diff --git a/components/dashboard/servicemesh_setup.go b/components/dashboard/servicemesh_setup.go
index 81dcbb279fc..83365dcd14e 100644
--- a/components/dashboard/servicemesh_setup.go
+++ b/components/dashboard/servicemesh_setup.go
@@ -2,7 +2,6 @@ package dashboard
 
 import (
 	"path"
-	"path/filepath"
 
 	operatorv1 "github.com/openshift/api/operator/v1"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
@@ -43,15 +42,10 @@ func (d *Dashboard) configureServiceMesh(cli client.Client, owner metav1.Object,
 
 func (d *Dashboard) defineServiceMeshFeatures(dscispec *dsci.DSCInitializationSpec) feature.DefinedFeatures {
 	return func(s *feature.FeaturesInitializer) error {
-		var rootDir = filepath.Join(feature.BaseOutputDir, dscispec.ApplicationsNamespace)
-		if err := feature.CopyEmbeddedFiles("templates", rootDir); err != nil {
-			return err
-		}
-
 		createMeshResources, err := feature.CreateFeature("dashboard-create-service-mesh-routing-resources").
 			For(dscispec).
 			Manifests(
-				path.Join(rootDir, feature.ControlPlaneDir, "components", d.GetComponentName()),
+				path.Join(feature.ControlPlaneDir, "components", d.GetComponentName()),
 			).
 			WithResources(servicemesh.EnabledInDashboard).
 			WithData(
diff --git a/components/kserve/serverless_setup.go b/components/kserve/serverless_setup.go
index a86f88ad373..83d2b6cf877 100644
--- a/components/kserve/serverless_setup.go
+++ b/components/kserve/serverless_setup.go
@@ -2,7 +2,6 @@ package kserve
 
 import (
 	"path"
-	"path/filepath"
 
 	"github.com/opendatahub-io/opendatahub-operator/v2/pkg/feature"
 	"github.com/opendatahub-io/opendatahub-operator/v2/pkg/feature/serverless"
@@ -16,15 +15,10 @@ const (
 )
 
 func (k *Kserve) configureServerlessFeatures(s *feature.FeaturesInitializer) error {
-	var rootDir = filepath.Join(feature.BaseOutputDir, s.DSCInitializationSpec.ApplicationsNamespace)
-	if err := feature.CopyEmbeddedFiles(templatesDir, rootDir); err != nil {
-		return err
-	}
-
 	servingDeployment, err := feature.CreateFeature("serverless-serving-deployment").
 		For(s.DSCInitializationSpec).
 		Manifests(
-			path.Join(rootDir, templatesDir, "serving-install"),
+			path.Join(templatesDir, "serving-install"),
 		).
 		WithData(PopulateComponentSettings(k)).
 		PreConditions(
@@ -55,7 +49,7 @@ func (k *Kserve) configureServerlessFeatures(s *feature.FeaturesInitializer) err
 		).
 		WithResources(serverless.ServingCertificateResource).
 		Manifests(
-			path.Join(rootDir, templatesDir, "serving-istio-gateways"),
+			path.Join(templatesDir, "serving-istio-gateways"),
 		).
 		Load()
 	if err != nil {
diff --git a/controllers/dscinitialization/servicemesh_setup.go b/controllers/dscinitialization/servicemesh_setup.go
index 1b4b140cb1c..800d5e27875 100644
--- a/controllers/dscinitialization/servicemesh_setup.go
+++ b/controllers/dscinitialization/servicemesh_setup.go
@@ -2,7 +2,6 @@ package dscinitialization
 
 import (
 	"path"
-	"path/filepath"
 
 	operatorv1 "github.com/openshift/api/operator/v1"
 	corev1 "k8s.io/api/core/v1"
@@ -14,17 +13,12 @@ import (
 )
 
 func defineServiceMeshFeatures(f *feature.FeaturesInitializer) error {
-	var rootDir = filepath.Join(feature.BaseOutputDir, f.DSCInitializationSpec.ApplicationsNamespace)
-	if err := feature.CopyEmbeddedFiles("templates", rootDir); err != nil {
-		return err
-	}
-
 	serviceMeshSpec := f.ServiceMesh
 
