diff --git a/e2e/tests/up/docker.go b/e2e/tests/up/docker.go
index 4ca61d3bc..85f015988 100644
--- a/e2e/tests/up/docker.go
+++ b/e2e/tests/up/docker.go
@@ -429,6 +429,45 @@ var _ = DevPodDescribe("devpod up test suite", func() {
 				framework.ExpectNoError(err)
 				server.Close()
 			}, ginkgo.SpecTimeout(framework.GetTimeout()))
+
+			ginkgo.It("should start a new workspace with feature that uses environment variables", func(ctx context.Context) {
+				tempDir, err := framework.CopyToTempDir("tests/up/testdata/docker-feature-env")
+				framework.ExpectNoError(err)
+				ginkgo.DeferCleanup(framework.CleanupTempDir, initialDir, tempDir)
+
+				f := framework.NewDefaultFramework(initialDir + "/bin")
+				_ = f.DevPodProviderAdd(ctx, "docker")
+				err = f.DevPodProviderUse(ctx, "docker")
+				framework.ExpectNoError(err)
+
+				ginkgo.DeferCleanup(f.DevPodWorkspaceDelete, context.Background(), tempDir)
+
+				// Wait for devpod workspace to come online (deadline: 30s)
+				err = f.DevPodUp(ctx, tempDir, "--debug")
+				framework.ExpectNoError(err)
+
+				workspace, err := f.FindWorkspace(ctx, tempDir)
+				framework.ExpectNoError(err)
+
+				projectName := workspace.ID
+				ids, err := dockerHelper.FindContainer(ctx, []string{
+					fmt.Sprintf("%s=%s", config.DockerIDLabel, workspace.UID),
+				})
+				framework.ExpectNoError(err)
+				gomega.Expect(ids).To(gomega.HaveLen(1), "1 container to be created")
+
+				// Verify the environment variable was passed to the feature in postCreateCommand
+				featureEnvValue, _, err := f.ExecCommandCapture(ctx, []string{"ssh", "--command", "cat $HOME/feature-env-value.out", projectName})
+				framework.ExpectNoError(err)
+				featureEnvValue = strings.TrimSpace(featureEnvValue)
+				gomega.Expect(featureEnvValue).To(gomega.Equal("RESULT_ENV=feature_value"), "Feature should have access to environment variable in postCreateCommand")
+
+				// Verify standard DevPod environment variables are present
+				devpodEnv, _, err := f.ExecCommandCapture(ctx, []string{"ssh", "--command", "env | grep DEVPOD", projectName})
+				framework.ExpectNoError(err)
+				gomega.Expect(devpodEnv).To(gomega.ContainSubstring("DEVPOD=true"), "DEVPOD environment variable should be set")
+				gomega.Expect(devpodEnv).To(gomega.ContainSubstring("DEVPOD_WORKSPACE_ID="), "DEVPOD_WORKSPACE_ID environment variable should be set")
+			}, ginkgo.SpecTimeout(framework.GetTimeout()))
 		})
 	})
 })
diff --git a/e2e/tests/up/testdata/docker-feature-env/.devcontainer.json b/e2e/tests/up/testdata/docker-feature-env/.devcontainer.json
new file mode 100644
index 000000000..c559f8d20
--- /dev/null
+++ b/e2e/tests/up/testdata/docker-feature-env/.devcontainer.json
@@ -0,0 +1,17 @@
+{
+    "name": "Docker with features that use environment variables",
+    "image": "mcr.microsoft.com/vscode/devcontainers/base:alpine",
+    "features": {
+        "./test-feature": {
+            "version": "1.0.0"
+        }
+    },
+    "remoteEnv": {
+        "TEST_FEATURE_ENV": "feature_value"
+    },
+    "postCreateCommand": [
+        "sh",
+        "-c",
+        "cat /tmp/feature-entrypoint-env.txt > $HOME/feature-env-value.out"
+    ]
+}
