diff --git a/test/e2e/common.go b/test/e2e/common.go
index d70d67cf8..38cf46043 100644
--- a/test/e2e/common.go
+++ b/test/e2e/common.go
@@ -23,6 +23,12 @@ func withCommand(command []string) podOption {
 	}
 }
 
+func withEnvironmentalVariables(envVar []corev1.EnvVar) podOption {
+	return func(p *corev1.Pod) {
+		p.Spec.Containers[0].Env = envVar
+	}
+}
+
 func withConfigMapBinding(mountPath string, configMapName string) podOption {
 	return func(p *corev1.Pod) {
 		p.Spec.Containers[0].VolumeMounts = append(p.Spec.Containers[0].VolumeMounts, corev1.VolumeMount{Name: "config-volume", MountPath: mountPath})
diff --git a/test/e2e/common_suite_test.go b/test/e2e/common_suite_test.go
index 3f889267c..1357cec94 100644
--- a/test/e2e/common_suite_test.go
+++ b/test/e2e/common_suite_test.go
@@ -163,6 +163,7 @@ func (tc *testCase) run() {
 				if tc.expectedPodLogString != "" {
 					LogString, err := comparePodLogString(ctx, client, *tc.pod, tc.expectedPodLogString)
 					if err != nil {
+						t.Logf("Output:%s", LogString)
 						t.Fatal(err)
 					}
 					t.Logf("Log output of peer pod:%s", LogString)
@@ -291,8 +292,8 @@ func comparePodLogString(ctx context.Context, client klient.Client, customPod v1
 		return podLogString, err
 	}
 
-	if podLogString != expectedPodlogString {
-		return podLogString, errors.New("Error: Pod Log doesn't match with Expected String")
+	if !strings.Contains(podLogString, expectedPodlogString) {
+		return podLogString, errors.New("Error: Pod Log doesn't contain Expected String")
 	}
 
 	return podLogString, nil
@@ -493,3 +494,30 @@ func doTestCreatePeerPodAndCheckWorkDirLogs(t *testing.T, assert CloudAssert) {
 	expectedPodLogString := "/other"
 	newTestCase(t, "WorkDirPeerPod", assert, "Peer pod with work directory has been created").withPod(pod).withExpectedPodLogString(expectedPodLogString).withCustomPodState(v1.PodSucceeded).run()
 }
+
+func doTestCreatePeerPodAndCheckEnvVariableLogsWithImageOnly(t *testing.T, assert CloudAssert) {
+	namespace := envconf.RandomName("default", 7)
+	podName := "env-variable-in-image"
+	imageName := "quay.io/confidential-containers/test-images:testenv"
+	pod := newPod(namespace, podName, podName, imageName, withRestartPolicy(v1.RestartPolicyNever))
+	expectedPodLogString := "ISPRODUCTION=false"
+	newTestCase(t, "EnvVariablePeerPodWithImageOnly", assert, "Peer pod with environmental variables has been created").withPod(pod).withExpectedPodLogString(expectedPodLogString).withCustomPodState(v1.PodSucceeded).run()
+}
+
+func doTestCreatePeerPodAndCheckEnvVariableLogsWithDeploymentOnly(t *testing.T, assert CloudAssert) {
+	namespace := envconf.RandomName("default", 7)
+	podName := "env-variable-in-config"
+	imageName := "nginx:latest"
+	pod := newPod(namespace, podName, podName, imageName, withRestartPolicy(v1.RestartPolicyNever), withEnvironmentalVariables([]v1.EnvVar{{Name: "ISPRODUCTION", Value: "true"}}), withCommand([]string{"/bin/sh", "-c", "env"}))
+	expectedPodLogString := "ISPRODUCTION=true"
+	newTestCase(t, "EnvVariablePeerPodWithDeploymentOnly", assert, "Peer pod with environmental variables has been created").withPod(pod).withExpectedPodLogString(expectedPodLogString).run()
+}
+
+func doTestCreatePeerPodAndCheckEnvVariableLogsWithImageAndDeployment(t *testing.T, assert CloudAssert) {
+	namespace := envconf.RandomName("default", 7)
+	podName := "env-variable-in-both"
+	imageName := "quay.io/confidential-containers/test-images:testenv"
+	pod := newPod(namespace, podName, podName, imageName, withRestartPolicy(v1.RestartPolicyNever), withEnvironmentalVariables([]v1.EnvVar{{Name: "ISPRODUCTION", Value: "true"}}))
+	expectedPodLogString := "ISPRODUCTION=true"
+	newTestCase(t, "EnvVariablePeerPodWithBoth", assert, "Peer pod with environmental variables has been created").withPod(pod).withExpectedPodLogString(expectedPodLogString).withCustomPodState(v1.PodSucceeded).run()
+}
diff --git a/test/e2e/fixtures/Dockerfile.testenv b/test/e2e/fixtures/Dockerfile.testenv
new file mode 100644
index 000000000..a909d103a
--- /dev/null
+++ b/test/e2e/fixtures/Dockerfile.testenv
@@ -0,0 +1,3 @@
+FROM --platform="${TARGETPLATFORM}" alpine:latest
+ENV ISPRODUCTION=false
+ENTRYPOINT [ "/bin/sh", "-c", "env" ]
diff --git a/test/e2e/ibmcloud_test.go b/test/e2e/ibmcloud_test.go
index c9f7090e8..4b8fd2e79 100644
--- a/test/e2e/ibmcloud_test.go
+++ b/test/e2e/ibmcloud_test.go
@@ -106,6 +106,27 @@ func TestCreatePeerPodAndCheckWorkDirLogs(t *testing.T) {
 	doTestCreatePeerPodAndCheckWorkDirLogs(t, assert)
 }
 
+func TestCreatePeerPodAndCheckEnvVariableLogsWithImageOnly(t *testing.T) {
+	assert := IBMCloudAssert{
+		vpc: pv.IBMCloudProps.VPC,
+	}
+	doTestCreatePeerPodAndCheckEnvVariableLogsWithImageOnly(t, assert)
+}
+
+func TestCreatePeerPodAndCheckEnvVariableLogsWithDeploymentOnly(t *testing.T) {
+	assert := IBMCloudAssert{
+		vpc: pv.IBMCloudProps.VPC,
+	}
+	doTestCreatePeerPodAndCheckEnvVariableLogsWithDeploymentOnly(t, assert)
+}
+
+func TestCreatePeerPodAndCheckEnvVariableLogsWithImageAndDeployment(t *testing.T) {
+	assert := IBMCloudAssert{
+		vpc: pv.IBMCloudProps.VPC,
+	}
+	doTestCreatePeerPodAndCheckEnvVariableLogsWithImageAndDeployment(t, assert)
+}
+
 // IBMCloudAssert implements the CloudAssert interface for ibmcloud.
 type IBMCloudAssert struct {
 	vpc *vpcv1.VpcV1