diff --git a/cmd/internal/agentworkspace/up.go b/cmd/internal/agentworkspace/up.go
index 204cbb0f6..de041dee0 100644
--- a/cmd/internal/agentworkspace/up.go
+++ b/cmd/internal/agentworkspace/up.go
@@ -506,12 +506,14 @@ func (w *workspaceInitializer) prepareWorkspaceContent(ctx context.Context) erro
 	})
 }
 
-// waitForDocker waits for the Docker installation to complete.
-// Note: This function modifies workspaceInfo.Agent.Docker.Path if Docker was installed.
+// waitForDocker waits for Docker discovery or installation to complete.
+// It replaces an unset path or the provider default with the resolved path while
+// preserving an explicitly configured custom Docker path.
 func (w *workspaceInitializer) waitForDocker(resultChan <-chan dockerInstallResult) error {
 	result := <-resultChan
 
-	if result.path != "" && w.workspaceInfo.Agent.Docker.Path == "" {
+	dockerPath := w.workspaceInfo.Agent.Docker.Path
+	if result.path != "" && (dockerPath == "" || dockerPath == "docker") {
 		w.workspaceInfo.Agent.Docker.Path = result.path
 		log.Debugf("set docker path to %s", result.path)
 	}
diff --git a/cmd/internal/agentworkspace/up_test.go b/cmd/internal/agentworkspace/up_test.go
new file mode 100644
index 000000000..0b1f7de9e
--- /dev/null
+++ b/cmd/internal/agentworkspace/up_test.go
@@ -0,0 +1,56 @@
+package agentworkspace
+
+import (
+	"errors"
+	"testing"
+
+	"github.com/devsy-org/devsy/pkg/provider"
+)
+
+func TestWaitForDockerPropagatesResolvedPath(t *testing.T) {
+	const resolvedPath = "/Users/dev/.rd/bin/docker"
+
+	for _, configuredPath := range []string{"", "docker"} {
+		t.Run(configuredPath, func(t *testing.T) {
+			workspaceInfo := &provider.AgentWorkspaceInfo{}
+			workspaceInfo.Agent.Docker.Path = configuredPath
+			initializer := &workspaceInitializer{workspaceInfo: workspaceInfo}
+			resultChan := make(chan dockerInstallResult, 1)
+			resultChan <- dockerInstallResult{path: resolvedPath}
+
+			if err := initializer.waitForDocker(resultChan); err != nil {
+				t.Fatalf("waitForDocker() error = %v", err)
+			}
+			if got := workspaceInfo.Agent.Docker.Path; got != resolvedPath {
+				t.Fatalf("Docker.Path = %q, want %q", got, resolvedPath)
+			}
+		})
+	}
+}
+
+func TestWaitForDockerPreservesExplicitPath(t *testing.T) {
+	const customPath = "/opt/custom/bin/docker"
+	workspaceInfo := &provider.AgentWorkspaceInfo{}
+	workspaceInfo.Agent.Docker.Path = customPath
+	initializer := &workspaceInitializer{workspaceInfo: workspaceInfo}
+	resultChan := make(chan dockerInstallResult, 1)
+	resultChan <- dockerInstallResult{path: "/Users/dev/.rd/bin/docker"}
+
+	if err := initializer.waitForDocker(resultChan); err != nil {
+		t.Fatalf("waitForDocker() error = %v", err)
+	}
+	if got := workspaceInfo.Agent.Docker.Path; got != customPath {
+		t.Fatalf("Docker.Path = %q, want explicit path %q", got, customPath)
+	}
+}
+
+func TestWaitForDockerReturnsDiscoveryError(t *testing.T) {
+	discoveryErr := errors.New("docker not found")
+	initializer := &workspaceInitializer{workspaceInfo: &provider.AgentWorkspaceInfo{}}
+	resultChan := make(chan dockerInstallResult, 1)
+	resultChan <- dockerInstallResult{err: discoveryErr}
+
+	if err := initializer.waitForDocker(resultChan); !errors.Is(err, discoveryErr) {
+		t.Fatalf("waitForDocker() error = %v, want wrapped %v", err, discoveryErr)
+	}
+}