diff --git a/.github/workflows/smoke-test.yaml b/.github/workflows/smoke-test.yaml
index 8bc38e22..24676931 100644
--- a/.github/workflows/smoke-test.yaml
+++ b/.github/workflows/smoke-test.yaml
@@ -79,7 +79,7 @@ jobs:
             ${{ runner.os }}-gradle-
 
       - name: Build And Run Smoke Tests Container
-        run: ${{ env.GRADLE_EXEC }} buildAndRunSmokeTestsContainer -x test
+        run: ${{ env.GRADLE_EXEC }} startDockerContainerSmokeTest
 
       - name: Run Smoke Test
         working-directory: server/src/test/resources/
diff --git a/server/build.gradle.kts b/server/build.gradle.kts
index 2b703e49..ca3d33df 100644
--- a/server/build.gradle.kts
+++ b/server/build.gradle.kts
@@ -1,5 +1,5 @@
 /*
- * Copyright (C) 2024 Hedera Hashgraph, LLC
+ * Copyright (C) 2022-2024 Hedera Hashgraph, LLC
  *
  * Licensed under the Apache License, Version 2.0 (the "License");
  * you may not use this file except in compliance with the License.
@@ -64,60 +64,92 @@ tasks.register("bumpVersion") {
 }
 
 // Vals
-val buildRootAbsolutePath: String =
-    layout.buildDirectory.get().asFile.toPath().toAbsolutePath().toString()
-val buildRootEnvFileAbsolutePath: String = "$buildRootAbsolutePath/.env"
-val dockerRootDirectory: Directory = layout.projectDirectory.dir("docker")
+val dockerProjectRootDirectory: Directory = layout.projectDirectory.dir("docker")
+val dockerBuildRootDirectory: Directory = layout.buildDirectory.dir("docker").get()
 
 // Docker related tasks
-val updateDockerEnv: TaskProvider<Exec> =
-    tasks.register<Exec>("updateDockerEnv") {
+val copyDockerFolder: TaskProvider<Copy> =
+    tasks.register<Copy>("copyDockerFolder") {
+        description = "Copies the docker folder to the build root directory"
+        group = "docker"
+
+        from(dockerProjectRootDirectory)
+        into(dockerBuildRootDirectory)
+    }
+
+val createDockerImage: TaskProvider<Exec> =
+    tasks.register<Exec>("createDockerImage") {
         description =
-            "Creates the .env file in the docker folder that contains environment variables for docker"
+            "Creates the production docker image of the Block Node Server based on the current version"
         group = "docker"
 
-        workingDir(dockerRootDirectory)
+        dependsOn(copyDockerFolder, tasks.assemble)
+        workingDir(dockerBuildRootDirectory)
         commandLine(
             "sh",
             "-c",
-            "./update-env.sh $buildRootAbsolutePath ${project.version} false false"
+            "./update-env.sh ${project.version} false false && ./docker-build.sh ${project.version}"
         )
     }
 
-val createDockerImage: TaskProvider<Exec> =
-    tasks.register<Exec>("createDockerImage") {
+val createDockerImageDebug: TaskProvider<Exec> =
+    tasks.register<Exec>("createDockerImageDebug") {
         description =
-            "Creates the docker image of the Block Node Server based on the current version"
+            "Creates the debug docker image of the Block Node Server based on the current version"
         group = "docker"
 
-        dependsOn(updateDockerEnv, tasks.assemble)
-        workingDir(dockerRootDirectory)
-        commandLine("./docker-build.sh", project.version, layout.projectDirectory.dir("..").asFile)
+        dependsOn(copyDockerFolder, tasks.assemble)
+        workingDir(dockerBuildRootDirectory)
+        commandLine(
+            "sh",
+            "-c",
+            "./update-env.sh ${project.version} true false && ./docker-build.sh ${project.version}"
+        )
+    }
+
+val createDockerImageSmokeTest: TaskProvider<Exec> =
+    tasks.register<Exec>("createDockerImageSmokeTest") {
+        description =
+            "Creates the smoke tests docker image of the Block Node Server based on the current version"
+        group = "docker"
+
+        dependsOn(copyDockerFolder, tasks.assemble)
+        workingDir(dockerBuildRootDirectory)
+        commandLine(
+            "sh",
+            "-c",
+            "./update-env.sh ${project.version} false true && ./docker-build.sh ${project.version}"
+        )
     }
 
 tasks.register<Exec>("startDockerContainer") {
-    description = "Starts the docker container of the Block Node Server of the current version"
+    description = "Starts the docker container of the Block Node Server for the current version"
     group = "docker"
 
     dependsOn(createDockerImage)
-    workingDir(dockerRootDirectory)
-    commandLine(
-        "sh",
-        "-c",
-        "docker compose --env-file $buildRootEnvFileAbsolutePath -p block-node up -d"
-    )
+    workingDir(dockerBuildRootDirectory)
+    commandLine("sh", "-c", "docker compose -p block-node up -d")
 }
 
-tasks.register<Exec>("startDockerDebugContainer") {
-    description = "Starts the docker container of the Block Node Server of the current version"
+tasks.register<Exec>("startDockerContainerDebug") {
+    description = "Starts the docker debug container of the Block Node Server for the current version"
     group = "docker"
 