 	smcpCreation, errSmcp := feature.CreateFeature("service-mesh-control-plane-creation").
 		For(f.DSCInitializationSpec).
 		Manifests(
-			path.Join(rootDir, feature.ControlPlaneDir, "base", "control-plane.tmpl"),
+			path.Join(feature.ControlPlaneDir, "base", "control-plane.tmpl"),
 		).
 		PreConditions(
 			servicemesh.EnsureServiceMeshOperatorInstalled,
@@ -43,7 +37,7 @@ func defineServiceMeshFeatures(f *feature.FeaturesInitializer) error {
 		metricsCollection, errMetrics := feature.CreateFeature("service-mesh-monitoring").
 			For(f.DSCInitializationSpec).
 			Manifests(
-				path.Join(rootDir, feature.MonitoringDir),
+				path.Join(feature.MonitoringDir),
 			).
 			PreConditions(
 				servicemesh.EnsureServiceMeshInstalled,
@@ -59,9 +53,9 @@ func defineServiceMeshFeatures(f *feature.FeaturesInitializer) error {
 	if oauth, err := feature.CreateFeature("service-mesh-control-plane-configure-oauth").
 		For(f.DSCInitializationSpec).
 		Manifests(
-			path.Join(rootDir, feature.ControlPlaneDir, "base"),
-			path.Join(rootDir, feature.ControlPlaneDir, "oauth"),
-			path.Join(rootDir, feature.ControlPlaneDir, "filters"),
+			path.Join(feature.ControlPlaneDir, "base"),
+			path.Join(feature.ControlPlaneDir, "oauth"),
+			path.Join(feature.ControlPlaneDir, "filters"),
 		).
 		WithResources(
 			servicemesh.DefaultValues,
@@ -96,8 +90,8 @@ func defineServiceMeshFeatures(f *feature.FeaturesInitializer) error {
 	if serviceMesh, err := feature.CreateFeature("app-add-namespace-to-service-mesh").
 		For(f.DSCInitializationSpec).
 		Manifests(
-			path.Join(rootDir, feature.ControlPlaneDir, "smm.tmpl"),
-			path.Join(rootDir, feature.ControlPlaneDir, "namespace.patch.tmpl"),
+			path.Join(feature.ControlPlaneDir, "smm.tmpl"),
+			path.Join(feature.ControlPlaneDir, "namespace.patch.tmpl"),
 		).
 		WithData(servicemesh.ClusterDetails).
 		Load(); err != nil {
@@ -109,7 +103,7 @@ func defineServiceMeshFeatures(f *feature.FeaturesInitializer) error {
 	if gatewayRoute, err := feature.CreateFeature("service-mesh-create-gateway-route").
 		For(f.DSCInitializationSpec).
 		Manifests(
-			path.Join(rootDir, feature.ControlPlaneDir, "routing"),
+			path.Join(feature.ControlPlaneDir, "routing"),
 		).
 		WithData(servicemesh.ClusterDetails).
 		PostConditions(
@@ -133,10 +127,10 @@ func defineServiceMeshFeatures(f *feature.FeaturesInitializer) error {
 	if extAuthz, err := feature.CreateFeature("service-mesh-control-plane-setup-external-authorization").
 		For(f.DSCInitializationSpec).
 		Manifests(
-			path.Join(rootDir, feature.AuthDir, "auth-smm.tmpl"),
-			path.Join(rootDir, feature.AuthDir, "base"),
-			path.Join(rootDir, feature.AuthDir, "rbac"),
-			path.Join(rootDir, feature.AuthDir, "mesh-authz-ext-provider.patch.tmpl"),
+			path.Join(feature.AuthDir, "auth-smm.tmpl"),
+			path.Join(feature.AuthDir, "base"),
+			path.Join(feature.AuthDir, "rbac"),
+			path.Join(feature.AuthDir, "mesh-authz-ext-provider.patch.tmpl"),
 		).
 		WithData(servicemesh.ClusterDetails).
 		PreConditions(
@@ -153,7 +147,7 @@ func defineServiceMeshFeatures(f *feature.FeaturesInitializer) error {
 				//
 				// To make it part of Service Mesh we have to patch it with injection
 				// enabled instead, otherwise it will not have proxy pod injected.
-				return f.ApplyManifest(path.Join(rootDir, feature.AuthDir, "deployment.injection.patch.tmpl"))
+				return f.ApplyManifest(path.Join(feature.AuthDir, "deployment.injection.patch.tmpl"))
 			},
 		).
 		OnDelete(servicemesh.RemoveExtensionProvider).
diff --git a/pkg/cluster/cluster_config.go b/pkg/cluster/cluster_config.go
index e6e344931ea..acd56eb15b6 100644
--- a/pkg/cluster/cluster_config.go
+++ b/pkg/cluster/cluster_config.go
@@ -5,11 +5,9 @@ import (
 	"errors"
 	"fmt"
 	"io"
-	"k8s.io/client-go/rest"
 	"net/http"
 	"net/url"
 	"os"
-	"sigs.k8s.io/controller-runtime/pkg/client/config"
 	"strconv"
 	"strings"
 
