diff --git a/src/Aspire.Hosting.Docker/EnvFile.cs b/src/Aspire.Hosting.Docker/EnvFile.cs
index a95d668bf8e..5ac74226213 100644
--- a/src/Aspire.Hosting.Docker/EnvFile.cs
+++ b/src/Aspire.Hosting.Docker/EnvFile.cs
@@ -19,15 +19,9 @@ public static EnvFile Load(string path)
         foreach (var line in File.ReadAllLines(path))
         {
             envFile._lines.Add(line);
-            var trimmed = line.TrimStart();
-            if (!trimmed.StartsWith('#') && trimmed.Contains('='))
+            if (TryParseKey(line, out var key))
             {
-                var eqIndex = trimmed.IndexOf('=');
-                if (eqIndex > 0)
-                {
-                    var key = trimmed[..eqIndex].Trim();
-                    envFile._keys.Add(key);
-                }
+                envFile._keys.Add(key);
             }
         }
         return envFile;
@@ -35,10 +29,24 @@ public static EnvFile Load(string path)
 
     public void Add(string key, string? value, string? comment, bool onlyIfMissing = true)
     {
-        if (onlyIfMissing && _keys.Contains(key))
+        if (_keys.Contains(key))
         {
-            return;
+            if (onlyIfMissing)
+            {
+                return;
+            }
+
+            // Update the existing key's value.
+            for (int i = 0; i < _lines.Count; i++)
+            {
+                if (TryParseKey(_lines[i], out var lineKey) && lineKey == key)
+                {
+                    _lines[i] = value is not null ? $"{key}={value}" : $"{key}=";
+                    return;
+                }
+            }
         }
+
         if (!string.IsNullOrWhiteSpace(comment))
         {
             _lines.Add($"# {comment}");
@@ -48,6 +56,22 @@ public void Add(string key, string? value, string? comment, bool onlyIfMissing =
         _keys.Add(key);
     }
 
+    private static bool TryParseKey(string line, out string key)
+    {
+        key = string.Empty;
+        var trimmed = line.TrimStart();
+        if (!trimmed.StartsWith('#') && trimmed.Contains('='))
+        {
+            var eqIndex = trimmed.IndexOf('=');
+            if (eqIndex > 0)
+            {
+                key = trimmed[..eqIndex].Trim();
+                return true;
+            }
+        }
+        return false;
+    }
+
     public void Save(string path)
     {
         File.WriteAllLines(path, _lines);
diff --git a/tests/Aspire.Hosting.Docker.Tests/EnvFileTests.cs b/tests/Aspire.Hosting.Docker.Tests/EnvFileTests.cs
new file mode 100644
index 00000000000..58d23741b61
--- /dev/null
+++ b/tests/Aspire.Hosting.Docker.Tests/EnvFileTests.cs
@@ -0,0 +1,157 @@
+// Licensed to the .NET Foundation under one or more agreements.
+// The .NET Foundation licenses this file to you under the MIT license.
+
+namespace Aspire.Hosting.Docker.Tests;
+
+public class EnvFileTests
+{
+    [Fact]
+    public void Add_WithOnlyIfMissingTrue_DoesNotAddDuplicate()
+    {
+        using var tempDir = new TempDirectory();
+        var envFilePath = Path.Combine(tempDir.Path, ".env");
+
+        // Create initial .env file
+        File.WriteAllLines(envFilePath, [
+            "# Comment for KEY1",
+            "KEY1=value1",
+            ""
+        ]);
+
+        // Load and try to add the same key with onlyIfMissing=true
+        var envFile = EnvFile.Load(envFilePath);
+        envFile.Add("KEY1", "value2", "New comment", onlyIfMissing: true);
+        envFile.Save(envFilePath);
+
+        var lines = File.ReadAllLines(envFilePath);
+        var keyLines = lines.Where(l => l.StartsWith("KEY1=")).ToArray();
+
+        // Should still have only one KEY1 line with original value
+        Assert.Single(keyLines);
+        Assert.Equal("KEY1=value1", keyLines[0]);
+    }
+
+    [Fact]
+    public void Add_WithOnlyIfMissingFalse_UpdatesExistingKey()
+    {
+        using var tempDir = new TempDirectory();
+        var envFilePath = Path.Combine(tempDir.Path, ".env");
+
+        // Create initial .env file
+        File.WriteAllLines(envFilePath, [
