diff --git a/agent/agent.go b/agent/agent.go
index a7434b90d4854..b195368338242 100644
--- a/agent/agent.go
+++ b/agent/agent.go
@@ -1481,8 +1481,13 @@ func (a *agent) createTailnet(
 	}()
 	if err = a.trackGoroutine(func() {
 		defer apiListener.Close()
+		apiHandler, closeAPIHAndler := a.apiHandler()
+		defer func() {
+			_ = closeAPIHAndler()
+		}()
 		server := &http.Server{
-			Handler:           a.apiHandler(),
+			BaseContext:       func(net.Listener) context.Context { return ctx },
+			Handler:           apiHandler,
 			ReadTimeout:       20 * time.Second,
 			ReadHeaderTimeout: 20 * time.Second,
 			WriteTimeout:      20 * time.Second,
@@ -1493,6 +1498,7 @@ func (a *agent) createTailnet(
 			case <-ctx.Done():
 			case <-a.hardCtx.Done():
 			}
+			_ = closeAPIHAndler()
 			_ = server.Close()
 		}()
 
diff --git a/agent/agentcontainers/api.go b/agent/agentcontainers/api.go
index 9a028e565b6ca..489bc1e55194c 100644
--- a/agent/agentcontainers/api.go
+++ b/agent/agentcontainers/api.go
@@ -10,11 +10,13 @@ import (
 	"strings"
 	"time"
 
+	"github.com/fsnotify/fsnotify"
 	"github.com/go-chi/chi/v5"
 	"github.com/google/uuid"
 	"golang.org/x/xerrors"
 
 	"cdr.dev/slog"
+	"github.com/coder/coder/v2/agent/agentcontainers/watcher"
 	"github.com/coder/coder/v2/agent/agentexec"
 	"github.com/coder/coder/v2/coderd/httpapi"
 	"github.com/coder/coder/v2/codersdk"
@@ -30,6 +32,12 @@ const (
 // API is responsible for container-related operations in the agent.
 // It provides methods to list and manage containers.
 type API struct {
+	ctx     context.Context
+	cancel  context.CancelFunc
+	done    chan struct{}
+	logger  slog.Logger
+	watcher watcher.Watcher
+
 	cacheDuration time.Duration
 	cl            Lister
 	dccli         DevcontainerCLI
@@ -37,11 +45,12 @@ type API struct {
 
 	// lockCh protects the below fields. We use a channel instead of a
 	// mutex so we can handle cancellation properly.
-	lockCh             chan struct{}
-	containers         codersdk.WorkspaceAgentListContainersResponse
-	mtime              time.Time
-	devcontainerNames  map[string]struct{}                   // Track devcontainer names to avoid duplicates.
-	knownDevcontainers []codersdk.WorkspaceAgentDevcontainer // Track predefined and runtime-detected devcontainers.
+	lockCh                  chan struct{}
+	containers              codersdk.WorkspaceAgentListContainersResponse
+	mtime                   time.Time
+	devcontainerNames       map[string]struct{}                   // Track devcontainer names to avoid duplicates.
+	knownDevcontainers      []codersdk.WorkspaceAgentDevcontainer // Track predefined and runtime-detected devcontainers.
+	configFileModifiedTimes map[string]time.Time                  // Track when config files were last modified.
 }
 
 // Option is a functional option for API.
@@ -55,6 +64,16 @@ func WithLister(cl Lister) Option {
 	}
 }
 
+// WithClock sets the quartz.Clock implementation to use.
+// This is primarily used for testing to control time.
+func WithClock(clock quartz.Clock) Option {
+	return func(api *API) {
+		api.clock = clock
+	}
+}
+
+// WithDevcontainerCLI sets the DevcontainerCLI implementation to use.
+// This can be used in tests to modify @devcontainer/cli behavior.
 func WithDevcontainerCLI(dccli DevcontainerCLI) Option {
 	return func(api *API) {
 		api.dccli = dccli
@@ -76,14 +95,29 @@ func WithDevcontainers(devcontainers []codersdk.WorkspaceAgentDevcontainer) Opti
 	}
 }
 
+// WithWatcher sets the file watcher implementation to use. By default a
+// noop watcher is used. This can be used in tests to modify the watcher
+// behavior or to use an actual file watcher (e.g. fsnotify).
+func WithWatcher(w watcher.Watcher) Option {
+	return func(api *API) {
+		api.watcher = w
+	}
+}
+
 // NewAPI returns a new API with the given options applied.
 func NewAPI(logger slog.Logger, options ...Option) *API {
+	ctx, cancel := context.WithCancel(context.Background())
 	api := &API{
-		clock:              quartz.NewReal(),
-		cacheDuration:      defaultGetContainersCacheDuration,
-		lockCh:             make(chan struct{}, 1),
-		devcontainerNames:  make(map[string]struct{}),
-		knownDevcontainers: []codersdk.WorkspaceAgentDevcontainer{},
+		ctx:                     ctx,
+		cancel:                  cancel,
+		done:                    make(chan struct{}),
+		logger:                  logger,
+		clock:                   quartz.NewReal(),
+		cacheDuration:           defaultGetContainersCacheDuration,
+		lockCh:                  make(chan struct{}, 1),
+		devcontainerNames:       make(map[string]struct{}),
+		knownDevcontainers:      []codersdk.WorkspaceAgentDevcontainer{},
+		configFileModifiedTimes: make(map[string]time.Time),
 	}
 	for _, opt := range options {
 		opt(api)
@@ -92,12 +126,64 @@ func NewAPI(logger slog.Logger, options ...Option) *API {
 		api.cl = &DockerCLILister{}
 	}
 	if api.dccli == nil {
-		api.dccli = NewDevcontainerCLI(logger, agentexec.DefaultExecer)
+		api.dccli = NewDevcontainerCLI(logger.Named("devcontainer-cli"), agentexec.DefaultExecer)
+	}
+	if api.watcher == nil {
+		api.watcher = watcher.NewNoop()
+	}
+
+	// Make sure we watch the devcontainer config files for changes.
+	for _, devcontainer := range api.knownDevcontainers {
+		if devcontainer.ConfigPath != "" {
+			if err := api.watcher.Add(devcontainer.ConfigPath); err != nil {
+				api.logger.Error(ctx, "watch devcontainer config file failed", slog.Error(err), slog.F("file", devcontainer.ConfigPath))
+			}
+		}
 	}
 
