diff --git a/acceptance/acceptance_test.go b/acceptance/acceptance_test.go
index 529077b05..c7f40d11e 100644
--- a/acceptance/acceptance_test.go
+++ b/acceptance/acceptance_test.go
@@ -59,6 +59,13 @@ func TestAccept(t *testing.T) {
 	repls := testdiff.ReplacementsContext{}
 	repls.Set(execPath, "$CLI")
 
+	tempHomeDir := t.TempDir()
+	repls.Set(tempHomeDir, "$TMPHOME")
+	t.Logf("$TMPHOME=%v", tempHomeDir)
+
+	// Prevent CLI from downloading terraform in each test:
+	t.Setenv("DATABRICKS_TF_EXEC_PATH", tempHomeDir)
+
 	ctx := context.Background()
 	cloudEnv := os.Getenv("CLOUD_ENV")
 
diff --git a/acceptance/bundle/variables/git-branch/databricks.yml b/acceptance/bundle/variables/git-branch/databricks.yml
new file mode 100644
index 000000000..7cf210722
--- /dev/null
+++ b/acceptance/bundle/variables/git-branch/databricks.yml
@@ -0,0 +1,19 @@
+bundle:
+  name: git
+  git:
+    # This is currently not supported
+    branch: ${var.deployment_branch}
+
+variables:
+  deployment_branch:
+    # By setting deployment_branch to "" we set bundle.git.branch to "" which is the same unsetting it.
+    # This this should make CLI read branch from git and update bundle.git.branch accordingly. It should
+    # Also set bundle.git.inferred to true.
+    default: ""
+
+targets:
+  prod:
+    default: true
+  dev:
+    variables:
+      deployment_branch: dev-branch
diff --git a/acceptance/bundle/variables/git-branch/output.txt b/acceptance/bundle/variables/git-branch/output.txt
new file mode 100644
index 000000000..d6d824394
--- /dev/null
+++ b/acceptance/bundle/variables/git-branch/output.txt
@@ -0,0 +1,98 @@
+
+>>> $CLI bundle validate -o json
+{
+  "bundle": {
+    "environment": "prod",
+    "git": {
+      "actual_branch": "main",
+      "branch": "",
+      "bundle_root_path": ".",
+    },
+    "name": "git",
+    "target": "prod",
+    "terraform": {
+      "exec_path": "$TMPHOME"
+    }
+  },
+  "sync": {
+    "paths": [
+      "."
+    ]
+  },
+  "targets": null,
+  "variables": {
+    "deployment_branch": {
+      "default": "",
+      "value": ""
+    }
+  },
+  "workspace": {
+    "artifact_path": "/Workspace/Users/$USERNAME/.bundle/git/prod/artifacts",
+    "current_user": {
+      "short_name": "$USERNAME",
+      "userName": "$USERNAME"
+    },
+    "file_path": "/Workspace/Users/$USERNAME/.bundle/git/prod/files",
+    "resource_path": "/Workspace/Users/$USERNAME/.bundle/git/prod/resources",
+    "root_path": "/Workspace/Users/$USERNAME/.bundle/git/prod",
+    "state_path": "/Workspace/Users/$USERNAME/.bundle/git/prod/state"
+  }
+}
+
+>>> $CLI bundle validate
+Name: git
+Target: prod
+Workspace:
+  User: $USERNAME
+  Path: /Workspace/Users/$USERNAME/.bundle/git/prod
+
+Validation OK!
+
+>>> $CLI bundle validate -o json -t dev
+{
+  "bundle": {
+    "environment": "dev",
+    "git": {
+      "actual_branch": "main",
+      "branch": "dev-branch",
+      "bundle_root_path": ".",
+    },
+    "name": "git",
+    "target": "dev",
+    "terraform": {
+      "exec_path": "$TMPHOME"
+    }
+  },
+  "sync": {
+    "paths": [
+      "."
+    ]
+  },
+  "targets": null,
+  "variables": {
+    "deployment_branch": {
+      "default": "dev-branch",
+      "value": "dev-branch"
+    }
+  },
+  "workspace": {
+    "artifact_path": "/Workspace/Users/$USERNAME/.bundle/git/dev/artifacts",
+    "current_user": {
+      "short_name": "$USERNAME",
+      "userName": "$USERNAME"
+    },
+    "file_path": "/Workspace/Users/$USERNAME/.bundle/git/dev/files",
+    "resource_path": "/Workspace/Users/$USERNAME/.bundle/git/dev/resources",
+    "root_path": "/Workspace/Users/$USERNAME/.bundle/git/dev",
+    "state_path": "/Workspace/Users/$USERNAME/.bundle/git/dev/state"
+  }
+}
+
+>>> $CLI bundle validate -t dev
+Name: git
+Target: dev
+Workspace:
+  User: $USERNAME
+  Path: /Workspace/Users/$USERNAME/.bundle/git/dev
+
+Validation OK!
diff --git a/acceptance/bundle/variables/git-branch/script b/acceptance/bundle/variables/git-branch/script
new file mode 100644
index 000000000..aed881f1f
--- /dev/null
+++ b/acceptance/bundle/variables/git-branch/script
@@ -0,0 +1,6 @@
+git-repo-init
+trace $CLI bundle validate -o json | grep -v '"commit"'
+trace $CLI bundle validate
+trace $CLI bundle validate -o json -t dev | grep -v '"commit"'
+trace $CLI bundle validate -t dev | grep -v '"commit"'
+rm -fr .git
diff --git a/acceptance/script.prepare b/acceptance/script.prepare
index 3f1bb2acc..61061b59e 100644
--- a/acceptance/script.prepare
+++ b/acceptance/script.prepare
@@ -1,6 +1,3 @@
-# Prevent CLI from downloading terraform in each test:
-export DATABRICKS_TF_EXEC_PATH=/tmp/
-
 errcode() {
     # Temporarily disable 'set -e' to prevent the script from exiting on error
     set +e
@@ -34,3 +31,12 @@ trace() {
 
     return $?
 }
+
+git-repo-init() {
+    git init -qb main
+    git config --global core.autocrlf false
+    git config user.name "Tester"
+    git config user.email "tester@databricks.com"
+    git add databricks.yml
+    git commit -qm 'Add databricks.yml'
+}