diff --git a/CHANGELOG.md b/CHANGELOG.md
index 170ca6529..e9bb4c3b3 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -2,6 +2,10 @@
 
 # Change Log
 
+## 2025-03-18 - Runtime 0.17.4
+
+- fix: dgraph connection should ignore key for localhost [#793](https://github.com/hypermodeinc/modus/pull/793)
+
 ## 2025-03-13 - CLI 0.17.1
 
 - chore: cleanup unused dependencies and update remaining [#790](https://github.com/hypermodeinc/modus/pull/790)
diff --git a/runtime/dgraphclient/registry.go b/runtime/dgraphclient/registry.go
index 37a8604b0..260151d08 100644
--- a/runtime/dgraphclient/registry.go
+++ b/runtime/dgraphclient/registry.go
@@ -106,23 +106,11 @@ func createConnector(ctx context.Context, dgName string) (*dgraphConnector, erro
 	}
 
 	var opts []grpc.DialOption
-
-	if connection.Key != "" {
-		conKey, err := secrets.ApplySecretsToString(ctx, info, connection.Key)
-		if err != nil {
-			return nil, err
-		}
-
-		pool, err := x509.SystemCertPool()
-		if err != nil {
-			return nil, err
-		}
-		creds := credentials.NewClientTLSFromCert(pool, "")
+	if strings.Split(connection.GrpcTarget, ":")[0] == "localhost" {
 		opts = []grpc.DialOption{
-			grpc.WithTransportCredentials(creds),
-			grpc.WithPerRPCCredentials(&authCreds{conKey}),
+			grpc.WithTransportCredentials(insecure.NewCredentials()),
 		}
-	} else if strings.Split(connection.GrpcTarget, ":")[0] != "localhost" {
+	} else {
 		pool, err := x509.SystemCertPool()
 		if err != nil {
 			return nil, err
@@ -131,9 +119,12 @@ func createConnector(ctx context.Context, dgName string) (*dgraphConnector, erro
 		opts = []grpc.DialOption{
 			grpc.WithTransportCredentials(creds),
 		}
-	} else {
-		opts = []grpc.DialOption{
-			grpc.WithTransportCredentials(insecure.NewCredentials()),
+		if connection.Key != "" {
+			if conKey, err := secrets.ApplySecretsToString(ctx, info, connection.Key); err != nil {
+				return nil, err
+			} else if conKey != "" {
+				opts = append(opts, grpc.WithPerRPCCredentials(&authCreds{conKey}))
+			}
 		}
 	}