+	go api.start()
+
 	return api
 }
 
+func (api *API) start() {
+	defer close(api.done)
+
+	for {
+		event, err := api.watcher.Next(api.ctx)
+		if err != nil {
+			if errors.Is(err, watcher.ErrClosed) {
+				api.logger.Debug(api.ctx, "watcher closed")
+				return
+			}
+			if api.ctx.Err() != nil {
+				api.logger.Debug(api.ctx, "api context canceled")
+				return
+			}
+			api.logger.Error(api.ctx, "watcher error waiting for next event", slog.Error(err))
+			continue
+		}
+		if event == nil {
+			continue
+		}
+
+		now := api.clock.Now()
+		switch {
+		case event.Has(fsnotify.Create | fsnotify.Write):
+			api.logger.Debug(api.ctx, "devcontainer config file changed", slog.F("file", event.Name))
+			api.markDevcontainerDirty(event.Name, now)
+		case event.Has(fsnotify.Remove):
+			api.logger.Debug(api.ctx, "devcontainer config file removed", slog.F("file", event.Name))
+			api.markDevcontainerDirty(event.Name, now)
+		case event.Has(fsnotify.Rename):
+			api.logger.Debug(api.ctx, "devcontainer config file renamed", slog.F("file", event.Name))
+			api.markDevcontainerDirty(event.Name, now)
+		default:
+			api.logger.Debug(api.ctx, "devcontainer config file event ignored", slog.F("file", event.Name), slog.F("event", event))
+		}
+	}
+}
+
 // Routes returns the HTTP handler for container-related routes.
 func (api *API) Routes() http.Handler {
 	r := chi.NewRouter()
@@ -143,12 +229,12 @@ func copyListContainersResponse(resp codersdk.WorkspaceAgentListContainersRespon
 
 func (api *API) getContainers(ctx context.Context) (codersdk.WorkspaceAgentListContainersResponse, error) {
 	select {
+	case <-api.ctx.Done():
+		return codersdk.WorkspaceAgentListContainersResponse{}, api.ctx.Err()
 	case <-ctx.Done():
 		return codersdk.WorkspaceAgentListContainersResponse{}, ctx.Err()
 	case api.lockCh <- struct{}{}:
-		defer func() {
-			<-api.lockCh
-		}()
+		defer func() { <-api.lockCh }()
 	}
 
 	now := api.clock.Now()
@@ -165,51 +251,99 @@ func (api *API) getContainers(ctx context.Context) (codersdk.WorkspaceAgentListC
 	api.containers = updated
 	api.mtime = now
 
+	dirtyStates := make(map[string]bool)
 	// Reset all known devcontainers to not running.
 	for i := range api.knownDevcontainers {
 		api.knownDevcontainers[i].Running = false
 		api.knownDevcontainers[i].Container = nil
+
+		// Preserve the dirty state and store in map for lookup.
+		dirtyStates[api.knownDevcontainers[i].WorkspaceFolder] = api.knownDevcontainers[i].Dirty
 	}
 
 	// Check if the container is running and update the known devcontainers.
 	for _, container := range updated.Containers {
 		workspaceFolder := container.Labels[DevcontainerLocalFolderLabel]
-		if workspaceFolder != "" {
-			// Check if this is already in our known list.
-			if knownIndex := slices.IndexFunc(api.knownDevcontainers, func(dc codersdk.WorkspaceAgentDevcontainer) bool {
-				return dc.WorkspaceFolder == workspaceFolder
-			}); knownIndex != -1 {
-				// Update existing entry with runtime information.
-				if api.knownDevcontainers[knownIndex].ConfigPath == "" {
-					api.knownDevcontainers[knownIndex].ConfigPath = container.Labels[DevcontainerConfigFileLabel]
+		configFile := container.Labels[DevcontainerConfigFileLabel]
+
+		if workspaceFolder == "" {
+			continue
+		}
+
+		// Check if this is already in our known list.
+		if knownIndex := slices.IndexFunc(api.knownDevcontainers, func(dc codersdk.WorkspaceAgentDevcontainer) bool {
+			return dc.WorkspaceFolder == workspaceFolder
+		}); knownIndex != -1 {
+			// Update existing entry with runtime information.
+			if configFile != "" && api.knownDevcontainers[knownIndex].ConfigPath == "" {
+				api.knownDevcontainers[knownIndex].ConfigPath = configFile
+				if err := api.watcher.Add(configFile); err != nil {
+					api.logger.Error(ctx, "watch devcontainer config file failed", slog.Error(err), slog.F("file", configFile))
 				}
-				api.knownDevcontainers[knownIndex].Running = container.Running
-				api.knownDevcontainers[knownIndex].Container = &container
-				continue
 			}
+			api.knownDevcontainers[knownIndex].Running = container.Running
+			api.knownDevcontainers[knownIndex].Container = &container
+
+			// Check if this container was created after the config
+			// file was modified.
+			if configFile != "" && api.knownDevcontainers[knownIndex].Dirty {
+				lastModified, hasModTime := api.configFileModifiedTimes[configFile]
+				if hasModTime && container.CreatedAt.After(lastModified) {
+					api.logger.Info(ctx, "clearing dirty flag for container created after config modification",
+						slog.F("container", container.ID),
+						slog.F("created_at", container.CreatedAt),
+						slog.F("config_modified_at", lastModified),
+						slog.F("file", configFile),
+					)
+					api.knownDevcontainers[knownIndex].Dirty = false
+				}
+			}
+			continue
+		}
 
