diff --git a/cli/azd/cmd/env.go b/cli/azd/cmd/env.go
index 2d2163f75c6..8997bea8d04 100644
--- a/cli/azd/cmd/env.go
+++ b/cli/azd/cmd/env.go
@@ -5,6 +5,7 @@ package cmd
 
 import (
 	"context"
+	"encoding/json"
 	"errors"
 	"fmt"
 	"io"
@@ -1500,10 +1501,18 @@ func newEnvConfigSetCmd() *cobra.Command {
 	return &cobra.Command{
 		Use:   "set <path> <value>",
 		Short: "Sets a configuration value in the environment.",
-		Long:  "Sets a configuration value in the environment's config.json file.",
-		Args:  cobra.ExactArgs(2),
+		Long: `Sets a configuration value in the environment's config.json file.
+
+Values are automatically parsed as JSON types when possible. Booleans (true/false),
+numbers (42, 3.14), arrays ([...]), and objects ({...}) are stored with their native
+JSON types. Plain text values are stored as strings. To force a JSON-typed value to be
+stored as a string, wrap it in JSON quotes (e.g. '"true"' or '"8080"').`,
+		Args: cobra.ExactArgs(2),
 		Example: `$ azd env config set myapp.endpoint https://example.com
-$ azd env config set myapp.debug true`,
+$ azd env config set myapp.debug true
+$ azd env config set myapp.count 42
+$ azd env config set infra.parameters.tags '{"env":"dev"}'
+$ azd env config set myapp.port '"8080"'`,
 	}
 }
 
@@ -1567,7 +1576,7 @@ func (a *envConfigSetAction) Run(ctx context.Context) (*actions.ActionResult, er
 	path := a.args[0]
 	value := a.args[1]
 
-	err = env.Config.Set(path, value)
+	err = env.Config.Set(path, parseConfigValue(value))
 	if err != nil {
 		return nil, fmt.Errorf("failed setting configuration value '%s' to '%s'. %w", path, value, err)
 	}
@@ -1579,6 +1588,22 @@ func (a *envConfigSetAction) Run(ctx context.Context) (*actions.ActionResult, er
 	return nil, nil
 }
 
+// parseConfigValue attempts to parse a string value as a JSON type (bool, number, array, object).
+// If parsing fails or the result is null, the original string is returned.
+// JSON-quoted strings (e.g. `"true"`) are returned as their unquoted value,
+// allowing users to force string type for values that would otherwise parse as bool/number.
+func parseConfigValue(s string) any {
+	var parsed any
+	if err := json.Unmarshal([]byte(s), &parsed); err != nil {
+		return s
+	}
+	// null should remain as the string "null", not a nil value
+	if parsed == nil {
+		return s
+	}
+	return parsed
+}
+
 // azd env config unset <path>
 
 func newEnvConfigUnsetCmd() *cobra.Command {
diff --git a/cli/azd/cmd/env_config_test.go b/cli/azd/cmd/env_config_test.go
index c259c110c27..197e78ac1a3 100644
--- a/cli/azd/cmd/env_config_test.go
+++ b/cli/azd/cmd/env_config_test.go
@@ -227,7 +227,7 @@ func TestEnvConfigSet(t *testing.T) {
 			expectedConfig: map[string]any{
 				"app": map[string]any{
 					"endpoint": "https://example.com",
-					"port":     "8080",
+					"port":     float64(8080),
 				},
 			},
 			expectError: false,
@@ -246,6 +246,112 @@ func TestEnvConfigSet(t *testing.T) {
 			},
 			expectError: false,
 		},
+		{
+			name:          "SetBoolValueTrue",
+			initialConfig: map[string]any{},
+			path:          "infra.parameters.testBool",
+			value:         "true",
+			expectedConfig: map[string]any{
+				"infra": map[string]any{
+					"parameters": map[string]any{
+						"testBool": true,
+					},
+				},
+			},
+			expectError: false,
+		},
+		{
+			name:          "SetBoolValueFalse",
+			initialConfig: map[string]any{},
+			path:          "infra.parameters.testBool",
+			value:         "false",
+			expectedConfig: map[string]any{
+				"infra": map[string]any{
+					"parameters": map[string]any{
+						"testBool": false,
+					},
+				},
+			},
+			expectError: false,
+		},
+		{
+			name:          "SetNumberValue",
+			initialConfig: map[string]any{},
+			path:          "infra.parameters.count",
+			value:         "42",
+			expectedConfig: map[string]any{
+				"infra": map[string]any{
+					"parameters": map[string]any{
+						"count": float64(42),
+					},
+				},
+			},
+			expectError: false,
+		},
+		{
+			name:          "SetArrayValue",
+			initialConfig: map[string]any{},
+			path:          "infra.parameters.testStrings",
+			value:         `["one", "two", "three"]`,
+			expectedConfig: map[string]any{
+				"infra": map[string]any{
+					"parameters": map[string]any{
+						"testStrings": []any{"one", "two", "three"},
+					},
+				},
+			},
+			expectError: false,
+		},
+		{
+			name:          "SetObjectValue",
+			initialConfig: map[string]any{},
+			path:          "infra.parameters.tags",
+			value:         `{"env":"dev","team":"platform"}`,
+			expectedConfig: map[string]any{
+				"infra": map[string]any{
+					"parameters": map[string]any{
+						"tags": map[string]any{"env": "dev", "team": "platform"},
+					},
+				},
+			},
+			expectError: false,
+		},
+		{
+			name:          "SetPlainStringValue",
+			initialConfig: map[string]any{},
+			path:          "app.name",
+			value:         "my-app",
+			expectedConfig: map[string]any{
+				"app": map[string]any{
+					"name": "my-app",
+				},
+			},
+			expectError: false,
+		},
+		{
+			name:          "SetNullAsString",
+			initialConfig: map[string]any{},
+			path:          "app.value",
+			value:         "null",
+			expectedConfig: map[string]any{
+				"app": map[string]any{
+					"value": "null",
+				},
+			},
+			expectError: false,
+		},
+		{
+			name:          "SetQuotedJsonForcesStringType",
+			initialConfig: map[string]any{},
+			path:          "app.flag",
+			value:         `"true"`,
+			expectedConfig: map[string]any{
+				"app": map[string]any{
+					"flag": "true",
+				},
+			},
+			expectError: false,
+		},
 	}
 
 	for _, tt := range tests {
@@ -552,7 +658,7 @@ func TestEnvConfigMultipleOperations(t *testing.T) {
 	err = json.Unmarshal(buf.Bytes(), &result)
 	require.NoError(t, err)
 	require.Equal(t, "https://example.com", result["endpoint"])
-	require.Equal(t, "8080", result["port"])
+	require.Equal(t, float64(8080), result["port"])
 
 	// Unset one value
 	unsetFlags := &envConfigUnsetFlags{}
@@ -584,5 +690,5 @@ func TestEnvConfigMultipleOperations(t *testing.T) {
 	var result2 map[string]any
 	err = json.Unmarshal(buf.Bytes(), &result2)
 	require.NoError(t, err)
-	require.Equal(t, map[string]any{"port": "8080"}, result2)
+	require.Equal(t, map[string]any{"port": float64(8080)}, result2)
 }