diff --git a/sql/core/src/main/scala/org/apache/spark/sql/execution/SparkSqlParser.scala b/sql/core/src/main/scala/org/apache/spark/sql/execution/SparkSqlParser.scala
index aa139cb6b0c3b..078813b7d631d 100644
--- a/sql/core/src/main/scala/org/apache/spark/sql/execution/SparkSqlParser.scala
+++ b/sql/core/src/main/scala/org/apache/spark/sql/execution/SparkSqlParser.scala
@@ -18,6 +18,7 @@
 package org.apache.spark.sql.execution
 
 import java.util.Locale
+import javax.ws.rs.core.UriBuilder
 
 import scala.collection.JavaConverters._
 
@@ -753,7 +754,7 @@ class SparkSqlAstBuilder(conf: SQLConf) extends AstBuilder(conf) {
    *
    * Expected format:
    * {{{
-   *   INSERT OVERWRITE DIRECTORY
+   *   INSERT OVERWRITE [LOCAL] DIRECTORY
    *   [path]
    *   [OPTIONS table_property_list]
    *   select_statement;
@@ -761,11 +762,6 @@ class SparkSqlAstBuilder(conf: SQLConf) extends AstBuilder(conf) {
    */
   override def visitInsertOverwriteDir(
       ctx: InsertOverwriteDirContext): InsertDirParams = withOrigin(ctx) {
-    if (ctx.LOCAL != null) {
-      throw new ParseException(
-        "LOCAL is not supported in INSERT OVERWRITE DIRECTORY to data source", ctx)
-    }
-
     val options = Option(ctx.options).map(visitPropertyKeyValues).getOrElse(Map.empty)
     var storage = DataSource.buildStorageFormatFromOptions(options)
 
@@ -781,6 +777,19 @@ class SparkSqlAstBuilder(conf: SQLConf) extends AstBuilder(conf) {
       storage = storage.copy(locationUri = customLocation)
     }
 
+    if (ctx.LOCAL() != null) {
+      // assert if directory is local when LOCAL keyword is mentioned
+      val scheme = Option(storage.locationUri.get.getScheme)
+      scheme match {
+        case None =>
+          // force scheme to be file rather than fs.default.name
+          val loc = Some(UriBuilder.fromUri(CatalogUtils.stringToURI(path)).scheme("file").build())
+          storage = storage.copy(locationUri = loc)
+        case Some(pathScheme) if (!pathScheme.equals("file")) =>
+          throw new ParseException("LOCAL is supported only with file: scheme", ctx)
+      }
+    }
+
     val provider = ctx.tableProvider.multipartIdentifier.getText
 
     (false, storage, Some(provider))
diff --git a/sql/core/src/test/scala/org/apache/spark/sql/sources/InsertSuite.scala b/sql/core/src/test/scala/org/apache/spark/sql/sources/InsertSuite.scala
index bcff30a51c3f5..0101803561c90 100644
--- a/sql/core/src/test/scala/org/apache/spark/sql/sources/InsertSuite.scala
+++ b/sql/core/src/test/scala/org/apache/spark/sql/sources/InsertSuite.scala
@@ -26,6 +26,7 @@ import org.apache.spark.SparkException
 import org.apache.spark.sql._
 import org.apache.spark.sql.catalyst.TableIdentifier
 import org.apache.spark.sql.catalyst.catalog.{CatalogStorageFormat, CatalogTable, CatalogTableType}
+import org.apache.spark.sql.catalyst.parser.ParseException
 import org.apache.spark.sql.internal.SQLConf
 import org.apache.spark.sql.internal.SQLConf.PartitionOverwriteMode
 import org.apache.spark.sql.test.SharedSparkSession
@@ -820,6 +821,28 @@ class InsertSuite extends DataSourceTest with SharedSparkSession {
       }
     }
   }
+
+  test("SPARK-29174 Support LOCAL in INSERT OVERWRITE DIRECTORY to data source") {
+    withTempPath { dir =>
+      val path = dir.toURI.getPath
+      sql(s"""create table tab1 ( a int) location '$path'""")
+      sql("insert into tab1 values(1)")
+      checkAnswer(sql("select * from tab1"), Seq(1).map(i => Row(i)))
+      sql("create table tab2 ( a int)")
+      sql("insert into tab2 values(2)")
+      checkAnswer(sql("select * from tab2"), Seq(2).map(i => Row(i)))
+      sql(s"""insert overwrite local directory '$path' using parquet select * from tab2""")
+      sql("refresh table tab1")
+      checkAnswer(sql("select * from tab1"), Seq(2).map(i => Row(i)))
+      }
+  }
+
+  test("SPARK-29174 fail LOCAL in INSERT OVERWRITE DIRECT remote path") {
+    val message = intercept[ParseException] {
+      sql("insert overwrite local directory 'hdfs:/abcd' using parquet select 1")
+    }.getMessage
+    assert(message.contains("LOCAL is supported only with file: scheme"))
+  }
 }
 
 class FileExistingTestFileSystem extends RawLocalFileSystem {