-			// If not in our known list, add as a runtime detected entry.
-			name := path.Base(workspaceFolder)
-			if _, ok := api.devcontainerNames[name]; ok {
-				// Try to find a unique name by appending a number.
-				for i := 2; ; i++ {
-					newName := fmt.Sprintf("%s-%d", name, i)
-					if _, ok := api.devcontainerNames[newName]; !ok {
-						name = newName
-						break
-					}
+		// NOTE(mafredri): This name impl. may change to accommodate devcontainer agents RFC.
+		// If not in our known list, add as a runtime detected entry.
+		name := path.Base(workspaceFolder)
+		if _, ok := api.devcontainerNames[name]; ok {
+			// Try to find a unique name by appending a number.
+			for i := 2; ; i++ {
+				newName := fmt.Sprintf("%s-%d", name, i)
+				if _, ok := api.devcontainerNames[newName]; !ok {
+					name = newName
+					break
 				}
 			}
-			api.devcontainerNames[name] = struct{}{}
-			api.knownDevcontainers = append(api.knownDevcontainers, codersdk.WorkspaceAgentDevcontainer{
-				ID:              uuid.New(),
-				Name:            name,
-				WorkspaceFolder: workspaceFolder,
-				ConfigPath:      container.Labels[DevcontainerConfigFileLabel],
-				Running:         container.Running,
-				Container:       &container,
-			})
 		}
+		api.devcontainerNames[name] = struct{}{}
+		if configFile != "" {
+			if err := api.watcher.Add(configFile); err != nil {
+				api.logger.Error(ctx, "watch devcontainer config file failed", slog.Error(err), slog.F("file", configFile))
+			}
+		}
+
+		dirty := dirtyStates[workspaceFolder]
+		if dirty {
+			lastModified, hasModTime := api.configFileModifiedTimes[configFile]
+			if hasModTime && container.CreatedAt.After(lastModified) {
+				api.logger.Info(ctx, "new container created after config modification, not marking as dirty",
+					slog.F("container", container.ID),
+					slog.F("created_at", container.CreatedAt),
+					slog.F("config_modified_at", lastModified),
+					slog.F("file", configFile),
+				)
+				dirty = false
+			}
+		}
+
+		api.knownDevcontainers = append(api.knownDevcontainers, codersdk.WorkspaceAgentDevcontainer{
+			ID:              uuid.New(),
+			Name:            name,
+			WorkspaceFolder: workspaceFolder,
+			ConfigPath:      configFile,
+			Running:         container.Running,
+			Dirty:           dirty,
+			Container:       &container,
+		})
 	}
 
 	return copyListContainersResponse(api.containers), nil
@@ -271,6 +405,29 @@ func (api *API) handleRecreate(w http.ResponseWriter, r *http.Request) {
 		return
 	}
 
+	// TODO(mafredri): Temporarily handle clearing the dirty state after
+	// recreation, later on this should be handled by a "container watcher".
+	select {
+	case <-api.ctx.Done():
+		return
+	case <-ctx.Done():
+		return
+	case api.lockCh <- struct{}{}:
+		defer func() { <-api.lockCh }()
+	}
+	for i := range api.knownDevcontainers {
+		if api.knownDevcontainers[i].WorkspaceFolder == workspaceFolder {
+			if api.knownDevcontainers[i].Dirty {
+				api.logger.Info(ctx, "clearing dirty flag after recreation",
+					slog.F("workspace_folder", workspaceFolder),
+					slog.F("name", api.knownDevcontainers[i].Name),
+				)
+				api.knownDevcontainers[i].Dirty = false
+			}
+			break
+		}
+	}
+
 	w.WriteHeader(http.StatusNoContent)
 }
 
@@ -289,6 +446,8 @@ func (api *API) handleListDevcontainers(w http.ResponseWriter, r *http.Request)
 	}
 
 	select {
+	case <-api.ctx.Done():
+		return
 	case <-ctx.Done():
 		return
 	case api.lockCh <- struct{}{}:
@@ -309,3 +468,46 @@ func (api *API) handleListDevcontainers(w http.ResponseWriter, r *http.Request)
 