@@ -17,6 +15,8 @@ import (
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
 	"k8s.io/apimachinery/pkg/apis/meta/v1/unstructured"
 	"k8s.io/client-go/dynamic"
+	"k8s.io/client-go/rest"
+	"sigs.k8s.io/controller-runtime/pkg/client/config"
 
 	"github.com/opendatahub-io/opendatahub-operator/v2/pkg/gvr"
 )
@@ -46,7 +46,6 @@ func GetOAuthServerDetails() (*simplejson.Json, error) {
 }
 
 func request(method string, url string) ([]byte, error) {
-
 	restCfg, err := config.GetConfig()
 	if err != nil {
 		return nil, err
diff --git a/pkg/feature/builder.go b/pkg/feature/builder.go
index a3f8f1c4e0f..017241feb65 100644
--- a/pkg/feature/builder.go
+++ b/pkg/feature/builder.go
@@ -1,6 +1,8 @@
 package feature
 
 import (
+	"io/fs"
+
 	"github.com/pkg/errors"
 	apiextv1 "k8s.io/apiextensions-apiserver/pkg/apis/apiextensions/v1"
 	"k8s.io/client-go/dynamic"
@@ -79,7 +81,7 @@ func (fb *featureBuilder) Manifests(paths ...string) *featureBuilder {
 		var manifests []manifest
 
 		for _, path := range paths {
-			manifests, err = loadManifestsFrom(path)
+			manifests, err = loadManifestsFrom(f.fsys, path)
 			if err != nil {
 				return errors.WithStack(err)
 			}
@@ -156,6 +158,7 @@ func (fb *featureBuilder) Load() (*Feature, error) {
 	feature := &Feature{
 		Name:    fb.name,
 		Enabled: true,
+		fsys:    embeddedFiles,
 	}
 
 	for i := range fb.builders {
@@ -185,3 +188,15 @@ func (fb *featureBuilder) Load() (*Feature, error) {
 
 	return feature, nil
 }
+
+// ManifestSource sets the root file system (fs.FS) from which manifest paths are loaded
+// If ManifestSource is not called in the builder chain, the default source will be the embeddedFiles.
+func (fb *featureBuilder) ManifestSource(fsys fs.FS) *featureBuilder {
+	fb.builders = append(fb.builders, func(f *Feature) error {
+		f.fsys = fsys
+
+		return nil
+	})
+
+	return fb
+}
diff --git a/pkg/feature/feature.go b/pkg/feature/feature.go
index dcd95946116..ec6fd0a2ff9 100644
--- a/pkg/feature/feature.go
+++ b/pkg/feature/feature.go
@@ -2,6 +2,7 @@ package feature
 
 import (
 	"context"
+	"io/fs"
 
 	"github.com/hashicorp/go-multierror"
 	"github.com/pkg/errors"
@@ -31,7 +32,9 @@ type Feature struct {
 	DynamicClient dynamic.Interface
 	Client        client.Client
 
-	manifests      []manifest
+	fsys      fs.FS
+	manifests []manifest
+
 	cleanups       []Action
 	resources      []Action
 	preconditions  []Action
@@ -67,7 +70,7 @@ func (f *Feature) Apply() error {
 		return multiErr.ErrorOrNil()
 	}
 
-	// create or update resources
+	// Create or update resources
 	for _, resource := range f.resources {
 		if err := resource(f); err != nil {
 			return err
@@ -75,27 +78,24 @@ func (f *Feature) Apply() error {
 	}
 
