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A valuable metric in understanding local infectious disease dynamics is the local time-varying reproduction number, i.e. the expected number of secondary local cases caused by each infected individual. Accurate estimation of this quantity requires distinguishing cases arising from local transmission from those imported from elsewhere. Realistically, we can expect identification of cases as local or imported to be imperfect. We study the propagation of such errors in estimation of the local time-varying reproduction number. In addition, we propose a Bayesian framework for estimation of the true local time-varying reproduction number when identification errors exist. And we illustrate the practical performance of our estimator through simulation studies and with outbreaks of COVID-19 in Hong Kong and Victoria, Australia. This article is part of the theme issue ‘Technical challenges of modelling real-life epidemics and examples of overcoming these’.