diff --git a/transport/grpc/dial_test.go b/transport/grpc/dial_test.go
index 91b98c7a102..e4ad07110a2 100644
--- a/transport/grpc/dial_test.go
+++ b/transport/grpc/dial_test.go
@@ -18,6 +18,7 @@ import (
 	"context"
 	"errors"
 	"net"
+	"os"
 	"testing"
 	"time"
 
@@ -64,3 +65,65 @@ func TestGRPCHook(t *testing.T) {
 		t.Error("expected a call to expected dialer, didn't get one")
 	}
 }
+
+func TestIsDirectPathEnabled(t *testing.T) {
+	for _, testcase := range []struct {
+		name     string
+		endpoint string
+		envVar   string
+		want     bool
+	}{
+		{
+			name:     "matches",
+			endpoint: "some-api",
+			envVar:   "some-api",
+			want:     true,
+		},
+		{
+			name:     "does not match",
+			endpoint: "some-api",
+			envVar:   "some-other-api",
+			want:     false,
+		},
+		{
+			name:     "matches in list",
+			endpoint: "some-api-2",
+			envVar:   "some-api-1,some-api-2,some-api-3",
+			want:     true,
+		},
+		{
+			name:     "empty env var",
+			endpoint: "",
+			envVar:   "",
+			want:     false,
+		},
+		{
+			name:     "trailing comma",
+			endpoint: "",
+			envVar:   "foo,bar,",
+			want:     false,
+		},
+		{
+			name:     "dns schemes are allowed",
+			endpoint: "dns:///foo",
+			envVar:   "dns:///foo",
+			want:     true,
+		},
+		{
+			name:     "non-dns schemes are disallowed",
+			endpoint: "https://foo",
+			envVar:   "https://foo",
+			want:     false,
+		},
+	} {
+		t.Run(testcase.name, func(t *testing.T) {
+			if err := os.Setenv("GOOGLE_CLOUD_ENABLE_DIRECT_PATH", testcase.envVar); err != nil {
+				t.Fatal(err)
+			}
+
+			if got := isDirectPathEnabled(testcase.endpoint); got != testcase.want {
+				t.Fatalf("got %v, want %v", got, testcase.want)
+			}
+		})
+	}
+}