 	// Process and apply manifests
-	for _, m := range f.manifests {
-		if err := m.processTemplate(f.Spec); err != nil {
+	for i, m := range f.manifests {
+		if err := m.processTemplate(f.fsys, f.Spec); err != nil {
 			return errors.WithStack(err)
 		}
 
-		log.Info("converted template to manifest", "feature", f.Name, "path", m.targetPath())
+		f.manifests[i] = m
 	}
 
 	if err := f.applyManifests(); err != nil {
 		return err
 	}
 
+	// Check all postconditions and collect errors
 	for _, postcondition := range f.postconditions {
 		multiErr = multierror.Append(multiErr, postcondition(f))
 	}
 
-	if multiErr.ErrorOrNil() != nil {
-		return multiErr.ErrorOrNil()
-	}
-
-	return nil
+	return multiErr.ErrorOrNil()
 }
 
 func (f *Feature) Cleanup() error {
@@ -159,34 +159,34 @@ func (f *Feature) addCleanup(cleanupFuncs ...Action) {
 
 func (f *Feature) ApplyManifest(filename string) error {
 	m := loadManifestFrom(filename)
-	if err := m.processTemplate(f.Spec); err != nil {
+	if err := m.processTemplate(f.fsys, f.Spec); err != nil {
 		return err
 	}
 
 	return f.apply(m)
 }
 
-type apply func(filename string) error
+type apply func(data string) error
 
 func (f *Feature) apply(m manifest) error {
 	var applier apply
 	targetPath := m.targetPath()
 
 	if m.patch {
-		applier = func(filename string) error {
+		applier = func(data string) error {
 			log.Info("patching using manifest", "feature", f.Name, "name", m.name, "path", targetPath)
 
-			return f.patchResourceFromFile(filename)
+			return f.patchResources(data)
 		}
 	} else {
-		applier = func(filename string) error {
+		applier = func(data string) error {
 			log.Info("applying manifest", "feature", f.Name, "name", m.name, "path", targetPath)
 
-			return f.createResourceFromFile(filename)
+			return f.createResources(data)
 		}
 	}
 
-	if err := applier(targetPath); err != nil {
+	if err := applier(m.processedContent); err != nil {
 		log.Error(err, "failed to create resource", "feature", f.Name, "name", m.name, "path", targetPath)
 
 		return err
diff --git a/pkg/feature/manifest.go b/pkg/feature/manifest.go
index 71159b0684b..195766619d1 100644
--- a/pkg/feature/manifest.go
+++ b/pkg/feature/manifest.go
@@ -1,46 +1,58 @@
 package feature
 
 import (
+	"bytes"
+	"embed"
 	"fmt"
 	"html/template"
-	"os"
+	"io"
+	"io/fs"
 	"path/filepath"
 	"strings"
-
-	"github.com/pkg/errors"
 )
 
+//go:embed templates
+var embeddedFiles embed.FS
+
 const (
 	BaseDir         = "templates/servicemesh/"
 	ControlPlaneDir = BaseDir + "control-plane"
 	AuthDir         = BaseDir + "authorino"
 	MonitoringDir   = BaseDir + "monitoring"
-	BaseOutputDir   = "/tmp/opendatahub-manifests/"
 )
 
 type manifest struct {
 	name,
-	path string
+	path,
+	processedContent string
 	template,
-	patch,
-	processed bool
+	patch bool
 }
 
-func loadManifestsFrom(path string) ([]manifest, error) {
+func loadManifestsFrom(fsys fs.FS, path string) ([]manifest, error) {
 	var manifests []manifest
-	if err := filepath.Walk(path, func(path string, info os.FileInfo, err error) error {
+
+	err := fs.WalkDir(fsys, path, func(path string, dirEntry fs.DirEntry, err error) error {
 		if err != nil {
 			return err
 		}
-		if info.IsDir() {
+
+		if dirEntry.IsDir() {
 			return nil
 		}
+
+		_, err = fs.ReadFile(fsys, path)
+		if err != nil {
+			return err
+		}
 		m := loadManifestFrom(path)
 		manifests = append(manifests, m)
 
 		return nil
-	}); err != nil {
-		return nil, errors.WithStack(err)
+	})
+
+	if err != nil {
+		return nil, err
 	}
 
 	return manifests, nil
@@ -62,28 +74,36 @@ func (m *manifest) targetPath() string {
 	return fmt.Sprintf("%s%s", m.path[:len(m.path)-len(filepath.Ext(m.path))], ".yaml")
 }
 
