diff --git a/src/model_macro.jl b/src/model_macro.jl
index f415afd6..827a4400 100644
--- a/src/model_macro.jl
+++ b/src/model_macro.jl
@@ -702,7 +702,7 @@ function get_make_node_function(ms_body, ms_args, ms_name)
             __parent_context__::GraphPPL.Context,
             __options__::GraphPPL.NodeCreationOptions,
             ::typeof($ms_name),
-            __lhs_interface__::GraphPPL.ProxyLabel,
+            __lhs_interface__::Union{GraphPPL.NodeLabel, GraphPPL.ProxyLabel},
             __rhs_interfaces__::NamedTuple,
             __n_interfaces__::GraphPPL.StaticInt{$(length(ms_args))}
         )
diff --git a/test/graph_construction_tests.jl b/test/graph_construction_tests.jl
index a8983adb..d522d6ee 100644
--- a/test/graph_construction_tests.jl
+++ b/test/graph_construction_tests.jl
@@ -616,7 +616,7 @@ end
             return (y = y,)
         end
 
-        variable_nodes(model) do label, nodedata 
+        variable_nodes(model) do label, nodedata
             properties = getproperties(nodedata)
             if is_random(properties)
                 # Shouldn't be any anonymous variables here
@@ -634,7 +634,50 @@ end
         @test length(collect(filter(as_node(sum), model))) === 0
         @test length(collect(filter(as_variable(:C), model))) === 1
         @test length(collect(filter(as_variable(:m), model))) === 1
+    end
+end
+
+@testitem "Submodels can be used in the keyword arguments" begin
+    using Distributions, LinearAlgebra
+
+    import GraphPPL: create_model, getorcreate!, NodeCreationOptions, LazyIndex, variable_nodes, getproperties, is_random, getname
 
+    @model function prod_distributions(a, b, c)
+        a ~ b * c
+    end
 
+    # The test tests if we can write `μ = prod_distributions(b = A, c = x_prev)`
+    @model function state_transition_with_submodel(y_next, x_next, x_prev, A, B, P, Q)
+        x_next ~ MvNormal(μ = prod_distributions(b = A, c = x_prev), Σ = Q)
+        y_next ~ MvNormal(μ = prod_distributions(b = B, c = x_next), Σ = P)
     end
+
+    @model function multivariate_lgssm_model_with_several_submodels(y, mean0, cov0, A, B, Q, P)
+        x_prev ~ MvNormal(μ = mean0, Σ = cov0)
+        for i in eachindex(y)
+            x[i] ~ state_transition_with_submodel(y_next = y[i], x_prev = x_prev, A = A, B = B, P = P, Q = Q)
+            x_prev = x[i]
+        end
+    end
+
+    ydata = rand(10)
+    A = rand(3, 3)
+    B = rand(3, 3)
+    Q = rand(3, 3)
+    P = rand(3, 3)
+    mean0 = rand(3)
+    cov0 = rand(3, 3)
+
+    model =
+        create_model(multivariate_lgssm_model_with_several_submodels(mean0 = mean0, cov0 = cov0, A = A, B = B, Q = Q, P = P)) do model, ctx
+            y = getorcreate!(model, ctx, NodeCreationOptions(kind = :data), :y, LazyIndex(ydata))
+            return (y = y,)
+        end
+
+    @test length(collect(filter(as_node(MvNormal), model))) === 21
+    @test length(collect(filter(as_node(prod), model))) === 20
+
+    @test length(collect(filter(as_variable(:a), model))) === 0
+    @test length(collect(filter(as_variable(:b), model))) === 0
+    @test length(collect(filter(as_variable(:x), model))) === 10
 end
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