diff --git a/.devcontainer/build.sh b/.devcontainer/build.sh
new file mode 100755
index 00000000000000..761d911ef4467e
--- /dev/null
+++ b/.devcontainer/build.sh
@@ -0,0 +1,85 @@
+#!/bin/bash
+
+#
+#    Copyright (c) 2023 Project CHIP Authors
+#
+#    Licensed under the Apache License, Version 2.0 (the "License");
+#    you may not use this file except in compliance with the License.
+#    You may obtain a copy of the License at
+#
+#        http://www.apache.org/licenses/LICENSE-2.0
+#
+#    Unless required by applicable law or agreed to in writing, software
+#    distributed under the License is distributed on an "AS IS" BASIS,
+#    WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+#    See the License for the specific language governing permissions and
+#    limitations under the License.
+#
+
+HERE="$(dirname "$0")"
+CHIP_ROOT="$(realpath "$HERE"/..)"
+BUILD_VERSION="latest"
+IMAGE_TAG="matter-dev-environment:local"
+USER_UID=$UID
+
+function show_usage() {
+    cat <<EOF
+Usage: $0
+
+Build vscode dev environment docker image.
+
+Options:
+    -h,--help        Show this help
+    -t,--tag         Image tag - default is matter-dev-environment:local
+    -u,--uid         User UIDa - default is the current user ID
+    -v,--version     Build version - default is the latest
+EOF
+}
+
+SHORT=t:,u:,h:,v
+LONG=tag:,uid:,help:,version:
+OPTS=$(getopt -n build --options "$SHORT" --longoptions "$LONG" -- "$@")
+
+eval set -- "$OPTS"
+
+while :; do
+    case "$1" in
+        -h | --help)
+            show_usage
+            exit 0
+            ;;
+        -t | --tag)
+            IMAGE_TAG=$2
+            shift 2
+            ;;
+        -u | --uid)
+            USER_UID=$2
+            shift 2
+            ;;
+        -v | --version)
+            BUILD_VERSION=$2
+            shift 2
+            ;;
+        --)
+            shift
+            break
+            ;;
+        *)
+            echo "Unexpected option: $1"
+            show_usage
+            exit 2
+            ;;
+    esac
+done
+
+if [ "$USER_UID" = "0" ]; then
+    USER_UID=1000
+fi
+
+docker build \
+    -t "$IMAGE_TAG" \
+    --pull \
+    --build-arg USER_UID="$USER_UID" \
+    --build-arg BUILD_VERSION="$BUILD_VERSION" \
+    --network=host \
+    "$HERE"
diff --git a/.devcontainer/devcontainer.json b/.devcontainer/devcontainer.json
index c2659148b81655..63da06c81cf467 100644
--- a/.devcontainer/devcontainer.json
+++ b/.devcontainer/devcontainer.json
@@ -14,38 +14,43 @@
     "mounts": [
         "source=/var/run/docker.sock,target=/var/run/docker.sock,type=bind"
     ],
-    "build": {
-        "dockerfile": "Dockerfile",
-        "args": {
-            "BUILD_VERSION": "0.7.3"
-        }
-    },
+    "initializeCommand": ".devcontainer/build.sh --tag matter-dev-environment:local --version 0.7.3",
+    "image": "matter-dev-environment:local",
     "remoteUser": "vscode",
-    // Add the IDs of extensions you want installed when the container is created in the array below.
-    "extensions": [
-        "aaron-bond.better-comments",
-        "augustocdias.tasks-shell-input",
-        "christian-kohler.path-intellisense",
-        "eamodio.gitlens",
-        "editorconfig.editorconfig",
-        "esbenp.prettier-vscode",
-        "foxundermoon.shell-format",
-        "github.vscode-pull-request-github",
-        "maelvalais.autoconf",
-        "marus25.cortex-debug",
-        "ms-azuretools.vscode-docker",
-        "ms-vscode.cpptools",
-        "msedge-dev.gnls",
-        "redhat.vscode-yaml",
-        "vadimcn.vscode-lldb",
-        "xaver.clang-format",
-        "yuichinukiyama.vscode-preview-server",
-        "yzhang.markdown-all-in-one"
-    ],
-    // Use 'settings' to set *default* container specific settings.json values on container create.
-    // You can edit these settings after create using File > Preferences > Settings > Remote.
-    "settings": {
-        "terminal.integrated.shell.linux": "/bin/bash"
+    "customizations": {
+        "vscode": {
+            // Add the IDs of extensions you want installed when the container is created in the array below.
+            "extensions": [
+                "mcu-debug.debug-tracker-vscode",
+                "aaron-bond.better-comments",
+                "augustocdias.tasks-shell-input",
+                "christian-kohler.path-intellisense",
+                "eamodio.gitlens",
+                "editorconfig.editorconfig",
+                "esbenp.prettier-vscode",
+                "foxundermoon.shell-format",
+                "github.vscode-pull-request-github",
+                "maelvalais.autoconf",
+                "marus25.cortex-debug",
+                "ms-azuretools.vscode-docker",
+                "ms-vscode.cpptools",
+                "msedge-dev.gnls",
+                "redhat.vscode-yaml",
+                "vadimcn.vscode-lldb",
+                "xaver.clang-format",
+                "yuichinukiyama.vscode-preview-server",
+                "yzhang.markdown-all-in-one"
+            ],
+            "settings": {
+                "terminal.integrated.defaultProfile.linux": "bash",
+                "terminal.integrated.profiles.linux": {
+                    "bash": {
+                        "path": "/bin/bash",
+                        "args": ["-l"]
+                    }
+                }
+            }
+        }
     },
     "remoteEnv": {
         "GIT_PS1_SHOWDIRTYSTATE": "1",