diff --git a/cli/azd/cmd/env.go b/cli/azd/cmd/env.go
index 96b0b92bb76..74975200536 100644
--- a/cli/azd/cmd/env.go
+++ b/cli/azd/cmd/env.go
@@ -8,6 +8,7 @@ import (
 	"errors"
 	"fmt"
 	"io"
+	"os"
 	"slices"
 	"strings"
 	"time"
@@ -30,6 +31,7 @@ import (
 	"github.com/azure/azure-dev/cli/azd/pkg/output/ux"
 	"github.com/azure/azure-dev/cli/azd/pkg/project"
 	"github.com/azure/azure-dev/cli/azd/pkg/prompt"
+	"github.com/joho/godotenv"
 	"github.com/sethvargo/go-retry"
 	"github.com/spf13/cobra"
 	"github.com/spf13/pflag"
@@ -120,19 +122,26 @@ func newEnvSetFlags(cmd *cobra.Command, global *internal.GlobalCommandOptions) *
 
 func newEnvSetCmd() *cobra.Command {
 	return &cobra.Command{
-		Use:   "set <key> <value>",
-		Short: "Manage your environment settings.",
-		Args:  cobra.ExactArgs(2),
+		Use:   "set [<key> <value>] | [<key>=<value> ...] | [--file <filepath>]",
+		Short: "Set one or more environment values.",
+		Long:  "Set one or more environment values using key-value pairs or by loading from a .env formatted file.",
+		Args:  cobra.ArbitraryArgs,
+		// Sample arguments used in tests
+		Annotations: map[string]string{
+			"azdtest.use": "set key value",
+		},
 	}
 }
 
 type envSetFlags struct {
 	internal.EnvFlag
 	global *internal.GlobalCommandOptions
+	file   string
 }
 
 func (f *envSetFlags) Bind(local *pflag.FlagSet, global *internal.GlobalCommandOptions) {
 	f.EnvFlag.Bind(local, global)
+	local.StringVar(&f.file, "file", "", "Path to .env formatted file to load environment values from.")
 	f.global = global
 }
 
@@ -164,13 +173,57 @@ func newEnvSetAction(
 }
 
 func (e *envSetAction) Run(ctx context.Context) (*actions.ActionResult, error) {
-	key := e.args[0]
-	value := e.args[1]
-
+	// To track case conflicts
 	dotEnv := e.env.Dotenv()
-	warnKeyCaseConflicts(ctx, e.console, dotEnv, key)
+	keyValues := make(map[string]string)
+
+	// Handle file input if specified
+	if e.flags.file != "" {
+		if len(e.args) > 0 {
+			return nil, fmt.Errorf("cannot combine --file flag with key-value arguments")
+		}
+		filename := e.flags.file
+		file, err := os.Open(filename)
+		if err != nil {
+			return nil, fmt.Errorf("failed to open file %s: %w", filename, err)
+		}
+		defer file.Close()
+
+		keyValues, err = godotenv.Parse(file)
+		if err != nil {
+			return nil, fmt.Errorf("failed to parse file %s: %w", filename, err)
+		}
+	} else if len(e.args) == 0 {
+		//nolint:lll
+		return nil, fmt.Errorf("no environment values provided. Use '<key> <value>', '<key>=<value>', or '--file <filepath>'")
+	} else if len(e.args) == 2 && !strings.Contains(e.args[0], "=") {
+		// Handle single key-value pair format: azd env set key value
+		key := e.args[0]
+		value := e.args[1]
+		keyValues[key] = value
+	} else {
+		// Handle key=value format: azd env set key=value [key2=value2 ...]
+		for _, arg := range e.args {
+			key, value, err := parseKeyValue(arg)
+			if err != nil {
+				return nil, err
+			}
+			keyValues[key] = value
+		}
+	}
+
+	// No environment values to set
+	if len(keyValues) == 0 {
+		return nil, fmt.Errorf("no environment values to set")
+	}
 
-	e.env.DotenvSet(key, value)
+	// Apply the values
+	for key, value := range keyValues {
+		warnKeyCaseConflicts(ctx, e.console, dotEnv, key)
+		e.env.DotenvSet(key, value)
+		// Update to check case conflicts in subsequent keys
+		dotEnv[key] = value
+	}
 
 	if err := e.envManager.Save(ctx, e.env); err != nil {
 		return nil, fmt.Errorf("saving environment: %w", err)
@@ -179,6 +232,17 @@ func (e *envSetAction) Run(ctx context.Context) (*actions.ActionResult, error) {
 	return nil, nil
 }
 
+// parseKeyValue parses a key=value string and returns the key and value parts
+func parseKeyValue(arg string) (string, string, error) {
+	parts := strings.SplitN(arg, "=", 2)
+	if len(parts) != 2 {
+		return "", "", fmt.Errorf("invalid key=value format: %s", arg)
+	}
+	key := parts[0]
+	value := parts[1]
+	return key, value, nil
+}
+
 // Prints a warning message if there are any case-insensitive conflicts with the provided key
 func warnKeyCaseConflicts(
 	ctx context.Context,
diff --git a/cli/azd/cmd/testdata/TestUsage-azd-env-set.snap b/cli/azd/cmd/testdata/TestUsage-azd-env-set.snap
index b1267496cdc..038d32ce199 100644
--- a/cli/azd/cmd/testdata/TestUsage-azd-env-set.snap
+++ b/cli/azd/cmd/testdata/TestUsage-azd-env-set.snap
@@ -1,11 +1,12 @@
 
-Manage your environment settings.
+Set one or more environment values.
 
 Usage
-  azd env set <key> <value> [flags]
+  azd env set [<key> <value>] | [<key>=<value> ...] | [--file <filepath>] [flags]
 
 Flags
     -e, --environment string 	: The name of the environment to use.
+        --file string        	: Path to .env formatted file to load environment values from.
 
 Global Flags
     -C, --cwd string 	: Sets the current working directory.
diff --git a/cli/azd/cmd/testdata/TestUsage-azd-env.snap b/cli/azd/cmd/testdata/TestUsage-azd-env.snap
index bd75c84fa62..a0b3ee72989 100644
--- a/cli/azd/cmd/testdata/TestUsage-azd-env.snap
+++ b/cli/azd/cmd/testdata/TestUsage-azd-env.snap
@@ -16,7 +16,7 @@ Available Commands
   new       	: Create a new environment and set it as the default.
   refresh   	: Refresh environment settings by using information from a previous infrastructure provision.
   select    	: Set the default environment.
-  set       	: Manage your environment settings.
+  set       	: Set one or more environment values.
   set-secret	: Set a <name> as a reference to a Key Vault secret in the environment.
 
 Global Flags