diff --git a/init/action.yml b/init/action.yml
index ba5d6efcc..5b2baaeca 100644
--- a/init/action.yml
+++ b/init/action.yml
@@ -15,6 +15,8 @@ inputs:
       - A special value `nightly` which uses the latest nightly version of the
         CodeQL tools. Note that this is unstable and not recommended for
         production use.
+      - A special value `toolcache` which uses the latest version available in the
+        toolcache on the runner.
 
       If not specified, the Action will check in several places until it finds
       the CodeQL tools.
diff --git a/lib/analyze-action.js b/lib/analyze-action.js
index 6951aaef0..d0486873f 100644
--- a/lib/analyze-action.js
+++ b/lib/analyze-action.js
@@ -92111,6 +92111,7 @@ var CODEQL_NIGHTLIES_REPOSITORY_OWNER = "dsp-testing";
 var CODEQL_NIGHTLIES_REPOSITORY_NAME = "codeql-cli-nightlies";
 var CODEQL_BUNDLE_VERSION_ALIAS = ["linked", "latest"];
 var CODEQL_NIGHTLY_TOOLS_INPUTS = ["nightly", "nightly-latest"];
+var CODEQL_TOOLCACHE_INPUT = "toolcache";
 function getCodeQLBundleExtension(compressionMethod) {
   switch (compressionMethod) {
     case "gzip":
@@ -92289,6 +92290,20 @@ async function getCodeQLSource(toolsInput, defaultCliVersion, apiDetails, varian
         "`tools: latest` has been renamed to `tools: linked`, but the old name is still supported. No action is required."
       );
     }
+  } else if (toolsInput !== void 0 && toolsInput === CODEQL_TOOLCACHE_INPUT) {
+    logger.info(
+      `Attempting to use the latest CodeQL CLI version in the toolcache, as requested by 'tools: ${toolsInput}'.`
+    );
+    const latestToolcacheVersion = getLatestToolcacheVersion(logger);
+    if (latestToolcacheVersion) {
+      cliVersion2 = latestToolcacheVersion;
+    } else {
+      logger.info(
+        `Found no CodeQL CLI in the toolcache, ignoring 'tools: ${toolsInput}'...`
+      );
+      cliVersion2 = defaultCliVersion.cliVersion;
+      tagName = defaultCliVersion.tagName;
+    }
   } else if (toolsInput !== void 0) {
     tagName = tryGetTagNameFromUrl(toolsInput, logger);
     url2 = toolsInput;
@@ -92595,8 +92610,24 @@ async function getNightlyToolsUrl(logger) {
     );
   }
 }
+function getLatestToolcacheVersion(logger) {
+  const allVersions = toolcache3.findAllVersions("CodeQL").sort((a, b) => semver7.lt(a, b) ? 1 : -1);
+  logger.debug(
+    `Found the following versions of the CodeQL tools in the toolcache: ${JSON.stringify(
+      allVersions
+    )}.`
+  );
+  if (allVersions.length > 0) {
+    const latestToolcacheVersion = allVersions[0];
+    logger.info(
+      `CLI version ${latestToolcacheVersion} is the latest version in the toolcache.`
+    );
+    return latestToolcacheVersion;
+  }
+  return void 0;
+}
 function isReservedToolsValue(tools) {
-  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools);
+  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools) || tools === CODEQL_TOOLCACHE_INPUT;
 }
 
