diff --git a/.env.example b/.env.example
index abea3f77..b5ca0ba9 100644
--- a/.env.example
+++ b/.env.example
@@ -44,14 +44,3 @@ AWS_ACCESS_KEY_ID=
 AWS_SECRET_ACCESS_KEY=
 AWS_DEFAULT_REGION=ap-south-1
 AWS_S3_BUCKET_PREFIX="bucket-prefix-name"
-
-# OpenAI
-
-OPENAI_API_KEY="this_is_not_a_secret"
-LANGFUSE_PUBLIC_KEY="this_is_not_a_secret"
-LANGFUSE_SECRET_KEY="this_is_not_a_secret"
-LANGFUSE_HOST="this_is_not_a_secret"
-
-# Misc
-
-CI=""
diff --git a/.env.test.example b/.env.test.example
new file mode 100644
index 00000000..9065e4e6
--- /dev/null
+++ b/.env.test.example
@@ -0,0 +1,30 @@
+ENVIRONMENT=testing
+
+PROJECT_NAME="AI Platform"
+STACK_NAME=ai-platform
+
+#Backend
+SECRET_KEY=changethis
+FIRST_SUPERUSER=superuser@example.com
+FIRST_SUPERUSER_PASSWORD=changethis
+EMAIL_TEST_USER="test@example.com"
+
+# Postgres
+
+POSTGRES_SERVER=localhost
+POSTGRES_PORT=5432
+POSTGRES_DB=ai_platform_test
+POSTGRES_USER=postgres
+POSTGRES_PASSWORD=postgres
+
+# Configure these with your own Docker registry images
+
+DOCKER_IMAGE_BACKEND=backend
+DOCKER_IMAGE_FRONTEND=frontend
+
+# AWS
+
+AWS_ACCESS_KEY_ID=this_is_a_test_key
+AWS_SECRET_ACCESS_KEY=this_is_a_test_key
+AWS_DEFAULT_REGION=ap-south-1
+AWS_S3_BUCKET_PREFIX="bucket-prefix-name"
diff --git a/.github/workflows/benchmark.yml b/.github/workflows/benchmark.yml
index 917203f2..daccfd6e 100644
--- a/.github/workflows/benchmark.yml
+++ b/.github/workflows/benchmark.yml
@@ -18,10 +18,6 @@ jobs:
         count: [100]
 
     env:
-      OPENAI_API_KEY: ${{ secrets.OPENAI_API_KEY }}
-      LANGFUSE_PUBLIC_KEY: ${{ secrets.LANGFUSE_PUBLIC_KEY }}
-      LANGFUSE_SECRET_KEY: ${{ secrets.LANGFUSE_SECRET_KEY }}
-      LANGFUSE_HOST: ${{ secrets.LANGFUSE_HOST }}
       LOCAL_CREDENTIALS_ORG_OPENAI_API_KEY: ${{ secrets.LOCAL_CREDENTIALS_ORG_OPENAI_API_KEY }}
       LOCAL_CREDENTIALS_API_KEY: ${{ secrets.LOCAL_CREDENTIALS_API_KEY }}
 
diff --git a/.github/workflows/continuous_integration.yml b/.github/workflows/continuous_integration.yml
index 5b40cdd3..b617c59e 100644
--- a/.github/workflows/continuous_integration.yml
+++ b/.github/workflows/continuous_integration.yml
@@ -15,7 +15,7 @@ jobs:
         env:
           POSTGRES_USER: postgres
           POSTGRES_PASSWORD: postgres
-          POSTGRES_DB: ai_platform
+          POSTGRES_DB: ai_platform_test
         ports:
           - 5432:5432
         options: --health-cmd "pg_isready -U postgres" --health-interval 10s --health-timeout 5s --health-retries 5
@@ -34,7 +34,9 @@ jobs:
           python-version: ${{ matrix.python-version }}
 
       - name: Making env file
-        run: cp .env.example .env
+        run: |
+          cp .env.test.example .env
+          cp .env.test.example .env.test
 
       - name: Install uv
         uses: astral-sh/setup-uv@v6
diff --git a/.gitignore b/.gitignore
index 0d8e46df..ad2127f4 100644
--- a/.gitignore
+++ b/.gitignore
@@ -6,7 +6,7 @@ node_modules/
 /playwright/.cache/
 
 # Environments
-.env
+.env*
 .venv
 env/
 venv/
diff --git a/backend/app/api/main.py b/backend/app/api/main.py
index df0b1016..9d3ae489 100644
--- a/backend/app/api/main.py
+++ b/backend/app/api/main.py
@@ -37,5 +37,5 @@
 api_router.include_router(users.router)
 api_router.include_router(utils.router)
 
