diff --git a/cli/azd/internal/appdetect/appdetect.go b/cli/azd/internal/appdetect/appdetect.go
index e6103d3cbd7..dc1b33841d4 100644
--- a/cli/azd/internal/appdetect/appdetect.go
+++ b/cli/azd/internal/appdetect/appdetect.go
@@ -13,6 +13,7 @@ import (
 	"path/filepath"
 
 	"github.com/azure/azure-dev/cli/azd/pkg/exec"
+	"github.com/azure/azure-dev/cli/azd/pkg/osutil"
 	"github.com/azure/azure-dev/cli/azd/pkg/tools/dotnet"
 	"github.com/bmatcuk/doublestar/v4"
 )
@@ -167,8 +168,9 @@ type Port struct {
 }
 
 type Docker struct {
-	Path  string
-	Ports []Port
+	Path      string
+	Ports     []Port
+	BuildArgs []osutil.ExpandableString
 }
 
 type projectDetector interface {
diff --git a/cli/azd/internal/repository/app_init.go b/cli/azd/internal/repository/app_init.go
index cb211bc14b1..afbe32a3c2b 100644
--- a/cli/azd/internal/repository/app_init.go
+++ b/cli/azd/internal/repository/app_init.go
@@ -1,6 +1,7 @@
 package repository
 
 import (
+	"bufio"
 	"context"
 	"fmt"
 	"maps"
@@ -44,6 +45,34 @@ var dbMap = map[appdetect.DatabaseDep]struct{}{
 
 var featureCompose = alpha.MustFeatureKey("compose")
 
+// parseDockerfileForArgs parses a Dockerfile to extract ARG instructions and returns them as ExpandableString values.
+func parseDockerfileForArgs(dockerfilePath string) ([]osutil.ExpandableString, error) {
+	var buildArgs []osutil.ExpandableString
+
+	file, err := os.Open(dockerfilePath)
+	if err != nil {
+		return nil, fmt.Errorf("failed to open Dockerfile: %w", err)
+	}
+	defer file.Close()
+
+	scanner := bufio.NewScanner(file)
+	for scanner.Scan() {
+		line := strings.TrimSpace(scanner.Text())
+		if strings.HasPrefix(line, "ARG ") {
+			argLine := strings.TrimPrefix(line, "ARG ")
+			if len(argLine) > 0 {
+				buildArgs = append(buildArgs, osutil.NewExpandableString(argLine))
+			}
+		}
+	}
+
+	if err := scanner.Err(); err != nil {
+		return nil, fmt.Errorf("error reading Dockerfile: %w", err)
+	}
+
+	return buildArgs, nil
+}
+
 // InitFromApp initializes the infra directory and project file from the current existing app.
 func (i *Initializer) InitFromApp(
 	ctx context.Context,
@@ -264,6 +293,23 @@ func (i *Initializer) InitFromApp(
 		}
 	}
 
+	for idx := range detect.Services {
+		servicePath := detect.Services[idx].Path
+		dockerfilePath := filepath.Join(servicePath, "Dockerfile")
+
+		if _, err := os.Stat(dockerfilePath); err == nil {
+
+			buildArgs, err := parseDockerfileForArgs(dockerfilePath)
+			if err != nil {
+				return fmt.Errorf("failed to parse Dockerfile ARGs at %s: %w", dockerfilePath, err)
+			}
+
+			if len(buildArgs) > 0 {
+				detect.Services[idx].Docker.BuildArgs = buildArgs
+			}
+		}
+	}
+
 	tracing.SetUsageAttributes(fields.AppInitLastStep.String("generate"))
 
 	title = "Generating " + output.WithHighLightFormat("./"+azdcontext.ProjectFileName)
@@ -544,7 +590,8 @@ func ServiceFromDetect(
 		}
 
 		svc.Docker = project.DockerProjectOptions{
-			Path: relDocker,
+			Path:      relDocker,
+			BuildArgs: prj.Docker.BuildArgs,
 		}
 	}
 
diff --git a/cli/azd/internal/repository/app_init_test.go b/cli/azd/internal/repository/app_init_test.go
index 6a0b7a7dac6..632c0147bcf 100644
--- a/cli/azd/internal/repository/app_init_test.go
+++ b/cli/azd/internal/repository/app_init_test.go
@@ -11,6 +11,7 @@ import (
 	"github.com/azure/azure-dev/cli/azd/internal"
 	"github.com/azure/azure-dev/cli/azd/internal/appdetect"
 	"github.com/azure/azure-dev/cli/azd/pkg/input"
+	"github.com/azure/azure-dev/cli/azd/pkg/osutil"
 	"github.com/azure/azure-dev/cli/azd/pkg/project"
 	"github.com/stretchr/testify/require"
 )
@@ -93,7 +94,13 @@ func TestInitializer_prjConfigFromDetect(t *testing.T) {
 					{
 						Language: appdetect.DotNet,
 						Path:     "dotnet",
-						Docker:   &appdetect.Docker{Path: "Dockerfile"},
+						Docker: &appdetect.Docker{
+							Path: "Dockerfile",
+							BuildArgs: []osutil.ExpandableString{
+								osutil.NewExpandableString("ARG1"),
+								osutil.NewExpandableString("ARG2"),
+							},
+						},
 					},
 				},
 			},
@@ -112,6 +119,10 @@ func TestInitializer_prjConfigFromDetect(t *testing.T) {
 						RelativePath: "dotnet",
 						Docker: project.DockerProjectOptions{
 							Path: "Dockerfile",
+							BuildArgs: []osutil.ExpandableString{
+								osutil.NewExpandableString("ARG1"),
+								osutil.NewExpandableString("ARG2"),
+							},
 						},
 					},
 				},