 // src/tracer-config.ts
diff --git a/lib/init-action-post.js b/lib/init-action-post.js
index def7116e4..c905b89bc 100644
--- a/lib/init-action-post.js
+++ b/lib/init-action-post.js
@@ -130093,6 +130093,7 @@ var CODEQL_NIGHTLIES_REPOSITORY_OWNER = "dsp-testing";
 var CODEQL_NIGHTLIES_REPOSITORY_NAME = "codeql-cli-nightlies";
 var CODEQL_BUNDLE_VERSION_ALIAS = ["linked", "latest"];
 var CODEQL_NIGHTLY_TOOLS_INPUTS = ["nightly", "nightly-latest"];
+var CODEQL_TOOLCACHE_INPUT = "toolcache";
 function getCodeQLBundleExtension(compressionMethod) {
   switch (compressionMethod) {
     case "gzip":
@@ -130271,6 +130272,20 @@ async function getCodeQLSource(toolsInput, defaultCliVersion, apiDetails, varian
         "`tools: latest` has been renamed to `tools: linked`, but the old name is still supported. No action is required."
       );
     }
+  } else if (toolsInput !== void 0 && toolsInput === CODEQL_TOOLCACHE_INPUT) {
+    logger.info(
+      `Attempting to use the latest CodeQL CLI version in the toolcache, as requested by 'tools: ${toolsInput}'.`
+    );
+    const latestToolcacheVersion = getLatestToolcacheVersion(logger);
+    if (latestToolcacheVersion) {
+      cliVersion2 = latestToolcacheVersion;
+    } else {
+      logger.info(
+        `Found no CodeQL CLI in the toolcache, ignoring 'tools: ${toolsInput}'...`
+      );
+      cliVersion2 = defaultCliVersion.cliVersion;
+      tagName = defaultCliVersion.tagName;
+    }
   } else if (toolsInput !== void 0) {
     tagName = tryGetTagNameFromUrl(toolsInput, logger);
     url2 = toolsInput;
@@ -130577,8 +130592,24 @@ async function getNightlyToolsUrl(logger) {
     );
   }
 }
+function getLatestToolcacheVersion(logger) {
+  const allVersions = toolcache3.findAllVersions("CodeQL").sort((a, b) => semver7.lt(a, b) ? 1 : -1);
+  logger.debug(
+    `Found the following versions of the CodeQL tools in the toolcache: ${JSON.stringify(
+      allVersions
+    )}.`
+  );
+  if (allVersions.length > 0) {
+    const latestToolcacheVersion = allVersions[0];
+    logger.info(
+      `CLI version ${latestToolcacheVersion} is the latest version in the toolcache.`
+    );
+    return latestToolcacheVersion;
+  }
+  return void 0;
+}
 function isReservedToolsValue(tools) {
-  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools);
+  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools) || tools === CODEQL_TOOLCACHE_INPUT;
 }
 
 // src/tracer-config.ts
diff --git a/lib/init-action.js b/lib/init-action.js
index 42e063aad..32512e9df 100644
--- a/lib/init-action.js
+++ b/lib/init-action.js
@@ -88886,6 +88886,7 @@ var CODEQL_NIGHTLIES_REPOSITORY_OWNER = "dsp-testing";
 var CODEQL_NIGHTLIES_REPOSITORY_NAME = "codeql-cli-nightlies";
 var CODEQL_BUNDLE_VERSION_ALIAS = ["linked", "latest"];
 var CODEQL_NIGHTLY_TOOLS_INPUTS = ["nightly", "nightly-latest"];
+var CODEQL_TOOLCACHE_INPUT = "toolcache";
 function getCodeQLBundleExtension(compressionMethod) {
   switch (compressionMethod) {
     case "gzip":
@@ -89064,6 +89065,20 @@ async function getCodeQLSource(toolsInput, defaultCliVersion, apiDetails, varian
         "`tools: latest` has been renamed to `tools: linked`, but the old name is still supported. No action is required."
       );
     }
+  } else if (toolsInput !== void 0 && toolsInput === CODEQL_TOOLCACHE_INPUT) {
+    logger.info(
+      `Attempting to use the latest CodeQL CLI version in the toolcache, as requested by 'tools: ${toolsInput}'.`
+    );
+    const latestToolcacheVersion = getLatestToolcacheVersion(logger);
+    if (latestToolcacheVersion) {
+      cliVersion2 = latestToolcacheVersion;
+    } else {
+      logger.info(
+        `Found no CodeQL CLI in the toolcache, ignoring 'tools: ${toolsInput}'...`
+      );
+      cliVersion2 = defaultCliVersion.cliVersion;
+      tagName = defaultCliVersion.tagName;
+    }
   } else if (toolsInput !== void 0) {
     tagName = tryGetTagNameFromUrl(toolsInput, logger);
     url = toolsInput;
@@ -89370,8 +89385,24 @@ async function getNightlyToolsUrl(logger) {
     );
   }
 }
+function getLatestToolcacheVersion(logger) {
+  const allVersions = toolcache3.findAllVersions("CodeQL").sort((a, b) => semver7.lt(a, b) ? 1 : -1);
+  logger.debug(
+    `Found the following versions of the CodeQL tools in the toolcache: ${JSON.stringify(
+      allVersions
+    )}.`
+  );
+  if (allVersions.length > 0) {
+    const latestToolcacheVersion = allVersions[0];
+    logger.info(
+      `CLI version ${latestToolcacheVersion} is the latest version in the toolcache.`
+    );
+    return latestToolcacheVersion;
+  }
+  return void 0;
+}
 function isReservedToolsValue(tools) {
-  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools);
+  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools) || tools === CODEQL_TOOLCACHE_INPUT;
 }
 