-if settings.ENVIRONMENT == "local":
+if settings.ENVIRONMENT in ["development", "testing"]:
     api_router.include_router(private.router)
diff --git a/backend/app/core/config.py b/backend/app/core/config.py
index 24779bf3..4af13cb6 100644
--- a/backend/app/core/config.py
+++ b/backend/app/core/config.py
@@ -1,7 +1,7 @@
 import secrets
 import warnings
 import os
-from typing import Annotated, Any, Literal
+from typing import Any, Literal
 
 from pydantic import (
     EmailStr,
@@ -15,30 +15,30 @@
 from typing_extensions import Self
 
 
-def parse_cors(v: Any) -> list[str] | str:
-    if isinstance(v, str) and not v.startswith("["):
-        return [i.strip() for i in v.split(",")]
-    elif isinstance(v, list | str):
-        return v
-    raise ValueError(v)
+def parse_cors(origins: Any) -> list[str] | str:
+    # If it's a plain comma-separated string, split it into a list
+    if isinstance(origins, str) and not origins.startswith("["):
+        return [origin.strip() for origin in origins.split(",")]
+    # If it's already a list or JSON-style string, just return it
+    elif isinstance(origins, (list, str)):
+        return origins
+    raise ValueError(f"Invalid CORS origins format: {origins!r}")
 
 
 class Settings(BaseSettings):
     model_config = SettingsConfigDict(
-        # Use top level .env file (one level above ./backend/)
-        env_file="../.env",
+        # env_file will be set dynamically in get_settings()
         env_ignore_empty=True,
         extra="ignore",
     )
-    LANGFUSE_PUBLIC_KEY: str
-    LANGFUSE_SECRET_KEY: str
-    LANGFUSE_HOST: str  # 🇪🇺 EU region
-    OPENAI_API_KEY: str
+
     API_V1_STR: str = "/api/v1"
     SECRET_KEY: str = secrets.token_urlsafe(32)
     # 60 minutes * 24 hours * 1 days = 1 days
     ACCESS_TOKEN_EXPIRE_MINUTES: int = 60 * 24 * 1
-    ENVIRONMENT: Literal["local", "staging", "production"] = "local"
+    ENVIRONMENT: Literal[
+        "development", "testing", "staging", "production"
+    ] = "development"
 
     PROJECT_NAME: str
     SENTRY_DSN: HttpUrl | None = None
@@ -84,7 +84,7 @@ def _check_default_secret(self, var_name: str, value: str | None) -> None:
                 f'The value of {var_name} is "changethis", '
                 "for security, please change it, at least for deployments."
             )
-            if self.ENVIRONMENT == "local":
+            if self.ENVIRONMENT in ["development", "testing"]:
                 warnings.warn(message, stacklevel=1)
             else:
                 raise ValueError(message)
@@ -100,4 +100,17 @@ def _enforce_non_default_secrets(self) -> Self:
         return self
 
 
-settings = Settings()  # type: ignore
+def get_settings() -> Settings:
+    """Get settings with appropriate env file based on ENVIRONMENT."""
+    environment = os.getenv("ENVIRONMENT", "development")
+
+    # Determine env file
+    env_files = {"testing": "../.env.test", "development": "../.env"}
+    env_file = env_files.get(environment, "../.env")
+
+    # Create Settings instance with the appropriate env file
+    return Settings(_env_file=env_file)
+
+
+# Export settings instance
+settings = get_settings()
diff --git a/backend/app/core/db.py b/backend/app/core/db.py
index ba991fb3..510e9da7 100644
--- a/backend/app/core/db.py
+++ b/backend/app/core/db.py
@@ -1,10 +1,30 @@
 from sqlmodel import Session, create_engine, select
 
 from app import crud
-from app.core.config import settings
 from app.models import User, UserCreate
 
-engine = create_engine(str(settings.SQLALCHEMY_DATABASE_URI))
+
+def get_engine():
+    """Get database engine with current settings."""
+    # Import settings dynamically to get the current instance
+    from app.core.config import settings
+
+    # Configure connection pool settings
+    # For testing, we need more connections since tests run in parallel
+    pool_size = 20 if settings.ENVIRONMENT == "development" else 5
+    max_overflow = 30 if settings.ENVIRONMENT == "development" else 10
+
+    return create_engine(
+        str(settings.SQLALCHEMY_DATABASE_URI),
+        pool_size=pool_size,
+        max_overflow=max_overflow,
+        pool_pre_ping=True,
+        pool_recycle=300,  # Recycle connections after 5 minutes
+    )
+
+
+# Create a default engine for backward compatibility
+engine = get_engine()
 