 	httpapi.Write(ctx, w, http.StatusOK, response)
 }
+
+// markDevcontainerDirty finds the devcontainer with the given config file path
+// and marks it as dirty. It acquires the lock before modifying the state.
+func (api *API) markDevcontainerDirty(configPath string, modifiedAt time.Time) {
+	select {
+	case <-api.ctx.Done():
+		return
+	case api.lockCh <- struct{}{}:
+		defer func() { <-api.lockCh }()
+	}
+
+	// Record the timestamp of when this configuration file was modified.
+	api.configFileModifiedTimes[configPath] = modifiedAt
+
+	for i := range api.knownDevcontainers {
+		if api.knownDevcontainers[i].ConfigPath != configPath {
+			continue
+		}
+
+		// TODO(mafredri): Simplistic mark for now, we should check if the
+		// container is running and if the config file was modified after
+		// the container was created.
+		if !api.knownDevcontainers[i].Dirty {
+			api.logger.Info(api.ctx, "marking devcontainer as dirty",
+				slog.F("file", configPath),
+				slog.F("name", api.knownDevcontainers[i].Name),
+				slog.F("workspace_folder", api.knownDevcontainers[i].WorkspaceFolder),
+				slog.F("modified_at", modifiedAt),
+			)
+			api.knownDevcontainers[i].Dirty = true
+		}
+	}
+}
+
+func (api *API) Close() error {
+	api.cancel()
+	<-api.done
+	err := api.watcher.Close()
+	if err != nil {
+		return err
+	}
+	return nil
+}
diff --git a/agent/agentcontainers/api_internal_test.go b/agent/agentcontainers/api_internal_test.go
index 756526d341d68..331c41e8df10b 100644
--- a/agent/agentcontainers/api_internal_test.go
+++ b/agent/agentcontainers/api_internal_test.go
@@ -103,6 +103,8 @@ func TestAPI(t *testing.T) {
 					logger     = slogtest.Make(t, nil).Leveled(slog.LevelDebug)
 					api        = NewAPI(logger, WithLister(mockLister))
 				)
+				defer api.Close()
+
 				api.cacheDuration = tc.cacheDur
 				api.clock = clk
 				api.containers = tc.cacheData
diff --git a/agent/agentcontainers/api_test.go b/agent/agentcontainers/api_test.go
index 6f2fe5ce84919..a246d929d9089 100644
--- a/agent/agentcontainers/api_test.go
+++ b/agent/agentcontainers/api_test.go
@@ -6,7 +6,9 @@ import (
 	"net/http"
 	"net/http/httptest"
 	"testing"
+	"time"
 
+	"github.com/fsnotify/fsnotify"
 	"github.com/go-chi/chi/v5"
 	"github.com/google/uuid"
 	"github.com/stretchr/testify/assert"
@@ -17,6 +19,8 @@ import (
 	"cdr.dev/slog/sloggers/slogtest"
 	"github.com/coder/coder/v2/agent/agentcontainers"
 	"github.com/coder/coder/v2/codersdk"
+	"github.com/coder/coder/v2/testutil"
+	"github.com/coder/quartz"
 )
 
 // fakeLister implements the agentcontainers.Lister interface for
@@ -41,6 +45,103 @@ func (f *fakeDevcontainerCLI) Up(_ context.Context, _, _ string, _ ...agentconta
 	return f.id, f.err
 }
 
+// fakeWatcher implements the watcher.Watcher interface for testing.
+// It allows controlling what events are sent and when.
+type fakeWatcher struct {
+	t           testing.TB
+	events      chan *fsnotify.Event
+	closeNotify chan struct{}
+	addedPaths  []string
+	closed      bool
+	nextCalled  chan struct{}
+	nextErr     error
+	closeErr    error
+}
+
+func newFakeWatcher(t testing.TB) *fakeWatcher {
+	return &fakeWatcher{
+		t:           t,
+		events:      make(chan *fsnotify.Event, 10), // Buffered to avoid blocking tests.
+		closeNotify: make(chan struct{}),
+		addedPaths:  make([]string, 0),
+		nextCalled:  make(chan struct{}, 1),
+	}
+}
+
+func (w *fakeWatcher) Add(file string) error {
+	w.addedPaths = append(w.addedPaths, file)
+	return nil
+}
+
+func (w *fakeWatcher) Remove(file string) error {
+	for i, path := range w.addedPaths {
+		if path == file {
+			w.addedPaths = append(w.addedPaths[:i], w.addedPaths[i+1:]...)
+			break
+		}
+	}
+	return nil
+}
+
+func (w *fakeWatcher) clearNext() {
+	select {
+	case <-w.nextCalled:
+	default:
+	}
+}
+
+func (w *fakeWatcher) waitNext(ctx context.Context) bool {
+	select {
+	case <-w.t.Context().Done():
+		return false
+	case <-ctx.Done():
+		return false
+	case <-w.closeNotify:
+		return false
+	case <-w.nextCalled:
+		return true
+	}
+}
+
+func (w *fakeWatcher) Next(ctx context.Context) (*fsnotify.Event, error) {
+	select {
+	case w.nextCalled <- struct{}{}:
+	default:
+	}
+
+	if w.nextErr != nil {
+		err := w.nextErr
+		w.nextErr = nil
+		return nil, err
+	}
+
+	select {
+	case <-ctx.Done():
+		return nil, ctx.Err()
+	case <-w.closeNotify:
+		return nil, xerrors.New("watcher closed")
+	case event := <-w.events:
+		return event, nil
+	}
+}
+
+func (w *fakeWatcher) Close() error {
+	if w.closed {
+		return nil
+	}
+
+	w.closed = true
+	close(w.closeNotify)
+	return w.closeErr
+}
+
+// sendEvent sends a file system event through the fake watcher.
+func (w *fakeWatcher) sendEventWaitNextCalled(ctx context.Context, event fsnotify.Event) {
+	w.clearNext()
+	w.events <- &event
+	w.waitNext(ctx)
+}
+
 func TestAPI(t *testing.T) {
 	t.Parallel()
 