 // src/tracer-config.ts
diff --git a/lib/upload-lib.js b/lib/upload-lib.js
index 63d887a2b..e0cbdcbb5 100644
--- a/lib/upload-lib.js
+++ b/lib/upload-lib.js
@@ -89927,6 +89927,7 @@ var CODEQL_NIGHTLIES_REPOSITORY_OWNER = "dsp-testing";
 var CODEQL_NIGHTLIES_REPOSITORY_NAME = "codeql-cli-nightlies";
 var CODEQL_BUNDLE_VERSION_ALIAS = ["linked", "latest"];
 var CODEQL_NIGHTLY_TOOLS_INPUTS = ["nightly", "nightly-latest"];
+var CODEQL_TOOLCACHE_INPUT = "toolcache";
 function getCodeQLBundleExtension(compressionMethod) {
   switch (compressionMethod) {
     case "gzip":
@@ -90105,6 +90106,20 @@ async function getCodeQLSource(toolsInput, defaultCliVersion, apiDetails, varian
         "`tools: latest` has been renamed to `tools: linked`, but the old name is still supported. No action is required."
       );
     }
+  } else if (toolsInput !== void 0 && toolsInput === CODEQL_TOOLCACHE_INPUT) {
+    logger.info(
+      `Attempting to use the latest CodeQL CLI version in the toolcache, as requested by 'tools: ${toolsInput}'.`
+    );
+    const latestToolcacheVersion = getLatestToolcacheVersion(logger);
+    if (latestToolcacheVersion) {
+      cliVersion2 = latestToolcacheVersion;
+    } else {
+      logger.info(
+        `Found no CodeQL CLI in the toolcache, ignoring 'tools: ${toolsInput}'...`
+      );
+      cliVersion2 = defaultCliVersion.cliVersion;
+      tagName = defaultCliVersion.tagName;
+    }
   } else if (toolsInput !== void 0) {
     tagName = tryGetTagNameFromUrl(toolsInput, logger);
     url2 = toolsInput;
@@ -90411,8 +90426,24 @@ async function getNightlyToolsUrl(logger) {
     );
   }
 }
+function getLatestToolcacheVersion(logger) {
+  const allVersions = toolcache3.findAllVersions("CodeQL").sort((a, b) => semver7.lt(a, b) ? 1 : -1);
+  logger.debug(
+    `Found the following versions of the CodeQL tools in the toolcache: ${JSON.stringify(
+      allVersions
+    )}.`
+  );
+  if (allVersions.length > 0) {
+    const latestToolcacheVersion = allVersions[0];
+    logger.info(
+      `CLI version ${latestToolcacheVersion} is the latest version in the toolcache.`
+    );
+    return latestToolcacheVersion;
+  }
+  return void 0;
+}
 function isReservedToolsValue(tools) {
-  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools);
+  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools) || tools === CODEQL_TOOLCACHE_INPUT;
 }
 
 // src/tracer-config.ts
diff --git a/lib/upload-sarif-action.js b/lib/upload-sarif-action.js
index 30ed1a1bd..d8ec6eabe 100644
--- a/lib/upload-sarif-action.js
+++ b/lib/upload-sarif-action.js
@@ -90599,6 +90599,7 @@ var CODEQL_NIGHTLIES_REPOSITORY_OWNER = "dsp-testing";
 var CODEQL_NIGHTLIES_REPOSITORY_NAME = "codeql-cli-nightlies";
 var CODEQL_BUNDLE_VERSION_ALIAS = ["linked", "latest"];
 var CODEQL_NIGHTLY_TOOLS_INPUTS = ["nightly", "nightly-latest"];
+var CODEQL_TOOLCACHE_INPUT = "toolcache";
 function getCodeQLBundleExtension(compressionMethod) {
   switch (compressionMethod) {
     case "gzip":
@@ -90777,6 +90778,20 @@ async function getCodeQLSource(toolsInput, defaultCliVersion, apiDetails, varian
         "`tools: latest` has been renamed to `tools: linked`, but the old name is still supported. No action is required."
       );
     }
+  } else if (toolsInput !== void 0 && toolsInput === CODEQL_TOOLCACHE_INPUT) {
+    logger.info(
+      `Attempting to use the latest CodeQL CLI version in the toolcache, as requested by 'tools: ${toolsInput}'.`
+    );
+    const latestToolcacheVersion = getLatestToolcacheVersion(logger);
+    if (latestToolcacheVersion) {
+      cliVersion2 = latestToolcacheVersion;
+    } else {
+      logger.info(
+        `Found no CodeQL CLI in the toolcache, ignoring 'tools: ${toolsInput}'...`
+      );
+      cliVersion2 = defaultCliVersion.cliVersion;
+      tagName = defaultCliVersion.tagName;
+    }
   } else if (toolsInput !== void 0) {
     tagName = tryGetTagNameFromUrl(toolsInput, logger);
     url2 = toolsInput;
@@ -91083,8 +91098,24 @@ async function getNightlyToolsUrl(logger) {
     );
   }
 }
+function getLatestToolcacheVersion(logger) {
+  const allVersions = toolcache3.findAllVersions("CodeQL").sort((a, b) => semver7.lt(a, b) ? 1 : -1);
+  logger.debug(
+    `Found the following versions of the CodeQL tools in the toolcache: ${JSON.stringify(
+      allVersions
+    )}.`
+  );
+  if (allVersions.length > 0) {
+    const latestToolcacheVersion = allVersions[0];
+    logger.info(
+      `CLI version ${latestToolcacheVersion} is the latest version in the toolcache.`
+    );
+    return latestToolcacheVersion;
+  }
+  return void 0;
+}
 function isReservedToolsValue(tools) {
-  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools);
+  return CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) || CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools) || tools === CODEQL_TOOLCACHE_INPUT;
 }
 
