diff --git a/tests/fixtures/README.md b/tests/fixtures/README.md
new file mode 100644
index 000000000..e463f0321
--- /dev/null
+++ b/tests/fixtures/README.md
@@ -0,0 +1,44 @@
+# Atmos Test Fixtures
+
+This directory contains test fixtures for Atmos CLI testing. The structure is organized to maximize component reuse and reduce duplication through Atmos's inheritance and vendoring capabilities.
+
+## Directory Structure
+
+```
+fixtures/
+├── atmos.yaml              # Base configuration file
+├── components/             # Shared reusable components
+│   └── terraform/         # Terraform modules used across tests
+├── scenarios/             # Test scenarios
+│   ├── mock-terraform/    # Mock Terraform testing
+│   ├── vendor/           # Vendored components
+│   └── ...               # Other test scenarios
+└── schemas/               # JSON schemas for validation
+```
+
+## Component Reuse
+
+Components are managed in two ways:
+1. **Direct Reference**: Using `base_path` to point to the shared components directory
+2. **Vendoring**: Using Atmos's vendor capability to vendor components into specific test scenarios
+
+## Configuration Inheritance
+
+Test scenarios inherit from the base `atmos.yaml` and override only necessary settings. This reduces duplication and makes test maintenance easier.
+
+## Usage
+
+1. For new test scenarios, create a new directory under `scenarios/`
+2. Inherit from the base configuration using:
+   ```yaml
+   inherits:
+     - ../../atmos.yaml
+   ```
+3. Override only the necessary settings for your test case
+
+## Best Practices
+
+- Use vendoring for scenarios that need isolated components
+- Leverage inheritance to reduce configuration duplication
+- Keep shared components in the central `components/` directory
+- Document scenario-specific requirements in a README within each scenario directory 
\ No newline at end of file