 
 # make sure all SQLModel models are imported (app.models) before initializing DB
diff --git a/backend/app/load_env.py b/backend/app/load_env.py
new file mode 100644
index 00000000..f465b23b
--- /dev/null
+++ b/backend/app/load_env.py
@@ -0,0 +1,13 @@
+import os
+from dotenv import load_dotenv
+
+
+def load_environment():
+    env = os.getenv("ENVIRONMENT", "development")
+
+    # Use the same path as config.py expects (one level above backend/)
+    env_file = "../.env"
+    if env == "testing":
+        env_file = "../.env.test"
+
+    load_dotenv(env_file)
diff --git a/backend/app/main.py b/backend/app/main.py
index 903e02ef..0b473484 100644
--- a/backend/app/main.py
+++ b/backend/app/main.py
@@ -1,19 +1,24 @@
 import sentry_sdk
+
 from fastapi import FastAPI
 from fastapi.routing import APIRoute
 from asgi_correlation_id.middleware import CorrelationIdMiddleware
 from app.api.main import api_router
 from app.core.config import settings
-import app.core.logger
 from app.core.exception_handlers import register_exception_handlers
 from app.core.middleware import http_request_logger
 
+from app.load_env import load_environment
+
+# Load environment variables
+load_environment()
+
 
 def custom_generate_unique_id(route: APIRoute) -> str:
     return f"{route.tags[0]}-{route.name}"
 
 
-if settings.SENTRY_DSN and settings.ENVIRONMENT != "local":
+if settings.SENTRY_DSN and settings.ENVIRONMENT != "development":
     sentry_sdk.init(dsn=str(settings.SENTRY_DSN), enable_tracing=True)
 
 app = FastAPI(
diff --git a/backend/app/tests/conftest.py b/backend/app/tests/conftest.py
index 02773871..954059e7 100644
--- a/backend/app/tests/conftest.py
+++ b/backend/app/tests/conftest.py
@@ -1,9 +1,15 @@
 import pytest
+import os
+
+# Set environment before importing ANYTHING else
+os.environ["ENVIRONMENT"] = "testing"
+
 from fastapi.testclient import TestClient
 from sqlmodel import Session
 from sqlalchemy import event
 from collections.abc import Generator
 
+# Now import after setting environment
 from app.core.config import settings
 from app.core.db import engine
 from app.api.deps import get_db
diff --git a/backend/scripts/tests-start.sh b/backend/scripts/tests-start.sh
index 89dcb0da..1f6cc798 100644
--- a/backend/scripts/tests-start.sh
+++ b/backend/scripts/tests-start.sh
@@ -2,6 +2,16 @@
 set -e
 set -x
 
+# Set environment for testing
+export ENVIRONMENT=testing
+
 python app/tests_pre_start.py
 
+# Run pending migrations for test database
+uv run alembic upgrade head
+if [ $? -ne 0 ]; then
+    echo 'Error: Test database migrations failed'
+    exit 1
+fi
+
 bash scripts/test.sh "$@"
diff --git a/docker-compose.yml b/docker-compose.yml
index e8e1330d..78a4af52 100644
--- a/docker-compose.yml
+++ b/docker-compose.yml
@@ -72,10 +72,6 @@ services:
       - POSTGRES_USER=${POSTGRES_USER?Variable not set}
       - POSTGRES_PASSWORD=${POSTGRES_PASSWORD?Variable not set}
       - SENTRY_DSN=${SENTRY_DSN}
-      - OPENAI_API_KEY=${OPENAI_API_KEY}
-      - LANGFUSE_PUBLIC_KEY=${LANGFUSE_PUBLIC_KEY}
-      - LANGFUSE_SECRET_KEY=${LANGFUSE_SECRET_KEY}
-      - LANGFUSE_HOST=${LANGFUSE_HOST}
       - LOCAL_CREDENTIALS_ORG_OPENAI_API_KEY=${LOCAL_CREDENTIALS_ORG_OPENAI_API_KEY}
       - LOCAL_CREDENTIALS_API_KEY=${LOCAL_CREDENTIALS_API_KEY}
       - EMAIL_TEST_USER=${EMAIL_TEST_USER}
@@ -112,10 +108,6 @@ services:
       - POSTGRES_USER=${POSTGRES_USER?Variable not set}
       - POSTGRES_PASSWORD=${POSTGRES_PASSWORD?Variable not set}
       - SENTRY_DSN=${SENTRY_DSN}
-      - OPENAI_API_KEY=${OPENAI_API_KEY}
-      - LANGFUSE_PUBLIC_KEY=${LANGFUSE_PUBLIC_KEY}
-      - LANGFUSE_SECRET_KEY=${LANGFUSE_SECRET_KEY}
-      - LANGFUSE_HOST=${LANGFUSE_HOST}
       - LOCAL_CREDENTIALS_ORG_OPENAI_API_KEY=${LOCAL_CREDENTIALS_ORG_OPENAI_API_KEY}
       - LOCAL_CREDENTIALS_API_KEY=${LOCAL_CREDENTIALS_API_KEY}
       - EMAIL_TEST_USER=${EMAIL_TEST_USER}