 // src/tracer-config.ts
diff --git a/src/setup-codeql.test.ts b/src/setup-codeql.test.ts
index f2f199b7d..f2bb7efb4 100644
--- a/src/setup-codeql.test.ts
+++ b/src/setup-codeql.test.ts
@@ -255,6 +255,113 @@ test("setupCodeQLBundle logs the CodeQL CLI version being used when asked to dow
   });
 });
 
+test("getCodeQLSource correctly returns latest version from toolcache when tools == toolcache", async (t) => {
+  const loggedMessages: LoggedMessage[] = [];
+  const logger = getRecordingLogger(loggedMessages);
+
+  const latestToolcacheVersion = "3.2.1";
+  const latestVersionPath = "/path/to/latest";
+  const testVersions = ["2.3.1", latestToolcacheVersion, "1.2.3"];
+  const findAllVersionsStub = sinon
+    .stub(toolcache, "findAllVersions")
+    .returns(testVersions);
+  const findStub = sinon.stub(toolcache, "find");
+  findStub
+    .withArgs("CodeQL", latestToolcacheVersion)
+    .returns(latestVersionPath);
+
+  await withTmpDir(async (tmpDir) => {
+    setupActionsVars(tmpDir, tmpDir);
+    const source = await setupCodeql.getCodeQLSource(
+      "toolcache",
+      SAMPLE_DEFAULT_CLI_VERSION,
+      SAMPLE_DOTCOM_API_DETAILS,
+      GitHubVariant.DOTCOM,
+      false,
+      logger,
+    );
+
+    // Check that the toolcache functions were called with the expected arguments
+    t.assert(
+      findAllVersionsStub.calledOnceWith("CodeQL"),
+      `toolcache.findAllVersions("CodeQL") wasn't called`,
+    );
+    t.assert(
+      findStub.calledOnceWith("CodeQL", latestToolcacheVersion),
+      `toolcache.find("CodeQL", ${latestToolcacheVersion}) wasn't called`,
+    );
+
+    // Check that `sourceType` and `toolsVersion` match expectations.
+    t.is(source.sourceType, "toolcache");
+    t.is(source.toolsVersion, latestToolcacheVersion);
+
+    // Check that key messages we would expect to find in the log are present.
+    const expectedMessages: string[] = [
+      `Attempting to use the latest CodeQL CLI version in the toolcache, as requested by 'tools: toolcache'.`,
+      `CLI version ${latestToolcacheVersion} is the latest version in the toolcache.`,
+      `Using CodeQL CLI version ${latestToolcacheVersion} from toolcache at ${latestVersionPath}`,
+    ];
+    for (const expectedMessage of expectedMessages) {
+      t.assert(
+        loggedMessages.some(
+          (msg) =>
+            typeof msg.message === "string" &&
+            msg.message.includes(expectedMessage),
+        ),
+        `Expected '${expectedMessage}' in the logger output, but didn't find it.`,
+      );
+    }
+  });
+});
+
+test("getCodeQLSource falls back to downloading the CLI if the toolcache doesn't have a CodeQL CLI when tools == toolcache", async (t) => {
+  const loggedMessages: LoggedMessage[] = [];
+  const logger = getRecordingLogger(loggedMessages);
+
+  const testVersions = [];
+  const findAllVersionsStub = sinon
+    .stub(toolcache, "findAllVersions")
+    .returns(testVersions);
+
+  await withTmpDir(async (tmpDir) => {
+    setupActionsVars(tmpDir, tmpDir);
+    const source = await setupCodeql.getCodeQLSource(
+      "toolcache",
+      SAMPLE_DEFAULT_CLI_VERSION,
+      SAMPLE_DOTCOM_API_DETAILS,
+      GitHubVariant.DOTCOM,
+      false,
+      logger,
+    );
+
+    // Check that the toolcache functions were called with the expected arguments
+    t.assert(
+      findAllVersionsStub.calledWith("CodeQL"),
+      `toolcache.findAllVersions("CodeQL") wasn't called`,
+    );
+
+    // Check that `sourceType` and `toolsVersion` match expectations.
+    t.is(source.sourceType, "download");
+    t.is(source.toolsVersion, SAMPLE_DEFAULT_CLI_VERSION.cliVersion);
+
+    // Check that key messages we would expect to find in the log are present.
+    const expectedMessages: string[] = [
+      `Attempting to use the latest CodeQL CLI version in the toolcache, as requested by 'tools: toolcache'.`,
+      `Found no CodeQL CLI in the toolcache, ignoring 'tools: toolcache'...`,
+    ];
+    for (const expectedMessage of expectedMessages) {
+      t.assert(
+        loggedMessages.some(
+          (msg) =>
+            typeof msg.message === "string" &&
+            msg.message.includes(expectedMessage),
+        ),
+        `Expected '${expectedMessage}' in the logger output, but didn't find it.`,
+      );
+    }
+  });
+});
+
 test('tryGetTagNameFromUrl extracts the right tag name for a repo name containing "codeql-bundle"', (t) => {
   t.is(
     setupCodeql.tryGetTagNameFromUrl(
diff --git a/src/setup-codeql.ts b/src/setup-codeql.ts
index 4f5db88f3..5ae0c5fa3 100644
--- a/src/setup-codeql.ts
+++ b/src/setup-codeql.ts
@@ -38,6 +38,7 @@ const CODEQL_NIGHTLIES_REPOSITORY_NAME = "codeql-cli-nightlies";
 
