diff --git a/app/features/demo/pipeline.py b/app/features/demo/pipeline.py
index 3eb64533..041d5361 100644
--- a/app/features/demo/pipeline.py
+++ b/app/features/demo/pipeline.py
@@ -280,15 +280,21 @@ def _model_config_payload(model_type: str) -> dict[str, Any]:
 
 
 def _llm_key_present() -> bool:
-    """Return True when the configured agent model's provider API key is set.
+    """Return True when the configured agent model's provider can be used.
 
     Matches the provider prefix of ``agent_default_model`` so the agent step
     skips gracefully when its provider is unreachable. Logs key PRESENCE only,
     never the value (port of run_demo.py:317-335; see security-patterns.md).
+
+    The local ``ollama`` provider needs no API key (#340), so it always returns
+    True — the agent step still degrades gracefully if Ollama is unreachable
+    (the chat round-trip fails and the step skips via its error path).
     """
     settings = get_settings()
     model = settings.agent_default_model
     provider = model.split(":", 1)[0] if ":" in model else ""
+    if provider == "ollama":
+        return True
     if provider == "anthropic":
         return bool(settings.anthropic_api_key)
     if provider == "openai":
diff --git a/app/features/demo/tests/test_pipeline.py b/app/features/demo/tests/test_pipeline.py
index 971e1dd7..5f73a8c8 100644
--- a/app/features/demo/tests/test_pipeline.py
+++ b/app/features/demo/tests/test_pipeline.py
@@ -1801,6 +1801,41 @@ async def request(
     return _HitlClient(event_sink=intermediate), intermediate
 
 
+def test_llm_key_present_ollama_needs_no_key(monkeypatch):
+    """#340 — the local ollama provider needs no API key, so the gate is True.
+
+    Without this, a local-Ollama stack (agent_default_model=ollama:*) makes the
+    showcase agent_hitl_flow / agent steps skip with "no API key matching
+    agent_default_model provider" even though Ollama is reachable.
+    """
+    monkeypatch.setattr(
+        pipeline,
+        "get_settings",
+        lambda: SimpleNamespace(
+            agent_default_model="ollama:qwen3:8b",
+            anthropic_api_key="",
+            openai_api_key="",
+            google_api_key="",
+        ),
+    )
+    assert pipeline._llm_key_present() is True
+
+
+def test_llm_key_present_cloud_still_requires_key(monkeypatch):
+    """Regression guard for #340 — a cloud provider still requires its key."""
+    monkeypatch.setattr(
+        pipeline,
+        "get_settings",
+        lambda: SimpleNamespace(
+            agent_default_model="openai:gpt-4.1-mini",
+            anthropic_api_key="",
+            openai_api_key="",
+            google_api_key="",
+        ),
+    )
+    assert pipeline._llm_key_present() is False
+
+
 async def test_agent_hitl_flow_happy_path(monkeypatch, tmp_path):
     """PRP-41 — full HITL round-trip: chat -> intermediate -> approve -> pass."""
     monkeypatch.setattr(