-    dependsOn(createDockerImage)
-    workingDir(dockerRootDirectory)
+    dependsOn(createDockerImageDebug)
+    workingDir(dockerBuildRootDirectory)
+    commandLine("sh", "-c", "docker compose -p block-node up -d")
+}
+
+tasks.register<Exec>("startDockerContainerSmokeTest") {
+    description = "Starts the docker smoke test container of the Block Node Server for the current version"
+    group = "docker"
+
+    dependsOn(createDockerImageSmokeTest)
+    workingDir(dockerBuildRootDirectory)
     commandLine(
         "sh",
         "-c",
-        "./update-env.sh $buildRootAbsolutePath ${project.version} true false && docker compose --env-file $buildRootEnvFileAbsolutePath -p block-node up -d"
+        "docker compose -p block-node up -d"
     )
 }
 
@@ -125,35 +157,7 @@ tasks.register<Exec>("stopDockerContainer") {
     description = "Stops running docker containers of the Block Node Server"
     group = "docker"
 
-    workingDir(dockerRootDirectory)
+    dependsOn(copyDockerFolder)
+    workingDir(dockerBuildRootDirectory)
     commandLine("sh", "-c", "docker compose -p block-node stop")
 }
-
-tasks.register("buildAndRunSmokeTestsContainer") {
-    doFirst {
-        // ensure smoke test .env properties before creating the container
-        exec {
-            workingDir(dockerRootDirectory)
-            commandLine(
-                "sh",
-                "-c",
-                "./update-env.sh $buildRootAbsolutePath ${project.version} false true"
-            )
-        }
-    }
-
-    // build the project
-    dependsOn(tasks.build)
-
-    doLast {
-        // build and start smoke test container
-        exec {
-            workingDir(dockerRootDirectory)
-            commandLine(
-                "sh",
-                "-c",
-                "./docker-build.sh ${project.version} && docker compose --env-file $buildRootEnvFileAbsolutePath -p block-node up -d"
-            )
-        }
-    }
-}
diff --git a/server/docker/docker-build.sh b/server/docker/docker-build.sh
index d74dbc51..c31c5bad 100755
--- a/server/docker/docker-build.sh
+++ b/server/docker/docker-build.sh
@@ -7,11 +7,11 @@ fi
 
 VERSION=$1
 
-echo "CREATING CONTAINER FOR VERSION ${VERSION}"
-echo "Using project directory: ${2}"
+echo "Building image [block-node-server:${VERSION}]"
 echo
 
 # run docker build
-echo "Building image [block-node-server:${VERSION}]"
-docker buildx build --load -t "block-node-server:${VERSION}" --build-context distributions=../build/distributions --build-arg VERSION="${VERSION}" . || exit "${?}"
+docker buildx build --load -t "block-node-server:${VERSION}" --build-context distributions=../distributions --build-arg VERSION="${VERSION}" . || exit "${?}"
+
+echo
 echo "Image [block-node-server:${VERSION}] built successfully!"
diff --git a/server/docker/docker-compose.yml b/server/docker/docker-compose.yml
index fcbeccfe..d182b4e3 100644
--- a/server/docker/docker-compose.yml
+++ b/server/docker/docker-compose.yml
@@ -3,7 +3,7 @@ services:
     container_name: block-node-server
     image: block-node-server:${VERSION}
     env_file:
-      - ../build/.env
+      - .env
     ports:
       - "8080:8080"
       - "5005:5005"
diff --git a/server/docker/update-env.sh b/server/docker/update-env.sh
index 29d3bd6c..9594fcf8 100755
--- a/server/docker/update-env.sh
+++ b/server/docker/update-env.sh
@@ -3,21 +3,17 @@
 # This scripts create a '.env' file that is used for docker & docker-compose as an input of environment variables.
 # This script is called by gradle and get the current project version as an input param
 
-if [ $# -lt 2 ]; then
-  # <PROJECT_BUILD_ROOT> and <VERSION> are required!
-  echo "USAGE: $0 <PROJECT_BUILD_ROOT> <VERSION> [DEBUG] [SMOKE_TEST]"
+if [ $# -lt 1 ]; then
+  # <VERSION> is required!
+  echo "USAGE: $0 <VERSION> [DEBUG] [SMOKE_TEST]"
   exit 1
 fi
 
-project_build_root=$1
-project_version=$2
+project_version=$1
 # determine if we should include debug opts
-[ "$3" = true ] && is_debug=true || is_debug=false
+[ "$2" = true ] && is_debug=true || is_debug=false
 # determine if we should include smoke test env variables
-[ "$4" = true ] && is_smoke_test=true || is_smoke_test=false
-
-# work only inside the scope of the project build root
-cd "$project_build_root" || exit 1
+[ "$3" = true ] && is_smoke_test=true || is_smoke_test=false
 
 echo "VERSION=$project_version" > .env
 echo "REGISTRY_PREFIX=" >> .env
@@ -42,3 +38,4 @@ fi
 # Output the values
 echo ".env properties:"
 cat .env
+echo
\ No newline at end of file