 const CODEQL_BUNDLE_VERSION_ALIAS: string[] = ["linked", "latest"];
 const CODEQL_NIGHTLY_TOOLS_INPUTS = ["nightly", "nightly-latest"];
+const CODEQL_TOOLCACHE_INPUT = "toolcache";
 
 function getCodeQLBundleExtension(
   compressionMethod: tar.CompressionMethod,
@@ -346,6 +347,27 @@ export async function getCodeQLSource(
         "`tools: latest` has been renamed to `tools: linked`, but the old name is still supported. No action is required.",
       );
     }
+  } else if (
+    toolsInput !== undefined &&
+    toolsInput === CODEQL_TOOLCACHE_INPUT
+  ) {
+    // If `toolsInput === "toolcache"`, try to find the latest version of the CLI that's available in the toolcache
+    // and use that. We perform this check here since we can set `cliVersion` directly and don't want to default to
+    // the linked version.
+    logger.info(
+      `Attempting to use the latest CodeQL CLI version in the toolcache, as requested by 'tools: ${toolsInput}'.`,
+    );
+
+    const latestToolcacheVersion = getLatestToolcacheVersion(logger);
+    if (latestToolcacheVersion) {
+      cliVersion = latestToolcacheVersion;
+    } else {
+      logger.info(
+        `Found no CodeQL CLI in the toolcache, ignoring 'tools: ${toolsInput}'...`,
+      );
+      cliVersion = defaultCliVersion.cliVersion;
+      tagName = defaultCliVersion.tagName;
+    }
   } else if (toolsInput !== undefined) {
     // If a tools URL was provided, then use that.
     tagName = tryGetTagNameFromUrl(toolsInput, logger);
@@ -847,6 +869,7 @@ export function getLatestToolcacheVersion(logger: Logger): string | undefined {
 function isReservedToolsValue(tools: string): boolean {
   return (
     CODEQL_BUNDLE_VERSION_ALIAS.includes(tools) ||
-    CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools)
+    CODEQL_NIGHTLY_TOOLS_INPUTS.includes(tools) ||
+    tools === CODEQL_TOOLCACHE_INPUT
   );
 }