diff --git a/plugins/node/opentelemetry-instrumentation-aws-lambda/README.md b/plugins/node/opentelemetry-instrumentation-aws-lambda/README.md
index d4e090b46df..8a3c533c5cb 100644
--- a/plugins/node/opentelemetry-instrumentation-aws-lambda/README.md
+++ b/plugins/node/opentelemetry-instrumentation-aws-lambda/README.md
@@ -52,6 +52,7 @@ In your Lambda function configuration, add or update the `NODE_OPTIONS` environm
 | `responseHook` | `ResponseHook` (function) | Hook for adding custom attributes before lambda returns the response. Receives params: `span, { err?, res? }` |
 | `disableAwsContextPropagation` | `boolean` | By default, this instrumentation will try to read the context from the `_X_AMZN_TRACE_ID` environment variable set by Lambda, set this to `true` or set the environment variable `OTEL_LAMBDA_DISABLE_AWS_CONTEXT_PROPAGATION=true` to disable this behavior |
 | `eventContextExtractor` | `EventContextExtractor` (function) | Function for providing custom context extractor in order to support different event types that are handled by AWS Lambda (e.g., SQS, CloudWatch, Kinesis, API Gateway). Applied only when `disableAwsContextPropagation` is set to `true`. Receives params: `event, context` |
+| `lambdaHandler` | `string` | By default, this instrumentation automatically determines the Lambda handler function to instrument. This option is used to override that behavior by explicitly specifying the Lambda handler to instrument. See [Specifying the Lambda Handler](#specifying-the-lambda-handler) for additional information. |
 
 ### Hooks Usage Example
 
@@ -69,6 +70,18 @@ new AwsLambdaInstrumentation({
 })
 ```
 
+### Specifying the Lambda Handler
+
+The instrumentation will attempt to automatically determine the Lambda handler function to instrument. To do this, it relies on the `_HANDLER` environment variable which is [set by the Lambda runtime](https://docs.aws.amazon.com/lambda/latest/dg/configuration-envvars.html#configuration-envvars-runtime). For most use cases, this will accurately represent the handler that should be targeted by this instrumentation.
+
+There exist use cases where the `_HANDLER` environment variable does not accurately represent the module that should be targeted by this instrumentation. For these use cases, the `lambdaHandler` option can be used to explicitly specify the Lambda handler that should be instrumented.
+
+To better explain when `lambdaHandler` should be specified, consider how some telemetry tools, such as [Datadog](https://www.datadoghq.com/), are instrumented into the Lambda runtime. Datadog does this by overriding the handler function with a wrapper function that is loaded via a [Lambda Layer](https://docs.aws.amazon.com/lambda/latest/dg/chapter-layers.html). In these examples, the Lambda's handler will point to the Datadog wrapper and not to the actual handler that should be instrumented. In cases like this, `lambdaHandler` should be used to explicitly specify the handler that should be instrumented.
+
+The `lambdaHandler` should be specified as a string in the format `<file>.<handler>`, where `<file>` is the name of the file that contains the handler and `<handler>` is the name of the handler function. For example, if the handler is defined in the file `index.js` and the handler function is named `handler`, the `lambdaHandler` should be specified as `index.handler`.
+
+One way to determine if the `lambdaHandler` option should be used is to check the handler defined on your Lambda. This can be done by determining the value of the `_HANDLER` environment variable or by viewing the **Runtime Settings** of your Lambda in AWS Console. If the handler is what you expect, then the instrumentation should work without the `lambdaHandler` option. If the handler points to something else, then the `lambdaHandler` option should be used to explicitly specify the handler that should be instrumented.
+
 ## Useful links
 
 - For more information on OpenTelemetry, visit: <https://opentelemetry.io/>
diff --git a/plugins/node/opentelemetry-instrumentation-aws-lambda/src/instrumentation.ts b/plugins/node/opentelemetry-instrumentation-aws-lambda/src/instrumentation.ts
index 75adb7e3319..ca3d173d822 100644
--- a/plugins/node/opentelemetry-instrumentation-aws-lambda/src/instrumentation.ts
+++ b/plugins/node/opentelemetry-instrumentation-aws-lambda/src/instrumentation.ts
@@ -97,10 +97,14 @@ export class AwsLambdaInstrumentation extends InstrumentationBase {
 
   init() {
     const taskRoot = process.env.LAMBDA_TASK_ROOT;
-    const handlerDef = process.env._HANDLER;
+    const handlerDef = this._config.lambdaHandler ?? process.env._HANDLER;
 
     // _HANDLER and LAMBDA_TASK_ROOT are always defined in Lambda but guard bail out if in the future this changes.
     if (!taskRoot || !handlerDef) {
+      diag.error(
+        'Unable to initialize instrumentation for lambda. Cannot identify lambda handler or task root.',
+        { taskRoot, handlerDef }
+      );
       return [];
     }
 
@@ -123,6 +127,16 @@ export class AwsLambdaInstrumentation extends InstrumentationBase {
       }
     }
 
+    diag.debug('Instrumenting lambda handler', {
+      taskRoot,
+      handlerDef,
+      handler,
+      moduleRoot,
+      module,
+      filename,
+      functionName,
+    });
+
     return [
       new InstrumentationNodeModuleDefinition(
         // NB: The patching infrastructure seems to match names backwards, this must be the filename, while
diff --git a/plugins/node/opentelemetry-instrumentation-aws-lambda/src/types.ts b/plugins/node/opentelemetry-instrumentation-aws-lambda/src/types.ts
index da507efc094..279eb1a9a7a 100644
--- a/plugins/node/opentelemetry-instrumentation-aws-lambda/src/types.ts
+++ b/plugins/node/opentelemetry-instrumentation-aws-lambda/src/types.ts
@@ -40,4 +40,5 @@ export interface AwsLambdaInstrumentationConfig extends InstrumentationConfig {
   responseHook?: ResponseHook;
   disableAwsContextPropagation?: boolean;
   eventContextExtractor?: EventContextExtractor;
+  lambdaHandler?: string;
 }
diff --git a/plugins/node/opentelemetry-instrumentation-aws-lambda/test/integrations/lambda-handler.test.ts b/plugins/node/opentelemetry-instrumentation-aws-lambda/test/integrations/lambda-handler.test.ts
index 573cab81400..e8f9bea0836 100644
--- a/plugins/node/opentelemetry-instrumentation-aws-lambda/test/integrations/lambda-handler.test.ts
+++ b/plugins/node/opentelemetry-instrumentation-aws-lambda/test/integrations/lambda-handler.test.ts
@@ -964,4 +964,25 @@ describe('lambda handler', () => {
       });
     });
   });
+
+  describe('custom handler', () => {
+    it('prioritizes instrumenting the handler specified on the config over the handler implied from the _HANDLER env var', async () => {
+      initializeHandler('not-a-real-handler', {
+        lambdaHandler: 'lambda-test/async.handler',
+      });
+
+      const otherEvent = {};
+      const result = await lambdaRequire('lambda-test/async').handler(
+        otherEvent,
+        ctx
+      );
+
+      assert.strictEqual(result, 'ok');
+      const spans = memoryExporter.getFinishedSpans();
+      const [span] = spans;
+      assert.strictEqual(spans.length, 1);
+      assertSpanSuccess(span);
+      assert.strictEqual(span.parentSpanId, undefined);
+    });
+  });
 });