diff --git a/.github/workflows/backend-ci.yml b/.github/workflows/backend-ci.yml
index 5ac9a441..a078663f 100644
--- a/.github/workflows/backend-ci.yml
+++ b/.github/workflows/backend-ci.yml
@@ -37,6 +37,9 @@ jobs:
           --health-timeout 5s
           --health-retries 5
 
+    env:
+      DATABASE_PROVIDER: postgresql
+
     steps:
       - uses: actions/checkout@v4
 
diff --git a/app/backend/.env.example b/app/backend/.env.example
index ab1af48c..77ffe998 100644
--- a/app/backend/.env.example
+++ b/app/backend/.env.example
@@ -1,4 +1,9 @@
+DATABASE_PROVIDER="sqlite" # Use "sqlite" or "postgresql"
 DATABASE_URL="file:./prisma/dev.db"
+# For PostgreSQL configuration, set:
+# DATABASE_PROVIDER="postgresql"
+# DATABASE_URL="postgresql://postgres:password@localhost:5432/chainforge?schema=public"
+# SHADOW_DATABASE_URL="postgresql://postgres:password@localhost:5432/chainforge_shadow?schema=public"
 WEBHOOK_SECRET="change-me-to-a-strong-random-secret"
 SOROBAN_NETWORK="testnet"
 AID_ESCROW_CONTRACT_ID=""
diff --git a/app/backend/.gitignore b/app/backend/.gitignore
index 10ce9dde..b184de8b 100644
--- a/app/backend/.gitignore
+++ b/app/backend/.gitignore
@@ -73,3 +73,6 @@ reports/mutation/
 # Keep reports directory but ignore contents
 reports/*
 !reports/.gitkeep
+
+# Prisma
+/prisma/schema.generated.prisma
diff --git a/app/backend/prisma.config.ts b/app/backend/prisma.config.ts
index b2ad2efe..53b85305 100644
--- a/app/backend/prisma.config.ts
+++ b/app/backend/prisma.config.ts
@@ -1,7 +1,30 @@
 import { defineConfig } from 'prisma/config';
+import * as fs from 'fs';
+import * as path from 'path';
+
+const provider = process.env.DATABASE_PROVIDER || 'sqlite';
+const sourceSchemaPath = path.join(__dirname, 'prisma', 'schema.prisma');
+const destSchemaPath = path.join(__dirname, 'prisma', 'schema.generated.prisma');
+
+if (fs.existsSync(sourceSchemaPath)) {
+  let content = fs.readFileSync(sourceSchemaPath, 'utf8');
+  
+  // Replace provider in datasource block
+  content = content.replace(
+    /(datasource db\s*\{[^}]*provider\s*=\s*")[^"]*(")/g,
+    `$1${provider}$2`
+  );
+  
+  // Remove shadowDatabaseUrl if using SQLite
+  if (provider === 'sqlite') {
+    content = content.replace(/shadowDatabaseUrl\s*=\s*env\("SHADOW_DATABASE_URL"\)/g, '');
+  }
+  
+  fs.writeFileSync(destSchemaPath, content, 'utf8');
+}
 
 export default defineConfig({
-  schema: 'prisma/schema.prisma',
+  schema: 'prisma/schema.generated.prisma',
   migrations: {
     path: 'prisma/migrations',
   },
diff --git a/docs/db/providers.md b/docs/db/providers.md
new file mode 100644
index 00000000..27d14e28
--- /dev/null
+++ b/docs/db/providers.md
@@ -0,0 +1,49 @@
+# Database Providers
+
+ChainForge supports switching database providers dynamically using environment variables. This enables lightweight development/testing using SQLite and robust production deployments using PostgreSQL.
+
+## Supported Providers
+- `sqlite` (Default for local development and unit/e2e testing)
+- `postgresql` (Default for production)
+
+## Configuration
+
+The database provider is determined by the following environment variables:
+
+| Variable | Description | Example (SQLite) | Example (PostgreSQL) |
+|---|---|---|---|
+| `DATABASE_PROVIDER` | The Prisma database provider (`sqlite` or `postgresql`) | `sqlite` | `postgresql` |
+| `DATABASE_URL` | The database connection string | `file:./prisma/dev.db` | `postgresql://user:pass@host:5432/db?schema=public` |
+| `SHADOW_DATABASE_URL` | Optional shadow database URL (needed for PostgreSQL migrations if user lacks admin privileges to create new databases) | (Not used) | `postgresql://user:pass@host:5432/shadow_db?schema=public` |
+
+### Setting Environment Variables
+
+Copy `app/backend/.env.example` to `app/backend/.env` and configure:
+
+#### SQLite (Default)
+```env
+DATABASE_PROVIDER="sqlite"
+DATABASE_URL="file:./prisma/dev.db"
+```
+
+#### PostgreSQL
+```env
+DATABASE_PROVIDER="postgresql"
+DATABASE_URL="postgresql://postgres:password@localhost:5432/chainforge?schema=public"
+SHADOW_DATABASE_URL="postgresql://postgres:password@localhost:5432/chainforge_shadow?schema=public"
+```
+
+---
+
+## Prisma Migrations and Schema Validation
+
+Because migrations are provider-specific in Prisma:
+1. **SQLite migrations** are committed under `app/backend/prisma/migrations`.
+2. **PostgreSQL migrations** can be created/applied when using a PostgreSQL target by running:
+   ```bash
+   DATABASE_PROVIDER=postgresql DATABASE_URL="<pg_url>" npx prisma migrate dev --name <migration_name>
+   ```
+3. To dynamically apply migrations or initialize schema without pre-existing migration folders (e.g. for temporary test runs), use:
+   ```bash
+   DATABASE_PROVIDER=postgresql DATABASE_URL="<pg_url>" npx prisma db push
+   ```