@@ -153,6 +254,7 @@ func TestAPI(t *testing.T) {
 					agentcontainers.WithLister(tt.lister),
 					agentcontainers.WithDevcontainerCLI(tt.devcontainerCLI),
 				)
+				defer api.Close()
 				r.Mount("/", api.Routes())
 
 				// Simulate HTTP request to the recreate endpoint.
@@ -463,6 +565,7 @@ func TestAPI(t *testing.T) {
 				}
 
 				api := agentcontainers.NewAPI(logger, apiOptions...)
+				defer api.Close()
 				r.Mount("/", api.Routes())
 
 				req := httptest.NewRequest(http.MethodGet, "/devcontainers", nil)
@@ -489,6 +592,109 @@ func TestAPI(t *testing.T) {
 			})
 		}
 	})
+
+	t.Run("FileWatcher", func(t *testing.T) {
+		t.Parallel()
+
+		ctx := testutil.Context(t, testutil.WaitMedium)
+
+		startTime := time.Date(2025, 1, 1, 12, 0, 0, 0, time.UTC)
+		mClock := quartz.NewMock(t)
+		mClock.Set(startTime)
+		fWatcher := newFakeWatcher(t)
+
+		// Create a fake container with a config file.
+		configPath := "/workspace/project/.devcontainer/devcontainer.json"
+		container := codersdk.WorkspaceAgentContainer{
+			ID:           "container-id",
+			FriendlyName: "container-name",
+			Running:      true,
+			CreatedAt:    startTime.Add(-1 * time.Hour), // Created 1 hour before test start.
+			Labels: map[string]string{
+				agentcontainers.DevcontainerLocalFolderLabel: "/workspace/project",
+				agentcontainers.DevcontainerConfigFileLabel:  configPath,
+			},
+		}
+
+		fLister := &fakeLister{
+			containers: codersdk.WorkspaceAgentListContainersResponse{
+				Containers: []codersdk.WorkspaceAgentContainer{container},
+			},
+		}
+
+		logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+		api := agentcontainers.NewAPI(
+			logger,
+			agentcontainers.WithLister(fLister),
+			agentcontainers.WithWatcher(fWatcher),
+			agentcontainers.WithClock(mClock),
+		)
+		defer api.Close()
+
+		r := chi.NewRouter()
+		r.Mount("/", api.Routes())
+
+		// Call the list endpoint first to ensure config files are
+		// detected and watched.
+		req := httptest.NewRequest(http.MethodGet, "/devcontainers", nil)
+		rec := httptest.NewRecorder()
+		r.ServeHTTP(rec, req)
+		require.Equal(t, http.StatusOK, rec.Code)
+
+		var response codersdk.WorkspaceAgentDevcontainersResponse
+		err := json.NewDecoder(rec.Body).Decode(&response)
+		require.NoError(t, err)
+		require.Len(t, response.Devcontainers, 1)
+		assert.False(t, response.Devcontainers[0].Dirty,
+			"container should not be marked as dirty initially")
+
+		// Verify the watcher is watching the config file.
+		assert.Contains(t, fWatcher.addedPaths, configPath,
+			"watcher should be watching the container's config file")
+
+		// Make sure the start loop has been called.
+		fWatcher.waitNext(ctx)
+
+		// Send a file modification event and check if the container is
+		// marked dirty.
+		fWatcher.sendEventWaitNextCalled(ctx, fsnotify.Event{
+			Name: configPath,
+			Op:   fsnotify.Write,
+		})
+
+		mClock.Advance(time.Minute).MustWait(ctx)
+
+		// Check if the container is marked as dirty.
+		req = httptest.NewRequest(http.MethodGet, "/devcontainers", nil)
+		rec = httptest.NewRecorder()
+		r.ServeHTTP(rec, req)
+		require.Equal(t, http.StatusOK, rec.Code)
+
+		err = json.NewDecoder(rec.Body).Decode(&response)
+		require.NoError(t, err)
+		require.Len(t, response.Devcontainers, 1)
+		assert.True(t, response.Devcontainers[0].Dirty,
+			"container should be marked as dirty after config file was modified")
+
+		mClock.Advance(time.Minute).MustWait(ctx)
+
+		container.ID = "new-container-id" // Simulate a new container ID after recreation.
+		container.FriendlyName = "new-container-name"
+		container.CreatedAt = mClock.Now() // Update the creation time.
+		fLister.containers.Containers = []codersdk.WorkspaceAgentContainer{container}
+
+		// Check if dirty flag is cleared.
+		req = httptest.NewRequest(http.MethodGet, "/devcontainers", nil)
+		rec = httptest.NewRecorder()
+		r.ServeHTTP(rec, req)
+		require.Equal(t, http.StatusOK, rec.Code)
+
+		err = json.NewDecoder(rec.Body).Decode(&response)
+		require.NoError(t, err)
+		require.Len(t, response.Devcontainers, 1)
+		assert.False(t, response.Devcontainers[0].Dirty,
+			"dirty flag should be cleared after container recreation")
+	})
 }
 
