diff --git a/CHANGELOG.md b/CHANGELOG.md
index 1a45ddc..6583ec2 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,5 +1,10 @@
 # Change Log
 
+## [1.0.2] - 2026-07-03
+
+### Fixed
+- Load bundled `diff2html` webview assets from `node_modules` when the copied `media` assets are unavailable during local development and testing
+
 ## [1.0.0] - 2026-01-30
 
 ### Added
diff --git a/src/patchEditorProvider.ts b/src/patchEditorProvider.ts
index ee07025..04f34fd 100644
--- a/src/patchEditorProvider.ts
+++ b/src/patchEditorProvider.ts
@@ -1,5 +1,38 @@
+import * as fs from 'node:fs';
+import * as path from 'node:path';
 import * as vscode from 'vscode';
 
+const DIFF2HTML_ASSET_FILES = [
+    path.join('css', 'diff2html.min.css'),
+    path.join('js', 'diff2html.min.js')
+];
+
+/**
+ * Check whether all required diff2html asset files exist under the given asset root.
+ */
+function hasDiff2HtmlAssets(assetRoot: string): boolean {
+    return DIFF2HTML_ASSET_FILES.every(file => fs.existsSync(path.join(assetRoot, file)));
+}
+
+/**
+ * Resolve the diff2html asset directory for this extension installation.
+ * Prefers packaged media assets and falls back to the local dependency bundle
+ * when running from a source checkout where copied media assets are absent.
+ */
+export function resolveDiff2HtmlAssetDirectory(extensionPath: string): string {
+    const mediaAssetRoot = path.join(extensionPath, 'media', 'diff2html');
+    if (hasDiff2HtmlAssets(mediaAssetRoot)) {
+        return mediaAssetRoot;
+    }
+
+    const nodeModulesAssetRoot = path.join(extensionPath, 'node_modules', 'diff2html', 'bundles');
+    if (hasDiff2HtmlAssets(nodeModulesAssetRoot)) {
+        return nodeModulesAssetRoot;
+    }
+
+    return mediaAssetRoot;
+}
+
 /**
  * Custom editor provider for patch/diff files
  */
@@ -59,19 +92,26 @@ export class PatchEditorProvider implements vscode.CustomTextEditorProvider {
         this.activeWebviewPanel = webviewPanel;
 
         // Setup webview options
+        const diff2htmlAssetDirectory = resolveDiff2HtmlAssetDirectory(this.context.extensionUri.fsPath);
+        if (!hasDiff2HtmlAssets(diff2htmlAssetDirectory)) {
+            this.logError(`Diff2Html assets were not found in ${diff2htmlAssetDirectory}`);
+        }
+
+        const diff2htmlAssetRoot = vscode.Uri.file(diff2htmlAssetDirectory);
+
         webviewPanel.webview.options = {
             enableScripts: true,
             localResourceRoots: [
-                vscode.Uri.joinPath(this.context.extensionUri, 'media')
+                diff2htmlAssetRoot
             ]
         };
 
-        // Get URIs for diff2html resources from media folder
+        // Get URIs for diff2html resources from the packaged media folder or the local dependency fallback
         const diff2htmlCssUri = webviewPanel.webview.asWebviewUri(
-            vscode.Uri.joinPath(this.context.extensionUri, 'media', 'diff2html', 'css', 'diff2html.min.css')
+            vscode.Uri.joinPath(diff2htmlAssetRoot, 'css', 'diff2html.min.css')
         );
         const diff2htmlJsUri = webviewPanel.webview.asWebviewUri(
-            vscode.Uri.joinPath(this.context.extensionUri, 'media', 'diff2html', 'js', 'diff2html.min.js')
+            vscode.Uri.joinPath(diff2htmlAssetRoot, 'js', 'diff2html.min.js')
         );
 
         // Set initial HTML content
diff --git a/src/test/extension.test.ts b/src/test/extension.test.ts
index d5b27ca..46a3b41 100644
--- a/src/test/extension.test.ts
+++ b/src/test/extension.test.ts
@@ -1,5 +1,9 @@
 import * as assert from 'assert';
+import * as fs from 'node:fs';
+import * as os from 'node:os';
+import * as path from 'node:path';
 import * as vscode from 'vscode';
+import { resolveDiff2HtmlAssetDirectory } from '../patchEditorProvider';
 
 suite('Extension Test Suite', () => {
     vscode.window.showInformationMessage('Start all tests.');
@@ -22,4 +26,50 @@ suite('Extension Test Suite', () => {
             assert.ok(commands.includes('tlcsdm.patchReader.toggleView'));
         });
     });
+
+    test('Should prefer packaged diff2html assets when available', () => {
+        const tempRoot = fs.mkdtempSync(path.join(os.tmpdir(), 'patch-reader-media-'));
+        try {
+            const mediaCss = path.join(tempRoot, 'media', 'diff2html', 'css', 'diff2html.min.css');
+            const mediaJs = path.join(tempRoot, 'media', 'diff2html', 'js', 'diff2html.min.js');
+            const nodeModulesCss = path.join(tempRoot, 'node_modules', 'diff2html', 'bundles', 'css', 'diff2html.min.css');
+            const nodeModulesJs = path.join(tempRoot, 'node_modules', 'diff2html', 'bundles', 'js', 'diff2html.min.js');
+
+            fs.mkdirSync(path.dirname(mediaCss), { recursive: true });
+            fs.mkdirSync(path.dirname(mediaJs), { recursive: true });
+            fs.mkdirSync(path.dirname(nodeModulesCss), { recursive: true });
+            fs.mkdirSync(path.dirname(nodeModulesJs), { recursive: true });
+            fs.writeFileSync(mediaCss, '');
+            fs.writeFileSync(mediaJs, '');
+            fs.writeFileSync(nodeModulesCss, '');
+            fs.writeFileSync(nodeModulesJs, '');
+
+            assert.strictEqual(
+                resolveDiff2HtmlAssetDirectory(tempRoot),
+                path.join(tempRoot, 'media', 'diff2html')
+            );
+        } finally {
+            fs.rmSync(tempRoot, { recursive: true, force: true });
+        }
+    });
+
+    test('Should fall back to node_modules diff2html assets when media assets are missing', () => {
+        const tempRoot = fs.mkdtempSync(path.join(os.tmpdir(), 'patch-reader-node-modules-'));
+        try {
+            const nodeModulesCss = path.join(tempRoot, 'node_modules', 'diff2html', 'bundles', 'css', 'diff2html.min.css');
+            const nodeModulesJs = path.join(tempRoot, 'node_modules', 'diff2html', 'bundles', 'js', 'diff2html.min.js');
+
+            fs.mkdirSync(path.dirname(nodeModulesCss), { recursive: true });
+            fs.mkdirSync(path.dirname(nodeModulesJs), { recursive: true });
+            fs.writeFileSync(nodeModulesCss, '');
+            fs.writeFileSync(nodeModulesJs, '');
+
+            assert.strictEqual(
+                resolveDiff2HtmlAssetDirectory(tempRoot),
+                path.join(tempRoot, 'node_modules', 'diff2html', 'bundles')
+            );
+        } finally {
+            fs.rmSync(tempRoot, { recursive: true, force: true });
+        }
+    });
 });