diff --git a/packages/js-sdk/src/template/dockerfileParser.ts b/packages/js-sdk/src/template/dockerfileParser.ts
index 97d54a5727..17a3121fa8 100644
--- a/packages/js-sdk/src/template/dockerfileParser.ts
+++ b/packages/js-sdk/src/template/dockerfileParser.ts
@@ -220,6 +220,22 @@ function handleUserInstruction(
   }
 }
 
+/**
+ * Strip surrounding double or single quotes from an ENV value.
+ * Docker's ENV instruction strips quotes from values like ENV KEY="value".
+ */
+function stripQuotes(value: string): string {
+  if (value.length >= 2) {
+    if (
+      (value[0] === '"' && value[value.length - 1] === '"') ||
+      (value[0] === "'" && value[value.length - 1] === "'")
+    ) {
+      return value.slice(1, -1)
+    }
+  }
+  return value
+}
+
 function handleEnvInstruction(
   instruction: DockerfileInstruction,
   templateBuilder: DockerfileParserInterface
@@ -243,13 +259,13 @@ function handleEnvInstruction(
           const equalIndex = envString.indexOf('=')
           if (equalIndex > 0) {
             const key = envString.substring(0, equalIndex)
-            const value = envString.substring(equalIndex + 1)
+            const value = stripQuotes(envString.substring(equalIndex + 1))
             envVars[key] = value
           }
         }
       } else {
         // Traditional ENV key value format
-        envVars[firstArg] = secondArg
+        envVars[firstArg] = stripQuotes(secondArg)
       }
     } else if (argumentsData.length === 1) {
       // ENV/ARG key=value format (single argument) or ARG key (without default)
@@ -259,7 +275,7 @@ function handleEnvInstruction(
       const equalIndex = envString.indexOf('=')
       if (equalIndex > 0) {
         const key = envString.substring(0, equalIndex)
-        const value = envString.substring(equalIndex + 1)
+        const value = stripQuotes(envString.substring(equalIndex + 1))
         envVars[key] = value
       } else if (keyword === 'ARG' && envString.trim()) {
         // ARG without default value - set as empty ENV
@@ -273,7 +289,7 @@ function handleEnvInstruction(
         const equalIndex = envString.indexOf('=')
         if (equalIndex > 0) {
           const key = envString.substring(0, equalIndex)
-          const value = envString.substring(equalIndex + 1)
+          const value = stripQuotes(envString.substring(equalIndex + 1))
           envVars[key] = value
         } else if (keyword === 'ARG') {
           // ARG without default value
diff --git a/packages/js-sdk/tests/template/methods/dockerfileParserEnv.test.ts b/packages/js-sdk/tests/template/methods/dockerfileParserEnv.test.ts
new file mode 100644
index 0000000000..41222f01bb
--- /dev/null
+++ b/packages/js-sdk/tests/template/methods/dockerfileParserEnv.test.ts
@@ -0,0 +1,77 @@
+import { describe, it, assert } from 'vitest'
+import { Template } from '../../../src'
+import { InstructionType } from '../../../src/template/types'
+
+/**
+ * Helper to extract ENV instructions from a parsed Dockerfile.
+ * Returns an array of Record<string, string> — one per ENV instruction.
+ */
+function getEnvs(dockerfileContent: string): Record<string, string>[] {
+  const template = Template().fromDockerfile(dockerfileContent)
+  // @ts-expect-error - instructions is not a property of TemplateBuilder
+  const instructions = template.instructions as {
+    type: InstructionType
+    args: string[]
+  }[]
+  const envInstructions = instructions.filter(
+    (i) => i.type === InstructionType.ENV
+  )
+  return envInstructions.map((inst) => {
+    const result: Record<string, string> = {}
+    for (let i = 0; i < inst.args.length; i += 2) {
+      result[inst.args[i]] = inst.args[i + 1]
+    }
+    return result
+  })
+}
+
+describe('dockerfileParser ENV handling', () => {
+  describe('quote stripping', () => {
+    it('strips double quotes from ENV values', () => {
+      const envs = getEnvs('FROM node:24\nENV GOPATH="/go"')
+      assert.deepEqual(envs, [{ GOPATH: '/go' }])
+    })
+
+    it('strips single quotes from ENV values', () => {
+      const envs = getEnvs("FROM node:24\nENV GOPATH='/go'")
+      assert.deepEqual(envs, [{ GOPATH: '/go' }])
+    })
+
+    it('does not strip mismatched quotes', () => {
+      const envs = getEnvs('FROM node:24\nENV GOPATH="/go\'')
+      assert.deepEqual(envs, [{ GOPATH: '"/go\'' }])
+    })
+
+    it('handles unquoted values', () => {
+      const envs = getEnvs('FROM node:24\nENV GOPATH=/go')
+      assert.deepEqual(envs, [{ GOPATH: '/go' }])
+    })
+
+    it('preserves variable references as-is (expansion done by backend)', () => {
+      const envs = getEnvs(
+        'FROM node:24\nENV GOPATH=/go\nENV PATH="/usr/bin:${GOPATH}/bin"'
+      )
+      assert.deepEqual(envs, [
+        { GOPATH: '/go' },
+        { PATH: '/usr/bin:${GOPATH}/bin' },
+      ])
+    })
+
+    it('strips quotes from multiple key=value pairs', () => {
+      const envs = getEnvs('FROM node:24\nENV A="hello" B="world"')
+      assert.deepEqual(envs, [{ A: 'hello', B: 'world' }])
+    })
+  })
+
+  describe('ARG handling', () => {
+    it('ARG with default value', () => {
+      const envs = getEnvs('FROM node:24\nARG MY_ARG="hello"')
+      assert.deepEqual(envs, [{ MY_ARG: 'hello' }])
+    })
+
+    it('ARG without default sets empty value', () => {
+      const envs = getEnvs('FROM node:24\nARG MY_ARG')
+      assert.deepEqual(envs, [{ MY_ARG: '' }])
+    })
+  })
+})