 // mustFindDevcontainerByPath returns the devcontainer with the given workspace
diff --git a/agent/agentcontainers/watcher/noop.go b/agent/agentcontainers/watcher/noop.go
new file mode 100644
index 0000000000000..4d1307b71c9ad
--- /dev/null
+++ b/agent/agentcontainers/watcher/noop.go
@@ -0,0 +1,48 @@
+package watcher
+
+import (
+	"context"
+	"sync"
+
+	"github.com/fsnotify/fsnotify"
+)
+
+// NewNoop creates a new watcher that does nothing.
+func NewNoop() Watcher {
+	return &noopWatcher{done: make(chan struct{})}
+}
+
+type noopWatcher struct {
+	mu     sync.Mutex
+	closed bool
+	done   chan struct{}
+}
+
+func (*noopWatcher) Add(string) error {
+	return nil
+}
+
+func (*noopWatcher) Remove(string) error {
+	return nil
+}
+
+// Next blocks until the context is canceled or the watcher is closed.
+func (n *noopWatcher) Next(ctx context.Context) (*fsnotify.Event, error) {
+	select {
+	case <-ctx.Done():
+		return nil, ctx.Err()
+	case <-n.done:
+		return nil, ErrClosed
+	}
+}
+
+func (n *noopWatcher) Close() error {
+	n.mu.Lock()
+	defer n.mu.Unlock()
+	if n.closed {
+		return ErrClosed
+	}
+	n.closed = true
+	close(n.done)
+	return nil
+}
diff --git a/agent/agentcontainers/watcher/noop_test.go b/agent/agentcontainers/watcher/noop_test.go
new file mode 100644
index 0000000000000..5e9aa07f89925
--- /dev/null
+++ b/agent/agentcontainers/watcher/noop_test.go
@@ -0,0 +1,70 @@
+package watcher_test
+
+import (
+	"context"
+	"testing"
+	"time"
+
+	"github.com/stretchr/testify/assert"
+	"github.com/stretchr/testify/require"
+
+	"github.com/coder/coder/v2/agent/agentcontainers/watcher"
+	"github.com/coder/coder/v2/testutil"
+)
+
+func TestNoopWatcher(t *testing.T) {
+	t.Parallel()
+
+	// Create the noop watcher under test.
+	wut := watcher.NewNoop()
+
+	// Test adding/removing files (should have no effect).
+	err := wut.Add("some-file.txt")
+	assert.NoError(t, err, "noop watcher should not return error on Add")
+
+	err = wut.Remove("some-file.txt")
+	assert.NoError(t, err, "noop watcher should not return error on Remove")
+
+	ctx, cancel := context.WithCancel(t.Context())
+	defer cancel()
+
+	// Start a goroutine to wait for Next to return.
+	errC := make(chan error, 1)
+	go func() {
+		_, err := wut.Next(ctx)
+		errC <- err
+	}()
+
+	select {
+	case <-errC:
+		require.Fail(t, "want Next to block")
+	default:
+	}
+
+	// Cancel the context and check that Next returns.
+	cancel()
+
+	select {
+	case err := <-errC:
+		assert.Error(t, err, "want Next error when context is canceled")
+	case <-time.After(testutil.WaitShort):
+		t.Fatal("want Next to return after context was canceled")
+	}
+
+	// Test Close.
+	err = wut.Close()
+	assert.NoError(t, err, "want no error on Close")
+}
+
+func TestNoopWatcher_CloseBeforeNext(t *testing.T) {
+	t.Parallel()
+
+	wut := watcher.NewNoop()
+
+	err := wut.Close()
+	require.NoError(t, err, "close watcher failed")
+
+	ctx := context.Background()
+	_, err = wut.Next(ctx)
+	assert.Error(t, err, "want Next to return error when watcher is closed")
+}
diff --git a/agent/agentcontainers/watcher/watcher.go b/agent/agentcontainers/watcher/watcher.go
new file mode 100644
index 0000000000000..8e1acb9697cce
--- /dev/null
+++ b/agent/agentcontainers/watcher/watcher.go
@@ -0,0 +1,195 @@
+// Package watcher provides file system watching capabilities for the
+// agent. It defines an interface for monitoring file changes and
+// implementations that can be used to detect when configuration files
+// are modified. This is primarily used to track changes to devcontainer
+// configuration files and notify users when containers need to be
+// recreated to apply the new configuration.
+package watcher
+
+import (
+	"context"
+	"path/filepath"
+	"sync"
+
+	"github.com/fsnotify/fsnotify"
+	"golang.org/x/xerrors"
+)
+
+var ErrClosed = xerrors.New("watcher closed")
+
+// Watcher defines an interface for monitoring file system changes.
+// Implementations track file modifications and provide an event stream
+// that clients can consume to react to changes.
+type Watcher interface {
+	// Add starts watching a file for changes.
+	Add(file string) error
+
+	// Remove stops watching a file for changes.
+	Remove(file string) error
+
+	// Next blocks until a file system event occurs or the context is canceled.
+	// It returns the next event or an error if the watcher encountered a problem.
+	Next(context.Context) (*fsnotify.Event, error)
+
+	// Close shuts down the watcher and releases any resources.
+	Close() error
+}
+
+type fsnotifyWatcher struct {
+	*fsnotify.Watcher
+
+	mu           sync.Mutex      // Protects following.
+	watchedFiles map[string]bool // Files being watched (absolute path -> bool).
+	watchedDirs  map[string]int  // Refcount of directories being watched (absolute path -> count).
+	closed       bool            // Protects closing of done.
+	done         chan struct{}
+}
+
+// NewFSNotify creates a new file system watcher that watches parent directories
+// instead of individual files for more reliable event detection.
+func NewFSNotify() (Watcher, error) {
+	w, err := fsnotify.NewWatcher()
+	if err != nil {
+		return nil, xerrors.Errorf("create fsnotify watcher: %w", err)
+	}
+	return &fsnotifyWatcher{
+		Watcher:      w,
+		done:         make(chan struct{}),
+		watchedFiles: make(map[string]bool),
+		watchedDirs:  make(map[string]int),
+	}, nil
+}
+
+func (f *fsnotifyWatcher) Add(file string) error {
+	absPath, err := filepath.Abs(file)
+	if err != nil {
+		return xerrors.Errorf("absolute path: %w", err)
+	}
+
+	dir := filepath.Dir(absPath)
+
+	f.mu.Lock()
+	defer f.mu.Unlock()
+
+	// Already watching this file.
+	if f.closed || f.watchedFiles[absPath] {
+		return nil
+	}
+
+	// Start watching the parent directory if not already watching.
+	if f.watchedDirs[dir] == 0 {
+		if err := f.Watcher.Add(dir); err != nil {
+			return xerrors.Errorf("add directory to watcher: %w", err)
+		}
+	}
+
+	// Increment the reference count for this directory.
+	f.watchedDirs[dir]++
+	// Mark this file as watched.
+	f.watchedFiles[absPath] = true
+
+	return nil
+}
+
+func (f *fsnotifyWatcher) Remove(file string) error {
+	absPath, err := filepath.Abs(file)
+	if err != nil {
+		return xerrors.Errorf("absolute path: %w", err)
+	}
+
+	dir := filepath.Dir(absPath)
+
+	f.mu.Lock()
