diff --git a/ansible_rulebook/action/run_playbook.py b/ansible_rulebook/action/run_playbook.py
index fbab1c74..2d5b18d3 100644
--- a/ansible_rulebook/action/run_playbook.py
+++ b/ansible_rulebook/action/run_playbook.py
@@ -149,9 +149,12 @@ async def _pre_process(self) -> None:
         os.mkdir(inventory_dir)
 
         if self.helper.control.inventory:
-            create_inventory(inventory_dir, self.helper.control.inventory)
-            self.inventory = os.path.join(
-                inventory_dir, os.path.basename(self.helper.control.inventory)
+            self.inventory = create_inventory(
+                inventory_dir,
+                self.helper.control.inventory,
+                copy_files=self.action_args.get(
+                    "copy_files", self.default_copy_files
+                ),
             )
         os.mkdir(project_dir)
 
@@ -270,7 +273,6 @@ def _get_latest_artifact(self, component: str, content: bool = True):
         return files[0]
 
     async def _untar_project(self, output_dir, project_data_file):
-
         cmd = [tar, "zxvf", project_data_file]
         proc = await asyncio.create_subprocess_exec(
             *cmd,
diff --git a/ansible_rulebook/util.py b/ansible_rulebook/util.py
index 15df1333..847e6850 100644
--- a/ansible_rulebook/util.py
+++ b/ansible_rulebook/util.py
@@ -270,17 +270,33 @@ async def send_session_stats(event_log: asyncio.Queue, stats: Dict):
     )
 
 
-def create_inventory(runner_inventory_dir: str, inventory: str) -> None:
-    if os.path.isfile(inventory):
-        shutil.copy(os.path.abspath(inventory), runner_inventory_dir)
-    elif os.path.exists(inventory):
+def create_inventory(
+    runner_inventory_dir: str,
+    inventory: str,
+    copy_files: bool = False,
+) -> str:
+    inventory_src_basedir = inventory
+    inventory_dest_path = ""
+    absolute_inventory_path = os.path.abspath(inventory)
+
+    if not os.path.exists(absolute_inventory_path):
+        raise InventoryNotFound(f"Inventory {inventory} not found")
+
+    if os.path.isfile(absolute_inventory_path):
+        inventory_src_basedir = os.path.dirname(absolute_inventory_path)
+        inventory_dest_path = os.path.join(
+            runner_inventory_dir, os.path.basename(inventory)
+        )
+        if not copy_files:
+            shutil.copy(absolute_inventory_path, runner_inventory_dir)
+
+    if copy_files or not os.path.isfile(absolute_inventory_path):
         shutil.copytree(
-            os.path.abspath(inventory),
+            inventory_src_basedir,
             runner_inventory_dir,
             dirs_exist_ok=True,
         )
-    else:
-        raise InventoryNotFound(f"Inventory {inventory} not found")
+    return os.path.join(runner_inventory_dir, inventory_dest_path)
 
 
 def _builtin_filter_path(name: str) -> Tuple[bool, str]:
diff --git a/tests/test_engine.py b/tests/test_engine.py
index d5459ebf..14fce7b1 100644
--- a/tests/test_engine.py
+++ b/tests/test_engine.py
@@ -234,7 +234,6 @@ async def test_start_source_with_args(
 
 @pytest.mark.asyncio
 async def test_run_rulesets():
-
     ruleset_queues, event_log = load_rulebook("rules/test_rules.yml")
 
     queue = ruleset_queues[0][1]
@@ -495,33 +494,36 @@ async def test_run_assert_facts():
     inventory = dict(
         all=dict(hosts=dict(localhost=dict(ansible_connection="local")))
     )
-    with tempfile.NamedTemporaryFile(mode="w+") as temp:
-        temp.write(yaml.dump(inventory))
-        temp.flush()
-        queue = ruleset_queues[0][1]
-        queue.put_nowait(dict())
-        queue.put_nowait(dict(i=1, meta=dict(hosts="localhost")))
-        queue.put_nowait(Shutdown())
-        await run_rulesets(
-            event_log,
-            ruleset_queues,
-            dict(Naboo="naboo"),
-            temp.name,
-        )
+    with tempfile.TemporaryDirectory() as tempdir:
+        with tempfile.NamedTemporaryFile(mode="w+", dir=tempdir) as temp:
+            temp.write(yaml.dump(inventory))
+            temp.flush()
+            queue = ruleset_queues[0][1]
+            queue.put_nowait(dict())
+            queue.put_nowait(dict(i=1, meta=dict(hosts="localhost")))
+            queue.put_nowait(Shutdown())
+            await run_rulesets(
+                event_log,
+                ruleset_queues,
+                dict(Naboo="naboo"),
+                temp.name,
+            )
 
-        assert event_log.get_nowait()["type"] == "EmptyEvent", "0"
-        assert event_log.get_nowait()["type"] == "Action", "0.1"
-        assert event_log.get_nowait()["type"] == "Job", "1.0"
-        for i in range(47):
-            assert event_log.get_nowait()["type"] == "AnsibleEvent", f"1.{i}"
-
-        event = event_log.get_nowait()
-        assert event["type"] == "Action", "2.1"
-        assert event["action"] == "run_playbook", "2.2"
-        assert event["rc"] == 0, "2.3"
-        assert event["status"] == "successful", "2.4"
-        assert event_log.get_nowait()["type"] == "Shutdown", "4"
-        assert event_log.empty()
+            assert event_log.get_nowait()["type"] == "EmptyEvent", "0"
+            assert event_log.get_nowait()["type"] == "Action", "0.1"
+            assert event_log.get_nowait()["type"] == "Job", "1.0"
+            for i in range(47):
+                assert (
+                    event_log.get_nowait()["type"] == "AnsibleEvent"
+                ), f"1.{i}"
+
+            event = event_log.get_nowait()
+            assert event["type"] == "Action", "2.1"
+            assert event["action"] == "run_playbook", "2.2"
+            assert event["rc"] == 0, "2.3"
+            assert event["status"] == "successful", "2.4"
+            assert event_log.get_nowait()["type"] == "Shutdown", "4"
+            assert event_log.empty()
 
 
 @pytest.mark.asyncio