diff --git a/compose.yaml b/compose.yaml
index 7b0059e..a838b53 100644
--- a/compose.yaml
+++ b/compose.yaml
@@ -56,7 +56,6 @@ services:
     environment:
       ACCEPT_EULA: "Y"
       MSSQL_SA_PASSWORD: "${DATABASE_PASSWORD}"
-      MSSQL_PID: "Developer"
     ports:
       - "1433:1433"
     user: "root"
@@ -71,17 +70,20 @@ services:
     networks:
       - backend
 
-  db-setup:
-    container_name: "db-setup"
+  db-migrations:
+    container_name: db-migrations
     build:
-      context: ./database
-      dockerfile: Dockerfile
-    restart: "no"
-    environment:
-      DATABASE_PASSWORD: "${DATABASE_PASSWORD}"
+      context: .
+      dockerfile: src/ServiceLayer.Mesh/Dockerfile.migrations
+      args:
+        DatabaseConnectionString: "${DatabaseConnectionString}"
     depends_on:
       db:
         condition: service_healthy
+    environment:
+      DATABASE_NAME: "${DATABASE_NAME}"
+      DATABASE_USER: "${DATABASE_USER}"
+      DATABASE_PASSWORD: "${DATABASE_PASSWORD}"
     networks:
       - backend
 
diff --git a/database/Dockerfile b/database/Dockerfile
deleted file mode 100644
index bbe5048..0000000
--- a/database/Dockerfile
+++ /dev/null
@@ -1,16 +0,0 @@
-FROM mcr.microsoft.com/mssql-tools:v1
-
-# Use root initially to set permissions
-USER root
-WORKDIR /database
-COPY db-setup-entrypoint.sh /database/
-COPY create_database_statement.sql /database/
-
-RUN chmod +x /database/db-setup-entrypoint.sh && \
-    useradd -m -s /bin/bash mssqltools && \
-    chown -R mssqltools:mssqltools /database
-
-# Switch to non-root user for security
-USER mssqltools
-
-ENTRYPOINT ["/database/db-setup-entrypoint.sh"]
diff --git a/database/create_database_statement.sql b/database/create_database_statement.sql
deleted file mode 100644
index a6db7d9..0000000
--- a/database/create_database_statement.sql
+++ /dev/null
@@ -1,23 +0,0 @@
-USE master;
-GO
-
--- Check if database exists and create it if it doesn't
-IF NOT EXISTS (
-        SELECT name
-        FROM sys.databases
-        WHERE name = N'ServiceLayer'
-        )
-BEGIN
-    CREATE DATABASE [ServiceLayer];
-END
-GO
-
-USE [ServiceLayer];
-GO
-
--- Only try to set QUERY_STORE if SQL Server version is higher than 12 (SQL 2014)
-IF CAST(SERVERPROPERTY('ProductVersion') AS NVARCHAR(128)) > '12'
-BEGIN
-    ALTER DATABASE [ServiceLayer] SET QUERY_STORE = ON;
-END
-GO
diff --git a/database/db-setup-entrypoint.sh b/database/db-setup-entrypoint.sh
deleted file mode 100644
index 062f666..0000000
--- a/database/db-setup-entrypoint.sh
+++ /dev/null
@@ -1,21 +0,0 @@
-#!/bin/bash
-echo "🔧 Starting DB setup..."
-
-# Check if the SQL script exists
-if [ ! -f /database/create_database_statement.sql ]; then
-  echo "❌ SQL script not found!"
-  exit 1
-fi
-
-echo "📡 Connecting to SQL Server at db..."
-until /opt/mssql-tools/bin/sqlcmd -S db -U SA -P "${DATABASE_PASSWORD}" -Q "SELECT 1;" > /dev/null 2>&1
-do
-    echo "⏳ Waiting for SQL Server..."
-    sleep 5
-done
-echo "✅ SQL Server is ready."
-
-# Run the SQL setup script to create the database
-/opt/mssql-tools/bin/sqlcmd -S db -U SA -P "${DATABASE_PASSWORD}" -d master -i /database/create_database_statement.sql
-
-echo "✅ Database setup completed."
diff --git a/scripts/database/migrate-and-seed.sh b/scripts/database/migrate-and-seed.sh
new file mode 100644
index 0000000..6cb6030
--- /dev/null
+++ b/scripts/database/migrate-and-seed.sh
@@ -0,0 +1,12 @@
+#!/bin/bash
+set -e
+
+# Drop and recreate database for fresh start
+echo "Checking if database exists..."
+/opt/mssql-tools/bin/sqlcmd -S db -U "$DATABASE_USER" -P "$DATABASE_PASSWORD" -Q "IF NOT EXISTS (SELECT name FROM sys.databases WHERE name = N'$DATABASE_NAME') CREATE DATABASE $DATABASE_NAME"
+
+# Run migrations
+echo "Running migrations..."
+/opt/mssql-tools/bin/sqlcmd -S db -d "$DATABASE_NAME" -U "$DATABASE_USER" -P "$DATABASE_PASSWORD" -i /database/migration.sql
+
+echo "Migration completed successfully!"
diff --git a/src/ServiceLayer.Mesh/Dockerfile.migrations b/src/ServiceLayer.Mesh/Dockerfile.migrations
new file mode 100644
index 0000000..f6fb372
--- /dev/null
+++ b/src/ServiceLayer.Mesh/Dockerfile.migrations
@@ -0,0 +1,41 @@
+# Stage 1: Build & Generate EF Migration Script
+FROM mcr.microsoft.com/dotnet/sdk:9.0 AS build-env
+
+WORKDIR /src
+
+RUN apt-get update && apt-get install -y git
+
+COPY . .
+
+RUN git submodule update --init --recursive
+
+ARG DatabaseConnectionString
+ENV DatabaseConnectionString=${DatabaseConnectionString}
+
+RUN dotnet restore ./src/ServiceLayer.Mesh/ServiceLayer.Mesh.csproj && \
+    dotnet build ./src/ServiceLayer.Mesh/ServiceLayer.Mesh.csproj && \
+    dotnet tool install dotnet-ef --tool-path /tools
+
+ENV PATH="/tools:$PATH" \
+    DOTNET_CLI_HOME=/tmp \
+    DOTNET_SKIP_FIRST_TIME_EXPERIENCE=true \
+    DOTNET_NOLOGO=true
+
+RUN mkdir -p /database && \
+    dotnet ef migrations script \
+    -o /database/migration.sql \
+    --project ./src/ServiceLayer.Mesh/
+
+# Stage 2: Runtime - Apply Migration and Seed Data
+FROM mcr.microsoft.com/mssql-tools:v1 AS migration-env
+
+COPY --from=build-env /database/migration.sql /database/migration.sql
+COPY scripts/database/migrate-and-seed.sh /scripts/database/migrate-and-seed.sh
+
+RUN addgroup --system appgroup && \
+    adduser --system --ingroup appgroup appuser && \
+    chmod +x /scripts/database/migrate-and-seed.sh
+
+USER appuser
+
+ENTRYPOINT ["/scripts/database/migrate-and-seed.sh"]