diff --git a/internal/api/grpc/instance/v2/integration_test/instance_test.go b/internal/api/grpc/instance/v2/integration_test/instance_test.go
index 549765b51dd..2c00eb374a4 100644
--- a/internal/api/grpc/instance/v2/integration_test/instance_test.go
+++ b/internal/api/grpc/instance/v2/integration_test/instance_test.go
@@ -5,6 +5,7 @@ package instance_test
 import (
 	"context"
 	"testing"
+	"time"
 
 	"github.com/stretchr/testify/assert"
 	"github.com/stretchr/testify/require"
@@ -12,6 +13,7 @@ import (
 	instance "github.com/zitadel/zitadel/pkg/grpc/instance/v2beta"
 	"google.golang.org/grpc/codes"
 	"google.golang.org/grpc/status"
+	"google.golang.org/protobuf/types/known/emptypb"
 )
 
 func TestCreateInstance(t *testing.T) {
@@ -168,3 +170,79 @@ func TestDeleteInstace(t *testing.T) {
 		})
 	}
 }
+
+func TestUpdateInstace(t *testing.T) {
+	// Given
+	inst := integration.NewInstance(CTXWithSysAuthZ)
+	orgOwnerCtx := inst.WithAuthorization(context.Background(), integration.UserTypeOrgOwner)
+
+	tt := []struct {
+		testName          string
+		inputRequest      *instance.UpdateInstanceRequest
+		inputContext      context.Context
+		expectedErrorMsg  string
+		expectedErrorCode codes.Code
+		expectedNewName   string
+	}{
+		{
+			testName: "when invalid context should return unauthN error",
+			inputRequest: &instance.UpdateInstanceRequest{
+				InstanceName: " ",
+			},
+			inputContext:      context.Background(),
+			expectedErrorCode: codes.Unauthenticated,
+			expectedErrorMsg:  "auth header missing",
+		},
+		{
+			testName: "when unauthZ context should return unauthZ error",
+			inputRequest: &instance.UpdateInstanceRequest{
+				InstanceName: " ",
+			},
+			inputContext:      orgOwnerCtx,
+			expectedErrorCode: codes.PermissionDenied,
+			expectedErrorMsg:  "No matching permissions found (AUTH-5mWD2)",
+		},
+		{
+			testName: "when invalid input should return invalid argument error",
+			inputRequest: &instance.UpdateInstanceRequest{
+				InstanceName: " ",
+			},
+			inputContext:      CTXWithSysAuthZ,
+			expectedErrorCode: codes.InvalidArgument,
+			expectedErrorMsg:  "instance_name must not be empty (instance_name)",
+		},
+		{
+			testName: "when update succeeds should change instance name",
+			inputRequest: &instance.UpdateInstanceRequest{
+				InstanceName: "an-updated-name",
+			},
+			inputContext:    CTXWithSysAuthZ,
+			expectedNewName: "an-updated-name",
+		},
+	}
+
+	for _, tc := range tt {
+		t.Run(tc.testName, func(t *testing.T) {
+			// Test
+			res, err := inst.Client.InstanceV2Beta.UpdateInstance(tc.inputContext, tc.inputRequest)
+
+			// Verify
+			assert.Equal(t, tc.expectedErrorCode, status.Code(err))
+			assert.Equal(t, tc.expectedErrorMsg, status.Convert(err).Message())
+			if tc.expectedErrorMsg == "" {
+
+				require.NotNil(t, res)
+				require.NotNil(t, res.GetDetails())
+				assert.NotEmpty(t, res.GetDetails().GetChangeDate())
+				assert.NotEmpty(t, res.GetDetails().GetResourceOwner())
+
+				retryDuration, tick := integration.WaitForAndTickWithMaxDuration(tc.inputContext, 20*time.Second)
+				require.EventuallyWithT(t, func(tt *assert.CollectT) {
+					retrievedInstance, err := inst.Client.InstanceV2Beta.GetInstance(tc.inputContext, &emptypb.Empty{})
+					require.Nil(tt, err)
+					assert.Equal(tt, tc.expectedNewName, retrievedInstance.GetInstance().GetName())
+				}, retryDuration, tick, "timeout waiting for expected execution result")
+			}
+		})
+	}
+}