+	defer f.mu.Unlock()
+
+	// Not watching this file.
+	if f.closed || !f.watchedFiles[absPath] {
+		return nil
+	}
+
+	// Remove the file from our watch list.
+	delete(f.watchedFiles, absPath)
+
+	// Decrement the reference count for this directory.
+	f.watchedDirs[dir]--
+
+	// If no more files in this directory are being watched, stop
+	// watching the directory.
+	if f.watchedDirs[dir] <= 0 {
+		f.watchedDirs[dir] = 0 // Ensure non-negative count.
+		if err := f.Watcher.Remove(dir); err != nil {
+			return xerrors.Errorf("remove directory from watcher: %w", err)
+		}
+		delete(f.watchedDirs, dir)
+	}
+
+	return nil
+}
+
+func (f *fsnotifyWatcher) Next(ctx context.Context) (event *fsnotify.Event, err error) {
+	defer func() {
+		if ctx.Err() != nil {
+			event = nil
+			err = ctx.Err()
+		}
+	}()
+
+	for {
+		select {
+		case <-ctx.Done():
+			return nil, ctx.Err()
+		case evt, ok := <-f.Events:
+			if !ok {
+				return nil, ErrClosed
+			}
+
+			// Get the absolute path to match against our watched files.
+			absPath, err := filepath.Abs(evt.Name)
+			if err != nil {
+				continue
+			}
+
+			f.mu.Lock()
+			if f.closed {
+				f.mu.Unlock()
+				return nil, ErrClosed
+			}
+			isWatched := f.watchedFiles[absPath]
+			f.mu.Unlock()
+			if !isWatched {
+				continue // Ignore events for files not being watched.
+			}
+
+			return &evt, nil
+
+		case err, ok := <-f.Errors:
+			if !ok {
+				return nil, ErrClosed
+			}
+			return nil, xerrors.Errorf("watcher error: %w", err)
+		case <-f.done:
+			return nil, ErrClosed
+		}
+	}
+}
+
+func (f *fsnotifyWatcher) Close() (err error) {
+	f.mu.Lock()
+	f.watchedFiles = nil
+	f.watchedDirs = nil
+	closed := f.closed
+	f.closed = true
+	f.mu.Unlock()
+
+	if closed {
+		return ErrClosed
+	}
+
+	close(f.done)
+
+	if err := f.Watcher.Close(); err != nil {
+		return xerrors.Errorf("close watcher: %w", err)
+	}
+
+	return nil
+}
diff --git a/agent/agentcontainers/watcher/watcher_test.go b/agent/agentcontainers/watcher/watcher_test.go
new file mode 100644
index 0000000000000..6cddfbdcee276
--- /dev/null
+++ b/agent/agentcontainers/watcher/watcher_test.go
@@ -0,0 +1,128 @@
+package watcher_test
+
+import (
+	"context"
+	"os"
+	"path/filepath"
+	"testing"
+
+	"github.com/fsnotify/fsnotify"
+	"github.com/stretchr/testify/assert"
+	"github.com/stretchr/testify/require"
+
+	"github.com/coder/coder/v2/agent/agentcontainers/watcher"
+	"github.com/coder/coder/v2/testutil"
+)
+
+func TestFSNotifyWatcher(t *testing.T) {
+	t.Parallel()
+
+	// Create test files.
+	dir := t.TempDir()
+	testFile := filepath.Join(dir, "test.json")
+	err := os.WriteFile(testFile, []byte(`{"test": "initial"}`), 0o600)
+	require.NoError(t, err, "create test file failed")
+
+	// Create the watcher under test.
+	wut, err := watcher.NewFSNotify()
+	require.NoError(t, err, "create FSNotify watcher failed")
+	defer wut.Close()
+
+	// Add the test file to the watch list.
+	err = wut.Add(testFile)
+	require.NoError(t, err, "add file to watcher failed")
+
+	ctx := testutil.Context(t, testutil.WaitShort)
+
+	// Modify the test file to trigger an event.
+	err = os.WriteFile(testFile, []byte(`{"test": "modified"}`), 0o600)
+	require.NoError(t, err, "modify test file failed")
+
+	// Verify that we receive the event we want.
+	for {
+		event, err := wut.Next(ctx)
+		require.NoError(t, err, "next event failed")
+
+		require.NotNil(t, event, "want non-nil event")
+		if !event.Has(fsnotify.Write) {
+			t.Logf("Ignoring event: %s", event)
+			continue
+		}
+		require.Truef(t, event.Has(fsnotify.Write), "want write event: %s", event.String())
+		require.Equal(t, event.Name, testFile, "want event for test file")
+		break
+	}
+
+	// Rename the test file to trigger a rename event.
+	err = os.Rename(testFile, testFile+".bak")
+	require.NoError(t, err, "rename test file failed")
+
+	// Verify that we receive the event we want.
+	for {
+		event, err := wut.Next(ctx)
+		require.NoError(t, err, "next event failed")
+		require.NotNil(t, event, "want non-nil event")
+		if !event.Has(fsnotify.Rename) {
+			t.Logf("Ignoring event: %s", event)
+			continue
+		}
+		require.Truef(t, event.Has(fsnotify.Rename), "want rename event: %s", event.String())
+		require.Equal(t, event.Name, testFile, "want event for test file")
+		break
+	}
+
+	err = os.WriteFile(testFile, []byte(`{"test": "new"}`), 0o600)
+	require.NoError(t, err, "write new test file failed")
+
+	// Verify that we receive the event we want.
+	for {
+		event, err := wut.Next(ctx)
+		require.NoError(t, err, "next event failed")
+		require.NotNil(t, event, "want non-nil event")
+		if !event.Has(fsnotify.Create) {
+			t.Logf("Ignoring event: %s", event)
+			continue
+		}
+		require.Truef(t, event.Has(fsnotify.Create), "want create event: %s", event.String())
+		require.Equal(t, event.Name, testFile, "want event for test file")
+		break
+	}
+
+	err = os.WriteFile(testFile+".atomic", []byte(`{"test": "atomic"}`), 0o600)
+	require.NoError(t, err, "write new atomic test file failed")
+
+	err = os.Rename(testFile+".atomic", testFile)
+	require.NoError(t, err, "rename atomic test file failed")
+
+	// Verify that we receive the event we want.
+	for {
+		event, err := wut.Next(ctx)
+		require.NoError(t, err, "next event failed")
+		require.NotNil(t, event, "want non-nil event")
+		if !event.Has(fsnotify.Create) {
+			t.Logf("Ignoring event: %s", event)
+			continue
+		}
+		require.Truef(t, event.Has(fsnotify.Create), "want create event: %s", event.String())
+		require.Equal(t, event.Name, testFile, "want event for test file")
+		break
+	}
+
+	// Test removing the file from the watcher.
+	err = wut.Remove(testFile)
+	require.NoError(t, err, "remove file from watcher failed")
+}
+
+func TestFSNotifyWatcher_CloseBeforeNext(t *testing.T) {
+	t.Parallel()
+
+	wut, err := watcher.NewFSNotify()
+	require.NoError(t, err, "create FSNotify watcher failed")
+
+	err = wut.Close()
+	require.NoError(t, err, "close watcher failed")
+
+	ctx := context.Background()
+	_, err = wut.Next(ctx)
+	assert.Error(t, err, "want Next to return error when watcher is closed")
+}
diff --git a/agent/api.go b/agent/api.go
index 0813deb77a146..97a04333f147e 100644
--- a/agent/api.go
+++ b/agent/api.go
@@ -12,7 +12,7 @@ import (
 	"github.com/coder/coder/v2/codersdk"
 )
 
