diff --git a/cmd/cloud.go b/cmd/cloud.go
index 2921b78e..8f6dc9dc 100644
--- a/cmd/cloud.go
+++ b/cmd/cloud.go
@@ -262,7 +262,7 @@ Examples:
 				force = true
 			}
 			// check to see if we have any env vars that are not in the project
-			envFile, projectData = envutil.ProcessEnvFiles(ctx, logger, dir, theproject, projectData, apiUrl, token, force)
+			envFile, projectData = envutil.ProcessEnvFiles(ctx, logger, dir, theproject, projectData, apiUrl, token, force, false)
 
 			if tui.HasTTY {
 				_, localIssues, remoteIssues, err := buildAgentTree(keys, state, context)
diff --git a/cmd/dev.go b/cmd/dev.go
index 3400e6d1..06af5e4b 100644
--- a/cmd/dev.go
+++ b/cmd/dev.go
@@ -70,7 +70,7 @@ Examples:
 
 		var envfile *deployer.EnvFile
 
-		envfile, project = envutil.ProcessEnvFiles(ctx, log, dir, theproject.Project, project, theproject.APIURL, apiKey, false)
+		envfile, project = envutil.ProcessEnvFiles(ctx, log, dir, theproject.Project, project, theproject.APIURL, apiKey, false, true)
 
 		if envfile == nil {
 			// we don't have an env file so we need to create one since this likely means you have cloned a new project
diff --git a/cmd/project.go b/cmd/project.go
index 7ce649e1..806b9131 100644
--- a/cmd/project.go
+++ b/cmd/project.go
@@ -329,15 +329,15 @@ Examples:
 				fmt.Println(tui.Text("• ") + tui.Command(" project import") + tui.Text(" - Import this project to your organization"))
 				fmt.Println(tui.Text("• ") + tui.Command(" deploy") + tui.Text(" - Deploy this project"))
 				fmt.Println()
-				
+
 				continueAnyway := tui.Ask(logger, "Are you sure you want to create a new project here?", false)
-				
+
 				if !continueAnyway {
 					fmt.Println()
 					tui.ShowSuccess("No worries! Use one of the commands above to work with your existing project.")
 					os.Exit(0)
 				}
-				
+
 				fmt.Println()
 				tui.ShowWarning("Continuing with new project creation...")
 				fmt.Println()
@@ -899,7 +899,7 @@ Examples:
 		if !tui.HasTTY {
 			force = true
 		}
-		_, _ = envutil.ProcessEnvFiles(ctx, logger, context.Dir, context.Project, nil, context.APIURL, context.Token, force)
+		_, _ = envutil.ProcessEnvFiles(ctx, logger, context.Dir, context.Project, nil, context.APIURL, context.Token, force, false)
 
 	},
 }
diff --git a/internal/envutil/envutil.go b/internal/envutil/envutil.go
index ca54a127..062b04f1 100644
--- a/internal/envutil/envutil.go
+++ b/internal/envutil/envutil.go
@@ -31,8 +31,23 @@ var looksLikeSecret = regexp.MustCompile(`(?i)(^|_|-)(APIKEY|API_KEY|PRIVATE_KEY
 var isAgentuityEnv = regexp.MustCompile(`(?i)AGENTUITY_`)
 
 // ProcessEnvFiles handles .env and template env processing
-func ProcessEnvFiles(ctx context.Context, logger logger.Logger, dir string, theproject *project.Project, projectData *project.ProjectData, apiUrl, token string, force bool) (*deployer.EnvFile, *project.ProjectData) {
+func ProcessEnvFiles(ctx context.Context, logger logger.Logger, dir string, theproject *project.Project, projectData *project.ProjectData, apiUrl, token string, force bool, isLocalDev bool) (*deployer.EnvFile, *project.ProjectData) {
 	envfilename := filepath.Join(dir, ".env")
+	if isLocalDev {
+		f := filepath.Join(dir, ".env.development")
+		if util.Exists(f) {
+			envfilename = f
+		} else {
+			// create it but don't load it -- this is required because uv expects a .env.development file to exist from the template
+			// but since its gitignore it won't get checked in and might not exist when you clone a project
+			of, err := os.Create(f)
+			if err != nil {
+				errsystem.New(errsystem.ErrInvalidConfiguration, err, errsystem.WithContextMessage("Failed to create .env.development file")).ShowErrorAndExit()
+			}
+			defer of.Close()
+			of.WriteString("# This file is used to store development environment variables\n")
+		}
+	}
 	var envFile *deployer.EnvFile
 	if (tui.HasTTY || force) && util.Exists(envfilename) {
 		// attempt to see if we have any template files