-func (m *manifest) processTemplate(data interface{}) error {
+func (m *manifest) processTemplate(fsys fs.FS, data interface{}) error {
 	if !m.template {
 		return nil
 	}
-	path := m.targetPath()
 
-	f, err := os.Create(path)
+	templateFile, err := fsys.Open(m.path)
 	if err != nil {
-		log.Error(err, "Failed to create file")
-
+		log.Error(err, "Failed to open template file", "path", m.path)
 		return err
 	}
+	defer templateFile.Close()
 
-	tmpl := template.New(m.name).Funcs(template.FuncMap{"ReplaceChar": ReplaceChar})
+	templateContent, err := io.ReadAll(templateFile)
+	if err != nil {
+		log.Error(err, "Failed to read template file", "path", m.path)
+		return err
+	}
 
-	tmpl, err = tmpl.ParseFiles(m.path)
+	tmpl, err := template.New(m.name).Funcs(template.FuncMap{"ReplaceChar": ReplaceChar}).Parse(string(templateContent))
 	if err != nil {
+		log.Error(err, "Failed to template for file", "path", m.path)
+		return err
+	}
+
+	var buffer bytes.Buffer
+	if err := tmpl.Execute(&buffer, data); err != nil {
 		return err
 	}
 
-	err = tmpl.Execute(f, data)
-	m.processed = err == nil
+	m.processedContent = buffer.String()
 
-	return err
+	return nil
 }
diff --git a/pkg/feature/raw_resources.go b/pkg/feature/raw_resources.go
index bf3abea8e8b..a0844f9d82f 100644
--- a/pkg/feature/raw_resources.go
+++ b/pkg/feature/raw_resources.go
@@ -15,8 +15,6 @@ package feature
 
 import (
 	"context"
-	"fmt"
-	"os"
 	"regexp"
 	"strings"
 
@@ -33,13 +31,9 @@ const (
 	YamlSeparator = "(?m)^---[ \t]*$"
 )
 
-func (f *Feature) createResourceFromFile(filename string) error {
-	data, err := os.ReadFile(filename)
-	if err != nil {
-		return errors.WithStack(err)
-	}
+func (f *Feature) createResources(resources string) error {
 	splitter := regexp.MustCompile(YamlSeparator)
-	objectStrings := splitter.Split(string(data), -1)
+	objectStrings := splitter.Split(resources, -1)
 	for _, str := range objectStrings {
 		if strings.TrimSpace(str) == "" {
 			continue
@@ -79,13 +73,9 @@ func (f *Feature) createResourceFromFile(filename string) error {
 	return nil
 }
 
-func (f *Feature) patchResourceFromFile(filename string) error {
-	data, err := os.ReadFile(filename)
-	if err != nil {
-		return errors.WithStack(err)
-	}
+func (f *Feature) patchResources(resources string) error {
 	splitter := regexp.MustCompile(YamlSeparator)
-	objectStrings := splitter.Split(string(data), -1)
+	objectStrings := splitter.Split(resources, -1)
 	for _, str := range objectStrings {
 		if strings.TrimSpace(str) == "" {
 			continue
@@ -93,7 +83,6 @@ func (f *Feature) patchResourceFromFile(filename string) error {
 		u := &unstructured.Unstructured{}
 		if err := yaml.Unmarshal([]byte(str), u); err != nil {
 			log.Error(err, "error unmarshalling yaml")
-
 			return errors.WithStack(err)
 		}
 
@@ -105,25 +94,16 @@ func (f *Feature) patchResourceFromFile(filename string) error {
 			Resource: strings.ToLower(u.GroupVersionKind().Kind) + "s",
 		}
 
-		// Convert the patch from YAML to JSON
-		patchAsJSON, err := yaml.YAMLToJSON(data)
+		// Convert the individual resource patch from YAML to JSON
+		patchAsJSON, err := yaml.YAMLToJSON([]byte(str))
 		if err != nil {
 			log.Error(err, "error converting yaml to json")
-
 			return errors.WithStack(err)
 		}
 
