diff --git a/conda_libmamba_solver/mamba_utils.py b/conda_libmamba_solver/mamba_utils.py
index 0d879bed..c34c4ecb 100644
--- a/conda_libmamba_solver/mamba_utils.py
+++ b/conda_libmamba_solver/mamba_utils.py
@@ -145,6 +145,8 @@ def init_api_context() -> api.Context:
         _get_base_url(x.url(with_credentials=True)) for x in context.default_channels
     ]
 
+    api_ctx.conda_build_local_paths = list(context.conda_build_local_paths)
+
     if context.channel_priority is ChannelPriority.STRICT:
         api_ctx.channel_priority = api.ChannelPriority.kStrict
     elif context.channel_priority is ChannelPriority.FLEXIBLE:
diff --git a/dev/requirements.txt b/dev/requirements.txt
index 6a186b15..d67c3502 100644
--- a/dev/requirements.txt
+++ b/dev/requirements.txt
@@ -3,7 +3,7 @@ pip
 # run-time
 boltons>=23.0.0
 conda>=23.7.3
-libmamba>=1.5.3
-libmambapy>=1.5.3
+libmamba>=1.5.6
+libmambapy>=1.5.6
 # be explicit about sqlite because sometimes it's removed from the env :shrug:
 sqlite
diff --git a/news/401-custom-local b/news/401-custom-local
new file mode 100644
index 00000000..6eea3a02
--- /dev/null
+++ b/news/401-custom-local
@@ -0,0 +1,19 @@
+### Enhancements
+
+* <news item>
+
+### Bug fixes
+
+* Properly propagate customized local channels (conda-build workspaces). Requires `libmamba 1.5.6` or above. (#398 via #401)
+
+### Deprecations
+
+* <news item>
+
+### Docs
+
+* <news item>
+
+### Other
+
+* <news item>
diff --git a/pyproject.toml b/pyproject.toml
index 5ac295be..b9b1bdaa 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -24,7 +24,7 @@ classifiers = [
 requires-python = ">=3.8"
 dependencies = [
   "conda >=23.7.3",
-  "libmambapy >=1.5.3",
+  "libmambapy >=1.5.6",
   "boltons >=23.0.0",
 ]
 dynamic = [
diff --git a/recipe/meta.yaml b/recipe/meta.yaml
index 9df7032e..e31b0968 100644
--- a/recipe/meta.yaml
+++ b/recipe/meta.yaml
@@ -22,7 +22,7 @@ requirements:
   run:
     - python >=3.8
     - conda >=23.7.3
-    - libmambapy >=1.5.3
+    - libmambapy >=1.5.6
     - boltons >=23.0.0
 
 test:
diff --git a/tests/test_channels.py b/tests/test_channels.py
index b7df88c5..67b5bc65 100644
--- a/tests/test_channels.py
+++ b/tests/test_channels.py
@@ -304,6 +304,34 @@ def test_http_server_auth_token_in_defaults(http_server_auth_token):
             condarc.unlink()
 
 
+def test_local_spec():
+    "https://github.com/conda/conda-libmamba-solver/issues/398"
+    env = os.environ.copy()
+    env["CONDA_BLD_PATH"] = str(DATA / "mamba_repo")
+    process = conda_subprocess(
+        "create",
+        "-p",
+        _get_temp_prefix(use_restricted_unicode=on_win),
+        "--dry-run",
+        "--solver=libmamba",
+        "--channel=local",
+        "test-package",
+        env=env,
+    )
+    assert process.returncode == 0
+
+    process = conda_subprocess(
+        "create",
+        "-p",
+        _get_temp_prefix(use_restricted_unicode=on_win),
+        "--dry-run",
+        "--solver=libmamba",
+        "local::test-package",
+        env=env,
+    )
+    assert process.returncode == 0
+
+
 def test_unknown_channels_do_not_crash(tmp_path):
     "https://github.com/conda/conda-libmamba-solver/issues/418"
     DATA = Path(__file__).parent / "data"