diff --git a/.env.example b/.env.example
new file mode 100644
index 0000000..a715880
--- /dev/null
+++ b/.env.example
@@ -0,0 +1,10 @@
+# Copy this file to .env and update values for local development
+# cp .env.example .env
+
+# Backend
+DATABASE_URL=postgresql+psycopg://postgres:postgres@postgres:5432/zaban_backend_development
+SECRET_KEY=your-local-secret-key
+ALLOWED_HOSTS=localhost,127.0.0.1
+
+# Frontend
+NEXT_PUBLIC_EXTERNAL_API_URL=http://localhost:8000
diff --git a/.gitignore b/.gitignore
index fb4cbdf..0c77806 100644
--- a/.gitignore
+++ b/.gitignore
@@ -1,7 +1,5 @@
 # Environment variables
 .env
-.env.local
-.env.*.local
 
 # Docker
 docker-compose.override.yml
diff --git a/docker-compose.prod.yml b/docker-compose.prod.yml
deleted file mode 100644
index 6e89807..0000000
--- a/docker-compose.prod.yml
+++ /dev/null
@@ -1,48 +0,0 @@
-# Production configuration with AWS RDS
-# Usage: docker-compose -f docker-compose.yml -f docker-compose.prod.yml up -d
-
-services:
-  # Disable local PostgreSQL (using RDS instead)
-  postgres:
-    image: alpine:latest
-    command: echo "Using external RDS database"
-    restart: "no"
-    deploy:
-      replicas: 0
-
-  # Backend - Production Configuration
-  backend:
-    environment:
-      DATABASE_URL: ${DATABASE_URL}
-      NODE_ENV: production
-      PYTHONUNBUFFERED: 1
-    restart: always
-    deploy:
-      resources:
-        limits:
-          cpus: '2'
-          memory: 4G
-        reservations:
-          cpus: '1'
-          memory: 2G
-    depends_on: []
-    volumes:
-      - /data/ml_models:/app/.cache/huggingface
-
-  # Frontend - Production Configuration  
-  frontend:
-    environment:
-      NEXT_PUBLIC_EXTERNAL_API_URL: ${NEXT_PUBLIC_EXTERNAL_API_URL}
-      NODE_ENV: production
-    restart: always
-    deploy:
-      resources:
-        limits:
-          cpus: '1'
-          memory: 1G
-        reservations:
-          cpus: '0.5'
-          memory: 512M
-
-volumes:
-  ml_models_cache:
diff --git a/docker-compose.yml b/docker-compose.yml
index f653c1c..4df318e 100644
--- a/docker-compose.yml
+++ b/docker-compose.yml
@@ -25,10 +25,10 @@ services:
       context: ./zaban_backend
       dockerfile: Dockerfile
     container_name: zaban-backend
-    env_file:
-      - ./zaban_backend/.env
     environment:
-      DATABASE_URL: ${DATABASE_URL:-postgresql+psycopg://postgres:postgres@postgres:5432/zaban_backend_development}
+      - DATABASE_URL=${DATABASE_URL}
+      - SECRET_KEY=${SECRET_KEY:-}
+      - ALLOWED_HOSTS=${ALLOWED_HOSTS:-}
     ports:
       - "8000:8000"
     depends_on:
@@ -45,11 +45,11 @@ services:
     build:
       context: ./frontend
       dockerfile: Dockerfile
+      args:
+        - NEXT_PUBLIC_EXTERNAL_API_URL=${NEXT_PUBLIC_EXTERNAL_API_URL:-http://localhost:8000}
     container_name: zaban-frontend
-    env_file:
-      - ./frontend/.env
     environment:
-      NEXT_PUBLIC_EXTERNAL_API_URL: ${NEXT_PUBLIC_EXTERNAL_API_URL:-http://localhost:8000}
+      - NEXT_PUBLIC_EXTERNAL_API_URL=${NEXT_PUBLIC_EXTERNAL_API_URL:-http://localhost:8000}
     ports:
       - "3000:3000"
     depends_on:
diff --git a/frontend/.dockerignore b/frontend/.dockerignore
index fc5dc4d..99b6eea 100644
--- a/frontend/.dockerignore
+++ b/frontend/.dockerignore
@@ -4,6 +4,8 @@ node_modules
 .gitignore
 README.md
 *.md
+.env
+.env*
 .env*.local
 .vscode
 .idea
diff --git a/frontend/Dockerfile b/frontend/Dockerfile
index 4e59d7e..90f0518 100644
--- a/frontend/Dockerfile
+++ b/frontend/Dockerfile
@@ -18,6 +18,10 @@ COPY --from=deps /app/node_modules ./node_modules
 # Copy application code
 COPY . .
 
+# Build arguments for NEXT_PUBLIC_* variables (must be available at build time)
+ARG NEXT_PUBLIC_EXTERNAL_API_URL
+ENV NEXT_PUBLIC_EXTERNAL_API_URL=${NEXT_PUBLIC_EXTERNAL_API_URL}
+
 # Set build-time environment variables
 ENV NEXT_TELEMETRY_DISABLED=1
 ENV NODE_ENV=production