diff --git a/e2e/tests/up/testdata/docker-feature-env/test-feature/devcontainer-feature.json b/e2e/tests/up/testdata/docker-feature-env/test-feature/devcontainer-feature.json
new file mode 100644
index 000000000..c8de3fc6f
--- /dev/null
+++ b/e2e/tests/up/testdata/docker-feature-env/test-feature/devcontainer-feature.json
@@ -0,0 +1,14 @@
+{
+  "name": "Test Feature with Environment Variables",
+  "id": "test-feature",
+  "version": "1.0.0",
+  "description": "A test feature that captures environment variables during installation and in its entrypoint",
+  "options": {
+    "version": {
+      "type": "string",
+      "default": "1.0.0",
+      "description": "Version of the test feature"
+    }
+  },
+  "entrypoint": "/usr/local/bin/test-feature-entrypoint.sh"
+}
\ No newline at end of file
diff --git a/e2e/tests/up/testdata/docker-feature-env/test-feature/entrypoint.sh b/e2e/tests/up/testdata/docker-feature-env/test-feature/entrypoint.sh
new file mode 100644
index 000000000..1a85cace1
--- /dev/null
+++ b/e2e/tests/up/testdata/docker-feature-env/test-feature/entrypoint.sh
@@ -0,0 +1,7 @@
+#!/bin/sh
+
+# Write environment variable to file when entrypoint is executed
+echo "RESULT_ENV=${TEST_FEATURE_ENV}" > /tmp/feature-entrypoint-env.txt
+
+# Continue with original entrypoint
+exec $@
diff --git a/e2e/tests/up/testdata/docker-feature-env/test-feature/install.sh b/e2e/tests/up/testdata/docker-feature-env/test-feature/install.sh
new file mode 100644
index 000000000..7affbab08
--- /dev/null
+++ b/e2e/tests/up/testdata/docker-feature-env/test-feature/install.sh
@@ -0,0 +1,7 @@
+#!/bin/sh
+
+script_dir="$( cd -- "$( dirname -- "${BASH_SOURCE[0]}" )" &> /dev/null && pwd )"
+
+install -D -m 755 "$script_dir/entrypoint.sh" /usr/local/bin/test-feature-entrypoint.sh
+
+echo "Test feature installed successfully"
diff --git a/pkg/devcontainer/single.go b/pkg/devcontainer/single.go
index cfb123bfe..f6f85172c 100644
--- a/pkg/devcontainer/single.go
+++ b/pkg/devcontainer/single.go
@@ -221,9 +221,20 @@ func (r *runner) getDockerlessRunOptions(
 		"DOCKERLESS_DOCKERFILE": buildInfo.Dockerless.Dockerfile,
 		"GODEBUG":               "http2client=0", // https://github.com/GoogleContainerTools/kaniko/issues/875
 	}
+
+	// Add containerEnv variables
 	for k, v := range mergedConfig.ContainerEnv {
 		env[k] = v
 	}
+
+	// Add remoteEnv variables to env to make them available to the container
+	for key, value := range mergedConfig.RemoteEnv {
+		if _, exists := env[key]; !exists {
+			env[key] = value
+		}
+	}
+
+
 	if buildInfo.Dockerless.Target != "" {
 		env["DOCKERLESS_TARGET"] = buildInfo.Dockerless.Target
 	}
@@ -294,6 +305,18 @@ func (r *runner) getRunOptions(
 		return nil, errors.Wrap(err, "marshal config")
 	}
 
+	// Ensure containerEnv is initialized
+	if mergedConfig.ContainerEnv == nil {
+		mergedConfig.ContainerEnv = make(map[string]string)
+	}
+
+	// Add remoteEnv variables to containerEnv to make them available to the container
+	for key, value := range mergedConfig.RemoteEnv {
+		if _, exists := mergedConfig.ContainerEnv[key]; !exists {
+			mergedConfig.ContainerEnv[key] = value
+		}
+	}
+
 	// build labels & entrypoint
 	entrypoint, cmd := GetContainerEntrypointAndArgs(mergedConfig, buildInfo.ImageDetails)
 	labels := []string{