diff --git a/scripts/setup-env-files.js b/scripts/setup-env-files.js
index 9068c458ef9..64811b2648d 100644
--- a/scripts/setup-env-files.js
+++ b/scripts/setup-env-files.js
@@ -1,25 +1,35 @@
+const crypto = require('crypto');
 const fs = require('fs');
 const path = require('path');
 
-const prePopulateEnv = (apps, folderBasePath, exampleEnvFilePath = 'src/.example.env', envFilePath = 'src/.env') => {
+const ENCRYPTION_KEY_PLACEHOLDER = '<ENCRYPTION_KEY_MUST_BE_32_LONG>';
+
+const generateEncryptionKey = () => crypto.randomBytes(16).toString('hex');
+
+const prePopulateEnv = (apps, folderBasePath, exampleEnvFilePath = 'src/.example.env', envFilePath = 'src/.env', sharedEncryptionKey) => {
   console.log(`Pre-populating .env files from .example.env for [${apps.join(',')}]`);
   for (const folder of apps) {
-    const exists = fs.existsSync(path.resolve(`${folderBasePath}/${folder}/${envFilePath}`));
+    const destPath = path.resolve(`${folderBasePath}/${folder}/${envFilePath}`);
+    const exists = fs.existsSync(destPath);
     if (!exists) {
       console.log(`Populating ${folderBasePath}/${folder} with .env file`);
-      fs.copyFileSync(
-        path.resolve(`${folderBasePath}/${folder}/${exampleEnvFilePath}`),
-        path.resolve(`${folderBasePath}/${folder}/${envFilePath}`)
-      );
+      const sourcePath = path.resolve(`${folderBasePath}/${folder}/${exampleEnvFilePath}`);
+      let content = fs.readFileSync(sourcePath, 'utf8');
+      if (content.includes(ENCRYPTION_KEY_PLACEHOLDER) && sharedEncryptionKey) {
+        content = content.replaceAll(ENCRYPTION_KEY_PLACEHOLDER, sharedEncryptionKey);
+        console.log(`  Generated STORE_ENCRYPTION_KEY for ${folder}`);
+      }
+      fs.writeFileSync(destPath, content);
     }
   }
 };
 
 (async () => {
   const appsBasePath = `${__dirname}/../apps`;
+  const sharedEncryptionKey = generateEncryptionKey();
   console.log('----------------------------------------');
-  prePopulateEnv(['api', 'ws', 'worker'], appsBasePath);
-  prePopulateEnv(['dashboard'], appsBasePath, '.example.env', '.env');
+  prePopulateEnv(['api', 'ws', 'worker'], appsBasePath, 'src/.example.env', 'src/.env', sharedEncryptionKey);
+  prePopulateEnv(['dashboard'], appsBasePath, '.example.env', '.env', sharedEncryptionKey);
   console.log('Finished populating .env files');
   console.log('----------------------------------------');
 })();