diff --git a/local-cli/__tests__/install-test.js b/local-cli/__tests__/install-test.js
new file mode 100644
index 0000000000..b3d374522f
--- /dev/null
+++ b/local-cli/__tests__/install-test.js
@@ -0,0 +1,44 @@
+'use strict';
+
+jest.dontMock('../install');
+jest.dontMock('fs');
+jest.dontMock('path');
+
+var install = require('../install.js');
+
+var openingReactTag = '#<React-Native>';
+var closingReactTag = '#</React-Native>';
+
+var fs = require.requireActual('fs');
+var path = require.requireActual('path');
+
+process.chdir(__dirname);
+
+describe('setup Podfile', function() {
+
+  it('creates a Podfile if none exists', function() {
+    try {
+      fs.unlinkSync(path.resolve(__dirname, 'Podfile'));
+    } catch(e) {}
+
+    var setupPodfile = install.setupPodfile();
+
+    expect(setupPodfile.created).toBe(true);
+  });
+
+  it('does not create Podfile if one exists', function() {
+    var setupPodfile = install.setupPodfile();
+    expect(setupPodfile.created).toBe(false);
+  });
+
+  it('includes React Native Tags', function() {
+    var setupPodfile = install.setupPodfile();
+
+    expect(setupPodfile.podfileText).toContain(openingReactTag);
+    expect(setupPodfile.podfileText).toContain(closingReactTag);
+
+    try {
+      fs.unlinkSync(path.resolve(__dirname, 'Podfile'));
+    } catch(e) {}
+  });
+});
diff --git a/local-cli/install.js b/local-cli/install.js
index c3de98aef6..63e7636676 100644
--- a/local-cli/install.js
+++ b/local-cli/install.js
@@ -5,11 +5,12 @@
  'use strict';
 
 var fs = require('fs');
+var path = require('path');
 var exec = require('child_process').exec;
 
-var NODE_MODULE_PATH = './node_modules';
+var NODE_MODULE_PATH = path.resolve(__dirname, 'node_modules');
 
-var PODFILE_PATH = './Podfile';
+var PODFILE_PATH = path.resolve(__dirname, 'Podfile');
 
 function addDependency(name, path) {
   console.log('Found dependency: ' + name);
@@ -48,6 +49,10 @@ function installDependecies() {
 
 module.exports = {
   setupPodfile: function() {
+    var returnArgs = {
+      created: false
+    };
+
     var podfileText;
     try {
       podfileText = fs.readFileSync(PODFILE_PATH, 'utf8');
@@ -58,6 +63,7 @@ module.exports = {
     var reactPodfileBoilerplate = openingReactTag + closingReactTag;
 
     if (!podfileText) {
+      returnArgs.created = true;
       fs.appendFileSync(PODFILE_PATH, reactPodfileBoilerplate);
     } else {
       if (podfileText.indexOf(openingReactTag) === -1 || podfileText.indexOf(closingReactTag) === -1) {
@@ -67,6 +73,7 @@ module.exports = {
 
     try {
       podfileText = fs.readFileSync(PODFILE_PATH, 'utf8');
+      returnArgs.podfileText = podfileText;
     } catch(e) {}
 
     if (podfileText.indexOf('pod \'React\'') === -1) {
@@ -79,10 +86,13 @@ module.exports = {
           podfileText.slice(indexOfReactComponents)].join('');
 
         fs.writeFileSync(PODFILE_PATH, newPodfileText);
+        returnArgs.podfileText = newPodfileText;
       } catch(e) {
         throw e;
       }
     }
+
+    return returnArgs;
   },
   init: function(arguement) {
     // arguement is available for future arguement commands