ -135,6 +173,6 @@ export async function performSelfUpdate(options?: {
         console.error(`Error: ${error.message}`);
       }
     }
-    return { success: false, currentVersion };
+    return { success: false, currentVersion, scope };
   }
 }
diff --git a/apps/cli/test/self-update.test.ts b/apps/cli/test/self-update.test.ts
index 55af7fc3..17620b05 100644
--- a/apps/cli/test/self-update.test.ts
+++ b/apps/cli/test/self-update.test.ts
@@ -1,5 +1,9 @@
 import { describe, expect, test } from 'bun:test';
-import { detectPackageManagerFromPath } from '../src/commands/self/index.js';
+import {
+  detectInstallScopeFromPath,
+  detectPackageManagerFromPath,
+} from '../src/commands/self/index.js';
+import { getInstallArgs } from '../src/self-update.js';
 
 describe('detectPackageManagerFromPath', () => {
   test('detects bun when path contains .bun', () => {
@@ -20,3 +24,72 @@ describe('detectPackageManagerFromPath', () => {
     expect(detectPackageManagerFromPath('')).toBe('npm');
   });
 });
+
+describe('detectInstallScopeFromPath', () => {
+  test('detects local for project node_modules path', () => {
+    expect(detectInstallScopeFromPath('/home/user/proj/node_modules/.bin/agentv')).toBe('local');
+  });
+
+  test('detects local for nested npx cache path', () => {
+    expect(
+      detectInstallScopeFromPath('/home/user/.npm/_npx/abc123/node_modules/agentv/dist/cli.js'),
+    ).toBe('local');
+  });
+
+  test('detects global for system bin path', () => {
+    expect(detectInstallScopeFromPath('/usr/local/bin/agentv')).toBe('global');
+  });
+
+  test('detects global for bun global bin path', () => {
+    expect(detectInstallScopeFromPath('/home/user/.bun/bin/agentv')).toBe('global');
+  });
+
+  test('detects global for nvm-managed path without node_modules', () => {
+    expect(detectInstallScopeFromPath('/home/user/.nvm/versions/node/v20/bin/agentv')).toBe(
+      'global',
+    );
+  });
+
+  test('detects local for Windows node_modules path', () => {
+    expect(detectInstallScopeFromPath('C:\\Users\\dev\\proj\\node_modules\\.bin\\agentv.cmd')).toBe(
+      'local',
+    );
+  });
+
+  test('treats unrelated directory containing node_modules substring as global', () => {
+    // A path with the substring but no actual `node_modules` path segment
+    // (e.g. a third-party tool installed under /opt/my_node_modules_tool/)
+    // must not be misclassified as local.
+    expect(detectInstallScopeFromPath('/opt/my_node_modules_tool/bin/agentv')).toBe('global');
+  });
+
+  test('defaults to global for empty string', () => {
+    expect(detectInstallScopeFromPath('')).toBe('global');
+  });
+});
+
+describe('getInstallArgs', () => {
+  test('global npm uses -g flag', () => {
+    expect(getInstallArgs('npm', 'latest', 'global')).toEqual(['install', '-g', 'agentv@latest']);
+  });
+
+  test('local npm drops -g flag', () => {
+    const args = getInstallArgs('npm', 'latest', 'local');
+    expect(args).toEqual(['install', 'agentv@latest']);
+    expect(args).not.toContain('-g');
+  });
+
+  test('global bun uses -g flag', () => {
+    expect(getInstallArgs('bun', 'latest', 'global')).toEqual(['add', '-g', 'agentv@latest']);
+  });
+
+  test('local bun drops -g flag', () => {
+    const args = getInstallArgs('bun', 'latest', 'local');
+    expect(args).toEqual(['add', 'agentv@latest']);
+    expect(args).not.toContain('-g');
+  });
+
+  test('forwards a semver range as the version spec', () => {
+    expect(getInstallArgs('npm', '>=4.1.0', 'local')).toEqual(['install', 'agentv@>=4.1.0']);
+  });
+});