 		_, err = f.DynamicClient.Resource(gvr).
 			Namespace(u.GetNamespace()).
 			Patch(context.TODO(), u.GetName(), k8stypes.MergePatchType, patchAsJSON, metav1.PatchOptions{})
-		if err != nil {
-			log.Error(err, "error patching resource",
-				"gvr", fmt.Sprintf("%+v\n", gvr),
-				"patch", fmt.Sprintf("%+v\n", u),
-				"json", fmt.Sprintf("%+v\n", patchAsJSON))
-
-			return errors.WithStack(err)
-		}
 
 		if err != nil {
 			return errors.WithStack(err)
diff --git a/pkg/feature/servicemesh/loaders.go b/pkg/feature/servicemesh/loaders.go
index 02f3b650b37..148da8d669d 100644
--- a/pkg/feature/servicemesh/loaders.go
+++ b/pkg/feature/servicemesh/loaders.go
@@ -1,9 +1,10 @@
 package servicemesh
 
 import (
-	"github.com/pkg/errors"
 	"strings"
 
+	"github.com/pkg/errors"
+
 	"github.com/opendatahub-io/opendatahub-operator/v2/controllers/secretgenerator"
 	"github.com/opendatahub-io/opendatahub-operator/v2/pkg/cluster"
 	"github.com/opendatahub-io/opendatahub-operator/v2/pkg/feature"
diff --git a/pkg/feature/template_loader.go b/pkg/feature/template_loader.go
deleted file mode 100644
index 9d2fd53cf1e..00000000000
--- a/pkg/feature/template_loader.go
+++ /dev/null
@@ -1,39 +0,0 @@
-package feature
-
-import (
-	"embed"
-	"io/fs"
-	"os"
-	"path/filepath"
-)
-
-//go:embed templates
-var embeddedFiles embed.FS
-
-// CopyEmbeddedFiles ensures that files embedded using go:embed are populated
-// to dest directory. In order to process the templates, we need to create a tmp directory
-// to store the files. This is because embedded files are read only.
-func CopyEmbeddedFiles(src, dest string) error {
-	return fs.WalkDir(embeddedFiles, src, func(path string, dir fs.DirEntry, err error) error {
-		if err != nil {
-			return err
-		}
-
-		destPath := filepath.Join(dest, path)
-		if dir.IsDir() {
-			if err := os.MkdirAll(destPath, 0755); err != nil {
-				return err
-			}
-		} else {
-			data, err := fs.ReadFile(embeddedFiles, path)
-			if err != nil {
-				return err
-			}
-			if err := os.WriteFile(destPath, data, 0644); err != nil {
-				return err
-			}
-		}
-
-		return nil
-	})
-}
diff --git a/tests/integration/servicemesh/service_mesh_setup_features_int_test.go b/tests/integration/servicemesh/service_mesh_setup_features_int_test.go
index 88d6deb72e5..40c23507cab 100644
--- a/tests/integration/servicemesh/service_mesh_setup_features_int_test.go
+++ b/tests/integration/servicemesh/service_mesh_setup_features_int_test.go
@@ -2,6 +2,7 @@ package servicemesh_test
 
 import (
 	"context"
+	"embed"
 	"io"
 	"os"
 	"path"
@@ -27,9 +28,14 @@ import (
 	. "github.com/onsi/gomega"
 )
 
+//go:embed test-templates
+var testEmbeddedFiles embed.FS
+
 const (
-	timeout  = 5 * time.Second
-	interval = 250 * time.Millisecond
+	timeout            = 5 * time.Second
+	interval           = 250 * time.Millisecond
+	authorinoName      = "authorino"
+	authorinoNamespace = "test-provider"
 )
 
 var _ = Describe("preconditions", func() {
@@ -301,7 +307,7 @@ var _ = Describe("Cleanup operations", func() {
 
 			controlPlaneWithSecretVolumes, err := feature.CreateFeature("control-plane-with-secret-volumes").
 				For(dsciSpec).
-				Manifests(fromTestTmpDir(path.Join(feature.ControlPlaneDir, "base/control-plane-ingress.patch.tmpl"))).
+				Manifests(path.Join(feature.ControlPlaneDir, "base/control-plane-ingress.patch.tmpl")).
 				UsingConfig(envTest.Config).
 				Load()
 
