diff --git a/cmd/cli/commands/package.go b/cmd/cli/commands/package.go
index e793150b0..f7f0b4b03 100644
--- a/cmd/cli/commands/package.go
+++ b/cmd/cli/commands/package.go
@@ -15,6 +15,7 @@ import (
 	"github.com/docker/model-runner/pkg/distribution/registry"
 	"github.com/docker/model-runner/pkg/distribution/tarball"
 	"github.com/docker/model-runner/pkg/distribution/types"
+	"github.com/docker/model-runner/pkg/inference/models"
 	"github.com/google/go-containerregistry/pkg/name"
 	"github.com/spf13/cobra"
 
@@ -313,7 +314,9 @@ func newModelRunnerTarget(client *desktop.Client, tag string) (*modelRunnerTarge
 	}
 	if tag != "" {
 		var err error
-		target.tag, err = name.NewTag(tag)
+		// Normalize the tag to add default namespace (ai/) and tag (:latest) if missing
+		normalizedTag := models.NormalizeModelName(tag)
+		target.tag, err = name.NewTag(normalizedTag)
 		if err != nil {
 			return nil, fmt.Errorf("invalid tag: %w", err)
 		}
diff --git a/cmd/cli/commands/tag.go b/cmd/cli/commands/tag.go
index f7197b363..265c51ad8 100644
--- a/cmd/cli/commands/tag.go
+++ b/cmd/cli/commands/tag.go
@@ -39,6 +39,8 @@ func newTagCmd() *cobra.Command {
 func tagModel(cmd *cobra.Command, desktopClient *desktop.Client, source, target string) error {
 	// Normalize source model name to add default org and tag if missing
 	source = models.NormalizeModelName(source)
+	// Normalize target model name to add default org and tag if missing
+	target = models.NormalizeModelName(target)
 	// Ensure tag is valid
 	tag, err := name.NewTag(target)
 	if err != nil {
diff --git a/cmd/cli/commands/utils_test.go b/cmd/cli/commands/utils_test.go
index ad4a8e3c3..2f64232ac 100644
--- a/cmd/cli/commands/utils_test.go
+++ b/cmd/cli/commands/utils_test.go
@@ -146,3 +146,51 @@ func TestStripDefaultsFromModelName(t *testing.T) {
 		})
 	}
 }
+
+// TestNormalizeModelNameConsistency verifies that locally packaged models
+// (without namespace) get normalized the same way as other operations.
+// This test documents the fix for the bug where `docker model package my-model`
+// would create a model that couldn't be run with `docker model run my-model`.
+func TestNormalizeModelNameConsistency(t *testing.T) {
+	tests := []struct {
+		name                    string
+		userProvidedName        string
+		expectedNormalizedName  string
+		description             string
+	}{
+		{
+			name:                   "locally packaged model without namespace",
+			userProvidedName:       "my-model",
+			expectedNormalizedName: "ai/my-model:latest",
+			description:            "When a user packages a local model as 'my-model', it should be normalized to 'ai/my-model:latest'",
+		},
+		{
+			name:                   "locally packaged model without namespace but with tag",
+			userProvidedName:       "my-model:v1.0",
+			expectedNormalizedName: "ai/my-model:v1.0",
+			description:            "When a user packages a local model as 'my-model:v1.0', it should be normalized to 'ai/my-model:v1.0'",
+		},
+		{
+			name:                   "model with explicit namespace",
+			userProvidedName:       "myorg/my-model",
+			expectedNormalizedName: "myorg/my-model:latest",
+			description:            "When a user packages a model with explicit org 'myorg/my-model', it should keep the org",
+		},
+		{
+			name:                   "model with ai namespace explicitly set",
+			userProvidedName:       "ai/my-model",
+			expectedNormalizedName: "ai/my-model:latest",
+			description:            "When a user explicitly sets 'ai/' namespace, it should remain the same",
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			result := models.NormalizeModelName(tt.userProvidedName)
+			if result != tt.expectedNormalizedName {
+				t.Errorf("%s: NormalizeModelName(%q) = %q, want %q", 
+					tt.description, tt.userProvidedName, result, tt.expectedNormalizedName)
+			}
+		})
+	}
+}
diff --git a/cmd/cli/desktop/desktop.go b/cmd/cli/desktop/desktop.go
index 01b7b080f..b3f41af27 100644
--- a/cmd/cli/desktop/desktop.go
+++ b/cmd/cli/desktop/desktop.go
@@ -799,8 +799,17 @@ func (c *Client) handleQueryError(err error, path string) error {
 	return fmt.Errorf("error querying %s: %w", path, err)
 }
 
+// normalizeHuggingFaceModelName converts Hugging Face model names to lowercase
+func normalizeHuggingFaceModelName(model string) string {
+	if strings.HasPrefix(model, "hf.co/") {
+		return strings.ToLower(model)
+	}
+
+	return model
+}
+
 func (c *Client) Tag(source, targetRepo, targetTag string) error {
-	source = dmrm.NormalizeModelName(source)
+	source = normalizeHuggingFaceModelName(source)
 	// Check if the source is a model ID, and expand it if necessary
 	if !strings.Contains(strings.Trim(source, "/"), "/") {
 		// Do an extra API call to check if the model parameter might be a model ID
diff --git a/cmd/cli/desktop/desktop_test.go b/cmd/cli/desktop/desktop_test.go
index 32d7907ce..fb0c82262 100644
--- a/cmd/cli/desktop/desktop_test.go
+++ b/cmd/cli/desktop/desktop_test.go
@@ -179,7 +179,7 @@ func TestTagHuggingFaceModel(t *testing.T) {
 
 	// Test case for tagging a Hugging Face model with mixed case
 	sourceModel := "hf.co/Bartowski/Llama-3.2-1B-Instruct-GGUF"
-	expectedLowercase := "hf.co/bartowski/llama-3.2-1b-instruct-gguf:latest"
+	expectedLowercase := "hf.co/bartowski/llama-3.2-1b-instruct-gguf"
 	targetRepo := "myrepo"
 	targetTag := "latest"