diff --git a/internal/initwd/from_module.go b/internal/initwd/from_module.go
index 01742a141f..f2b52a04d3 100644
--- a/internal/initwd/from_module.go
+++ b/internal/initwd/from_module.go
@@ -217,9 +217,7 @@ func DirFromModule(ctx context.Context, loader *configload.Loader, rootDir, modu
 			mod, _ := loader.Parser().LoadConfigDir(rootDir) // ignore diagnostics since we're just doing value-add here anyway
 			if mod != nil {
 				for _, mc := range mod.ModuleCalls {
-					// TODO improve this
 					sourceVal, _ := mc.SourceExpr.Value(nil)
-
 					if !sourceVal.IsKnown() {
 						diags = diags.Append(&hcl.Diagnostic{
 							Severity: hcl.DiagError,
diff --git a/internal/initwd/from_module_test.go b/internal/initwd/from_module_test.go
index 690f142c78..ca3af4db56 100644
--- a/internal/initwd/from_module_test.go
+++ b/internal/initwd/from_module_test.go
@@ -12,6 +12,7 @@ import (
 
 	"github.com/google/go-cmp/cmp"
 	version "github.com/hashicorp/go-version"
+	"github.com/hashicorp/hcl/v2"
 	"github.com/hashicorp/terraform/internal/configs"
 	"github.com/hashicorp/terraform/internal/configs/configload"
 	"github.com/hashicorp/terraform/internal/copy"
@@ -358,3 +359,37 @@ func TestDirFromModule_rel_submodules(t *testing.T) {
 	})
 	assertResultDeepEqual(t, gotTraces, wantTraces)
 }
+
+func TestDirFromModule_submodulesWithDynamicSources(t *testing.T) {
+	fixtureDir := filepath.Clean("testdata/empty")
+	fromModuleDir, err := filepath.Abs("./testdata/local-module-dynamic-sources")
+	if err != nil {
+		t.Fatal(err)
+	}
+
+	tmpDir, done := tempChdir(t, fixtureDir)
+	defer done()
+
+	hooks := &testInstallHooks{}
+	dir, err := filepath.EvalSymlinks(tmpDir)
+	if err != nil {
+		t.Error(err)
+	}
+	modInstallDir := filepath.Join(dir, ".terraform/modules")
+
+	loader, cleanup := configload.NewLoaderForTests(t)
+	defer cleanup()
+	diags := DirFromModule(context.Background(), loader, dir, modInstallDir, fromModuleDir, nil, hooks)
+
+	wantDiags := tfdiags.Diagnostics{}.Append(&hcl.Diagnostic{
+		Severity: hcl.DiagError,
+		Summary:  "Unknown module source",
+		Detail:   "Dynamic module sources cannot be used in conjunction with -from-module",
+		Subject: &hcl.Range{
+			Filename: filepath.Join(dir, "main.tf"),
+			Start:    hcl.Pos{Line: 2, Column: 12, Byte: 27},
+			End:      hcl.Pos{Line: 2, Column: 27, Byte: 42},
+		},
+	})
+	tfdiags.AssertDiagnosticsMatch(t, diags, wantDiags)
+}
diff --git a/internal/initwd/testdata/local-module-dynamic-sources/main.tf b/internal/initwd/testdata/local-module-dynamic-sources/main.tf
new file mode 100644
index 0000000000..c02abbfbba
--- /dev/null
+++ b/internal/initwd/testdata/local-module-dynamic-sources/main.tf
@@ -0,0 +1,8 @@
+module "name" {
+  source = "./${var.path}"
+}
+
+variable "path" {
+  type    = string
+  default = "child"
+}