@@ -328,14 +334,14 @@ var _ = Describe("Cleanup operations", func() {
 			Expect(envTestClient.Create(context.Background(), ns)).To(Succeed())
 			defer objectCleaner.DeleteAll(ns)
 
-			serviceMeshSpec.Auth.Namespace = "test-provider"
-			serviceMeshSpec.Auth.Authorino.Name = "authorino"
+			serviceMeshSpec.Auth.Namespace = authorinoNamespace
+			serviceMeshSpec.Auth.Authorino.Name = authorinoName
 
 			createServiceMeshControlPlane(name, namespace)
 
 			controlPlaneWithExtAuthzProvider, err := feature.CreateFeature("control-plane-with-external-authz-provider").
 				For(dsciSpec).
-				Manifests(fromTestTmpDir(path.Join(feature.AuthDir, "mesh-authz-ext-provider.patch.tmpl"))).
+				Manifests(path.Join(feature.AuthDir, "mesh-authz-ext-provider.patch.tmpl")).
 				UsingConfig(envTest.Config).
 				Load()
 
@@ -374,6 +380,110 @@ var _ = Describe("Cleanup operations", func() {
 
 })
 
+var _ = Describe("Alternate Manifest source", func() {
+
+	Context("using a non-default manifest source", func() {
+
+		var (
+			objectCleaner   *envtestutil.Cleaner
+			dsciSpec        *dscv1.DSCInitializationSpec
+			serviceMeshSpec *infrav1.ServiceMeshSpec
+			namespace       = "test"
+			name            = "minimal"
+		)
+
+		BeforeEach(func() {
+			objectCleaner = envtestutil.CreateCleaner(envTestClient, envTest.Config, timeout, interval)
+
+			dsciSpec = newDSCInitializationSpec(namespace)
+
+			serviceMeshSpec = &dsciSpec.ServiceMesh
+
+			serviceMeshSpec.ControlPlane.Name = name
+			serviceMeshSpec.ControlPlane.Namespace = namespace
+		})
+
+		It("should be able to use manifests embedded from different location", func() {
+			// given
+			ns := createNamespace(namespace)
+			Expect(envTestClient.Create(context.Background(), ns)).To(Succeed())
+			defer objectCleaner.DeleteAll(ns)
+
+			serviceMeshSpec.Auth.Namespace = authorinoNamespace
+			serviceMeshSpec.Auth.Authorino.Name = authorinoName
+
+			createServiceMeshControlPlane(name, namespace)
+
+			controlPlaneWithExtAuthzProvider, err := feature.CreateFeature("external-manifests-control-plane-with-external-authz-provider").
+				For(dsciSpec).
+				ManifestSource(testEmbeddedFiles).
+				Manifests(path.Join("test-templates", "authorino", "mesh-authz-ext-provider.patch.tmpl")).
+				UsingConfig(envTest.Config).
+				Load()
+
+			Expect(err).ToNot(HaveOccurred())
+
+			// when
+			By("verifying extension provider has been added after applying feature", func() {
+				Expect(controlPlaneWithExtAuthzProvider.Apply()).To(Succeed())
+				serviceMeshControlPlane, err := getServiceMeshControlPlane(envTest.Config, namespace, name)
+				Expect(err).ToNot(HaveOccurred())
+
+				extensionProviders, found, err := unstructured.NestedSlice(serviceMeshControlPlane.Object, "spec", "techPreview", "meshConfig", "extensionProviders")
+				Expect(err).ToNot(HaveOccurred())
+				Expect(found).To(BeTrue())
+
+				extensionProvider := extensionProviders[0].(map[string]interface{})
+				Expect(extensionProvider["name"]).To(Equal("test-odh-different-auth-provider"))
+				Expect(extensionProvider["envoyExtAuthzGrpc"].(map[string]interface{})["service"]).To(Equal("authorino-authorino-authorization.test-provider.svc.cluster.local"))
+			})
+
+		})
+
+		It("should be able to use an actual file system", func() {
+			// given
+			tempDir := GinkgoT().TempDir()
+
+			ns := createNamespace(namespace)
+			Expect(envTestClient.Create(context.Background(), ns)).To(Succeed())
+			defer objectCleaner.DeleteAll(ns)
+
+			serviceMeshSpec.Auth.Namespace = authorinoNamespace
+			serviceMeshSpec.Auth.Authorino.Name = authorinoName
+
+			patchTemplate := path.Join(feature.AuthDir, "mesh-authz-ext-provider.patch.tmpl")
+			copyEmbeddedTemplatesTo(tempDir, patchTemplate)
+
+			createServiceMeshControlPlane(name, namespace)
+
+			controlPlaneWithExtAuthzProvider, err := feature.CreateFeature("external-manifests-control-plane-with-external-authz-provider").
+				For(dsciSpec).
+				ManifestSource(os.DirFS(tempDir)).
+				Manifests(patchTemplate). // must be relative to root DirFS defined above
+				UsingConfig(envTest.Config).
+				Load()
+
+			Expect(err).ToNot(HaveOccurred())
+
+			// when
+			By("verifying extension provider has been added after applying feature", func() {
+				Expect(controlPlaneWithExtAuthzProvider.Apply()).To(Succeed())
+				serviceMeshControlPlane, err := getServiceMeshControlPlane(envTest.Config, namespace, name)
+				Expect(err).ToNot(HaveOccurred())
+
+				extensionProviders, found, err := unstructured.NestedSlice(serviceMeshControlPlane.Object, "spec", "techPreview", "meshConfig", "extensionProviders")
+				Expect(err).ToNot(HaveOccurred())
+				Expect(found).To(BeTrue())
+
+				extensionProvider := extensionProviders[0].(map[string]interface{})
+				Expect(extensionProvider["name"]).To(Equal("test-odh-auth-provider"))
+				Expect(extensionProvider["envoyExtAuthzGrpc"].(map[string]interface{})["service"]).To(Equal("authorino-authorino-authorization.test-provider.svc.cluster.local"))
+			})
+
+		})
+	})
+})
+
 func createServiceMeshControlPlane(name, namespace string) {
 	serviceMeshControlPlane := &unstructured.Unstructured{
 		Object: map[string]interface{}{
@@ -492,22 +602,17 @@ func getNamespace(namespace string) (*v1.Namespace, error) {
 	return ns, err
 }
 