-func (a *agent) apiHandler() http.Handler {
+func (a *agent) apiHandler() (http.Handler, func() error) {
 	r := chi.NewRouter()
 	r.Get("/", func(rw http.ResponseWriter, r *http.Request) {
 		httpapi.Write(r.Context(), rw, http.StatusOK, codersdk.Response{
@@ -63,7 +63,9 @@ func (a *agent) apiHandler() http.Handler {
 	r.Get("/debug/manifest", a.HandleHTTPDebugManifest)
 	r.Get("/debug/prometheus", promHandler.ServeHTTP)
 
-	return r
+	return r, func() error {
+		return containerAPI.Close()
+	}
 }
 
 type listeningPortsHandler struct {
diff --git a/codersdk/workspaceagents.go b/codersdk/workspaceagents.go
index 6a72de5ae4ff3..5c7171f70a627 100644
--- a/codersdk/workspaceagents.go
+++ b/codersdk/workspaceagents.go
@@ -408,6 +408,7 @@ type WorkspaceAgentDevcontainer struct {
 
 	// Additional runtime fields.
 	Running   bool                     `json:"running"`
+	Dirty     bool                     `json:"dirty"`
 	Container *WorkspaceAgentContainer `json:"container,omitempty"`
 }
 
diff --git a/go.mod b/go.mod
index 230c911779b2f..8861406255434 100644
--- a/go.mod
+++ b/go.mod
@@ -488,6 +488,7 @@ require (
 
 require (
 	github.com/coder/preview v0.0.1
+	github.com/fsnotify/fsnotify v1.9.0
 	github.com/kylecarbs/aisdk-go v0.0.5
 	github.com/mark3labs/mcp-go v0.22.0
 )
diff --git a/site/src/api/typesGenerated.ts b/site/src/api/typesGenerated.ts
index 634c2da3f2bb1..f9c6ae423c822 100644
--- a/site/src/api/typesGenerated.ts
+++ b/site/src/api/typesGenerated.ts
@@ -3252,6 +3252,7 @@ export interface WorkspaceAgentDevcontainer {
 	readonly workspace_folder: string;
 	readonly config_path?: string;
 	readonly running: boolean;
+	readonly dirty: boolean;
 	readonly container?: WorkspaceAgentContainer;
 }