diff --git a/CHANGELOG.md b/CHANGELOG.md
index 47d5fa170..181a558a7 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -2,6 +2,14 @@
 
 # Change Log
 
+## 2025-04-01 - Runtime 0.17.8
+
+- fix: Update Hypermode api key reading for modus local dev [#805](https://github.com/hypermodeinc/modus/pull/805)
+
+## 2025-04-01 - CLI 0.17.2
+
+- fix: Update Hypermode api key reading for modus local dev [#805](https://github.com/hypermodeinc/modus/pull/805)
+
 ## 2025-03-28 - Runtime 0.17.7
 
 - feat: support new Dgraph connection string format [#803](https://github.com/hypermodeinc/modus/pull/803)
diff --git a/cli/src/commands/dev/index.ts b/cli/src/commands/dev/index.ts
index 558264130..55dd56110 100644
--- a/cli/src/commands/dev/index.ts
+++ b/cli/src/commands/dev/index.ts
@@ -164,8 +164,8 @@ export default class DevCommand extends BaseCommand {
       ...process.env,
       MODUS_ENV: "dev",
       HYP_EMAIL: hypSettings.email,
-      HYP_JWT: hypSettings.jwt,
-      HYP_ORG_ID: hypSettings.orgId,
+      HYP_API_KEY: hypSettings.apiKey,
+      HYP_WORKSPACE_ID: hypSettings.workspaceId,
     };
 
     // Spawn the runtime child process
diff --git a/cli/src/util/hypermode.ts b/cli/src/util/hypermode.ts
index 742237fac..1fbf6bfff 100644
--- a/cli/src/util/hypermode.ts
+++ b/cli/src/util/hypermode.ts
@@ -14,8 +14,8 @@ import chalk from "chalk";
 
 type HypSettings = {
   email?: string;
-  jwt?: string;
-  orgId?: string;
+  apiKey?: string;
+  workspaceId?: string;
 };
 
 export async function readHypermodeSettings(): Promise<HypSettings> {
@@ -28,8 +28,8 @@ export async function readHypermodeSettings(): Promise<HypSettings> {
     const settings = JSON.parse(await fs.readFile(path, "utf-8"));
     return {
       email: settings.HYP_EMAIL,
-      jwt: settings.HYP_JWT,
-      orgId: settings.HYP_ORG_ID,
+      apiKey: settings.HYP_API_KEY,
+      workspaceId: settings.HYP_WORKSPACE_ID,
     };
   } catch (e) {
     console.warn(chalk.yellow("Error reading " + path), e);
diff --git a/runtime/models/models.go b/runtime/models/models.go
index a28bb7985..c7825ec1e 100644
--- a/runtime/models/models.go
+++ b/runtime/models/models.go
@@ -93,8 +93,17 @@ func PostToModelEndpoint[TResult any](ctx context.Context, model *manifest.Model
 		var empty TResult
 		var httpe *utils.HttpError
 		if errors.As(err, &httpe) {
-			if app.IsDevEnvironment() && httpe.StatusCode == http.StatusNotFound {
-				return empty, fmt.Errorf("model %s is not available in the local dev environment", model.SourceModel)
+			switch httpe.StatusCode {
+			case http.StatusNotFound:
+				if app.IsDevEnvironment() {
+					return empty, fmt.Errorf("model %s is not available in the local dev environment", model.SourceModel)
+				}
+			case http.StatusUnauthorized:
+				return empty, fmt.Errorf("invalid or expired API key. Please use `hyp login` to create a new API key")
+			case http.StatusForbidden:
+				return empty, fmt.Errorf("API key is disabled or usage limit exceeded")
+			case http.StatusTooManyRequests:
+				return empty, fmt.Errorf("rate limit exceeded")
 			}
 		}
 
diff --git a/runtime/secrets/secrets.go b/runtime/secrets/secrets.go
index 3e06b926e..672b80f32 100644
--- a/runtime/secrets/secrets.go
+++ b/runtime/secrets/secrets.go
@@ -16,10 +16,8 @@ import (
 	"net/http"
 	"os"
 	"regexp"
-	"time"
 
 	"github.com/fatih/color"
-	"github.com/golang-jwt/jwt/v5"
 	"github.com/hypermodeinc/modus/lib/manifest"
 	"github.com/hypermodeinc/modus/runtime/logger"
 	"github.com/hypermodeinc/modus/runtime/utils"
@@ -94,57 +92,24 @@ func ApplySecretsToHttpRequest(ctx context.Context, connection *manifest.HTTPCon
 
 func ApplyAuthToLocalHypermodeModelRequest(ctx context.Context, connection manifest.ConnectionInfo, req *http.Request) error {
 
-	jwt := os.Getenv("HYP_JWT")
-	orgId := os.Getenv("HYP_ORG_ID")
+	apiKey := os.Getenv("HYP_API_KEY")
+	workspaceId := os.Getenv("HYP_WORKSPACE_ID")
 
 	warningColor := color.New(color.FgHiYellow, color.Bold)
 
-	if jwt == "" || orgId == "" {
+	if apiKey == "" || workspaceId == "" {
 		fmt.Fprintln(os.Stderr)
 		warningColor.Fprintln(os.Stderr, "Warning: Local authentication not found. Please login using `hyp login`")
 		fmt.Fprintln(os.Stderr)
 		return errLocalAuthFailed
 	}
 
-	isExpired, err := checkJWTExpiration(jwt)
-	if err != nil {
-		return err
-	}
-	if isExpired {
-		fmt.Fprintln(os.Stderr)
-		warningColor.Fprintln(os.Stderr, "Warning: Local authentication expired. Please login using `hyp login`")
-		fmt.Fprintln(os.Stderr)
-		return errLocalAuthFailed
-	}
-
-	req.Header.Set("Authorization", "Bearer "+jwt)
-	req.Header.Set("HYP-ORG-ID", orgId)
+	req.Header.Set("Authorization", "Bearer "+apiKey)
+	req.Header.Set("HYP-WORKSPACE-ID", workspaceId)
 
 	return nil
 }
 
-// checkJWTExpiration checks if the JWT has expired based on the 'exp' claim.
-func checkJWTExpiration(tokenString string) (bool, error) {
-	p := jwt.Parser{}
-	token, _, err := p.ParseUnverified(tokenString, jwt.MapClaims{})
-	if err != nil {
-		return false, fmt.Errorf("failed to parse: %w", err)
-	}
-
-	claims, ok := token.Claims.(jwt.MapClaims)
-	if !ok {
-		return false, fmt.Errorf("failed to extract claims from JWT")
-	}
-
-	exp, ok := claims["exp"].(float64)
-	if !ok {
-		return false, fmt.Errorf("exp claim is missing or not a number")
-	}
-
-	expirationTime := time.Unix(int64(exp), 0)
-	return time.Now().After(expirationTime), nil
-}
-
 // ApplySecretsToString evaluates the given string and replaces any placeholders
 // present in the string with their secret values for the given connection.
 func ApplySecretsToString(ctx context.Context, connection manifest.ConnectionInfo, str string) (string, error) {