-func fromTestTmpDir(fileName string) string {
+func copyEmbeddedTemplatesTo(tmpDir string, templatePaths ...string) {
 	root, err := envtestutil.FindProjectRoot()
 	Expect(err).ToNot(HaveOccurred())
 
-	tmpDir := filepath.Join(os.TempDir(), envtestutil.RandomUUIDName(16))
-	if err := os.Mkdir(tmpDir, os.ModePerm); err != nil {
-		Fail(err.Error())
-	}
-
-	src := path.Join(root, "pkg", "feature", fileName)
-	dest := path.Join(tmpDir, fileName)
-	if err := copyFile(src, dest); err != nil {
-		Fail(err.Error())
+	for _, templatePath := range templatePaths {
+		src := path.Join(root, "pkg", "feature", templatePath)
+		dest := path.Join(tmpDir, templatePath)
+		if err := copyFile(src, dest); err != nil {
+			Fail(err.Error())
+		}
 	}
-
-	return dest
 }
 
 func copyFile(src, dst string) error {
diff --git a/tests/integration/servicemesh/test-templates/authorino/mesh-authz-ext-provider.patch.tmpl b/tests/integration/servicemesh/test-templates/authorino/mesh-authz-ext-provider.patch.tmpl
new file mode 100644
index 00000000000..263676cb6a0
--- /dev/null
+++ b/tests/integration/servicemesh/test-templates/authorino/mesh-authz-ext-provider.patch.tmpl
@@ -0,0 +1,13 @@
+apiVersion: maistra.io/v2
+kind: ServiceMeshControlPlane
+metadata:
+  name: {{ .ControlPlane.Name }}
+  namespace: {{ .ControlPlane.Namespace }}
+spec:
+  techPreview:
+    meshConfig:
+      extensionProviders:
+      - name: {{ .AppNamespace }}-odh-different-auth-provider
+        envoyExtAuthzGrpc:
+          service: {{ .Auth.Authorino.Name }}-authorino-authorization.{{ .Auth.Namespace }}.svc.cluster.local
+          port: 50051