+            "# Comment for KEY1",
+            "KEY1=value1",
+            ""
+        ]);
+
+        // Load and try to add the same key with onlyIfMissing=false
+        var envFile = EnvFile.Load(envFilePath);
+        envFile.Add("KEY1", "value2", "New comment", onlyIfMissing: false);
+        envFile.Save(envFilePath);
+
+        var lines = File.ReadAllLines(envFilePath);
+        var keyLines = lines.Where(l => l.StartsWith("KEY1=")).ToArray();
+
+        // Should still have only one KEY1 line, but with updated value
+        Assert.Single(keyLines);
+        Assert.Equal("KEY1=value2", keyLines[0]);
+    }
+
+    [Fact]
+    public void Add_WithOnlyIfMissingFalse_UpdatesImageNameWithoutDuplication()
+    {
+        using var tempDir = new TempDirectory();
+        var envFilePath = Path.Combine(tempDir.Path, ".env");
+
+        // Create initial .env file simulating a project resource
+        File.WriteAllLines(envFilePath, [
+            "# Default container port for project1",
+            "PROJECT1_PORT=8080",
+            "",
+            "# Container image name for project1",
+            "PROJECT1_IMAGE=project1:latest",
+            ""
+        ]);
+
+        // Load the file
+        var envFile = EnvFile.Load(envFilePath);
+
+        // Add PORT with onlyIfMissing=true (should be skipped since it exists)
+        envFile.Add("PROJECT1_PORT", "8080", "Default container port for project1", onlyIfMissing: true);
+
+        // Add IMAGE with onlyIfMissing=false (should update the existing value)
+        envFile.Add("PROJECT1_IMAGE", "project1:1.0.0", "Container image name for project1", onlyIfMissing: false);
+
+        envFile.Save(envFilePath);
+
+        var lines = File.ReadAllLines(envFilePath);
+        var imageLines = lines.Where(l => l.StartsWith("PROJECT1_IMAGE=")).ToArray();
+
+        // Should have exactly one IMAGE line with the new value
+        Assert.Single(imageLines);
+        Assert.Equal("PROJECT1_IMAGE=project1:1.0.0", imageLines[0]);
+
+        // PORT should also still be present once
+        var portLines = lines.Where(l => l.StartsWith("PROJECT1_PORT=")).ToArray();
+        Assert.Single(portLines);
+        Assert.Equal("PROJECT1_PORT=8080", portLines[0]);
+    }
+
+    [Fact]
+    public void Add_NewKey_AddsToFile()
+    {
+        using var tempDir = new TempDirectory();
+        var envFilePath = Path.Combine(tempDir.Path, ".env");
+
+        // Create initial .env file
+        File.WriteAllLines(envFilePath, [
+            "# Comment for KEY1",
+            "KEY1=value1",
+            ""
+        ]);
+
+        // Load and add a new key
+        var envFile = EnvFile.Load(envFilePath);
+        envFile.Add("KEY2", "value2", "Comment for KEY2", onlyIfMissing: true);
+        envFile.Save(envFilePath);
+
+        var lines = File.ReadAllLines(envFilePath);
+
+        // Should have both keys
+        Assert.Contains("KEY1=value1", lines);
+        Assert.Contains("KEY2=value2", lines);
+    }
+
+    [Fact]
+    public void Load_EmptyFile_ReturnsEmptyEnvFile()
+    {
+        using var tempDir = new TempDirectory();
+        var envFilePath = Path.Combine(tempDir.Path, ".env");
+
+        // Create empty file
+        File.WriteAllText(envFilePath, string.Empty);
+
+        var envFile = EnvFile.Load(envFilePath);
+        envFile.Add("KEY1", "value1", "Comment");
+        envFile.Save(envFilePath);
+
+        var lines = File.ReadAllLines(envFilePath);
+        Assert.Contains("KEY1=value1", lines);
+    }
+
+    [Fact]
+    public void Load_NonExistentFile_ReturnsEmptyEnvFile()
+    {
+        using var tempDir = new TempDirectory();
+        var envFilePath = Path.Combine(tempDir.Path, ".env");
+
+        // Don't create the file
+        var envFile = EnvFile.Load(envFilePath);
+        envFile.Add("KEY1", "value1", "Comment");
+        envFile.Save(envFilePath);
+
+        Assert.True(File.Exists(envFilePath));
+        var lines = File.ReadAllLines(envFilePath);
+        Assert.Contains("KEY1=value1", lines);
+    }
+}