diff --git a/examples/deepspeed-multinode/sky.yaml b/examples/deepspeed-multinode/sky.yaml
index 378992d66a4..37d7445a2a1 100644
--- a/examples/deepspeed-multinode/sky.yaml
+++ b/examples/deepspeed-multinode/sky.yaml
@@ -18,8 +18,15 @@ resources:
   # accelerators: A100-80GB:1  # Azure, GCP, SCP
   # accelerators: A10G:1  # AWS. Will OOM for (1) single_node/run_1.3b_lora.sh (2) multi_node/run_66b.sh.
   # accelerators: T4:1  # AWS, Azure, GCP. Will OOM for (1) single_node/run_1.3b_lora.sh (2) multi_node/run_66b.sh.
+
 num_nodes: 2
 
+envs:
+  MY_VAR_1: "hello"
+  MY_VAR_2: "world"
+  # List of env vars to propagate to all nodes in deepspeed. If you add an env above, add it to this list.
+  DEEPSPEED_ENVS: "MY_VAR_1,MY_VAR_2,SKYPILOT_NODE_RANK"
+
 setup: |
   git clone https://github.com/microsoft/DeepSpeedExamples.git || true
   cd DeepSpeedExamples
@@ -60,6 +67,10 @@ run: |
     HOSTFILE_PATH=/tmp/hostfile.${SKYPILOT_TASK_ID}
     python -c "import os;n_gpus=os.environ['SKYPILOT_NUM_GPUS_PER_NODE'];print('\n'.join([f'{ip} slots={n_gpus}' for ip in os.environ['SKYPILOT_NODE_IPS'].splitlines()]))" > ${HOSTFILE_PATH}
 
+    # Generate .deepspeed_env to propagate env vars to all workers spawned by DeepSpeed.
+    echo "Generating .deepspeed_env"
+    python3 -c 'import os; f = open(".deepspeed_env", "w"); f.write("\n".join(["{}=\"{}\"".format(var, os.getenv(var, "")) for var in os.getenv("DEEPSPEED_ENVS").split(",")])); f.write("\n"); f.close()'
+
     echo "*******************************************"
     echo "Hostfile: ${HOSTFILE_PATH}"
     cat ${HOSTFILE_PATH}