diff --git a/.env.template b/.env.template
index c922fe54..ed456e91 100644
--- a/.env.template
+++ b/.env.template
@@ -32,7 +32,7 @@ LOG_LEVEL=INFO
 # =============================================================================
 # Connection URI for PostgreSQL database with pgvector support
 # Must use postgresql+psycopg prefix for SQLAlchemy compatibility
-DB_CONNECTION_URI=postgresql+psycopg://testuser:testpwd@localhost:5432/honcho
+DB_CONNECTION_URI=postgresql+psycopg://postgres:postgres@localhost:5432/postgres
 
 # Optional database settings
 # DB_SCHEMA=public
diff --git a/Dockerfile b/Dockerfile
index 30a8d09b..4a68d617 100644
--- a/Dockerfile
+++ b/Dockerfile
@@ -32,9 +32,11 @@ RUN --mount=type=cache,target=/root/.cache/uv \
 
 # Place executables in the environment at the front of the path
 ENV PATH="/app/.venv/bin:$PATH"
+ENV HOME=/app
+ENV UV_CACHE_DIR=/tmp/uv-cache
 
 # Create non-root user and set ownership
-RUN addgroup --system app && adduser --system --group app && chown -R app:app /app
+RUN addgroup --system app && adduser --system --group app && mkdir -p /tmp/uv-cache && chown -R app:app /app /tmp/uv-cache
 
 COPY --chown=app:app src/ /app/src/
 COPY --chown=app:app migrations/ /app/migrations/
diff --git a/docker-compose.yml.example b/docker-compose.yml.example
index 39b5d8c3..8bb8507f 100644
--- a/docker-compose.yml.example
+++ b/docker-compose.yml.example
@@ -4,29 +4,43 @@ services:
     build:
       context: .
       dockerfile: Dockerfile
+    entrypoint: ["sh", "docker/entrypoint.sh"]
     depends_on:
       database:
         condition: service_healthy
+      redis:
+        condition: service_healthy
     ports:
       - 8000:8000
     volumes:
       - .:/app
       - venv:/app/.venv
+    environment:
+      - DB_CONNECTION_URI=postgresql+psycopg://postgres:postgres@database:5432/postgres
+      - CACHE_URL=redis://redis:6379/0?suppress=true
     env_file:
-      - .env
+      - path: .env
+        required: false
   deriver:
     build:
       context: .
       dockerfile: Dockerfile
-    entrypoint: ["uv", "run", "python", "-m", "src.deriver"]
+    entrypoint: ["/app/.venv/bin/python", "-m", "src.deriver"]
     depends_on:
       database:
         condition: service_healthy
+      redis:
+        condition: service_healthy
     volumes:
       - .:/app
       - venv:/app/.venv
+    environment:
+      - DB_CONNECTION_URI=postgresql+psycopg://postgres:postgres@database:5432/postgres
+      - CACHE_URL=redis://redis:6379/0?suppress=true
+      - METRICS_ENABLED=true
     env_file:
-      - .env
+      - path: .env
+        required: false
   database:
     image: pgvector/pgvector:pg15
     restart: always
@@ -34,16 +48,16 @@ services:
       - 5432:5432
     command: ["postgres", "-c", "max_connections=800"]
     environment:
-      - POSTGRES_DB=honcho
-      - POSTGRES_USER=testuser
-      - POSTGRES_PASSWORD=testpwd
+      - POSTGRES_DB=postgres
+      - POSTGRES_USER=postgres
+      - POSTGRES_PASSWORD=postgres
       - POSTGRES_HOST_AUTH_METHOD=trust
       - PGDATA=/var/lib/postgresql/data/pgdata
     volumes:
       - ./database/init.sql:/docker-entrypoint-initdb.d/init.sql
       - pgdata:/var/lib/postgresql/data/
     healthcheck:
-      test: ["CMD-SHELL", "pg_isready -U testuser -d honcho"]
+      test: ["CMD-SHELL", "pg_isready -U postgres -d postgres"]
       interval: 5s
       timeout: 5s
       retries: 5
@@ -59,6 +73,16 @@ services:
       interval: 5s
       timeout: 5s
       retries: 5
+  prometheus:
+    image: prom/prometheus:v3.2.1
+    ports:
+      - 9090:9090
+    volumes:
+      - ./docker/prometheus.yml:/etc/prometheus/prometheus.yml:ro
+      - prometheus-data:/prometheus
+    depends_on:
+      api:
+        condition: service_started
   grafana:
     image: grafana/grafana:11.4.0
     ports:
@@ -70,6 +94,11 @@ services:
       - GF_AUTH_ANONYMOUS_ORG_ROLE=Viewer
     volumes:
       - ./grafana-data:/var/lib/grafana
+      - ./docker/grafana-datasource.yml:/etc/grafana/provisioning/datasources/datasource.yml:ro
+    depends_on:
+      prometheus:
+        condition: service_started
 volumes:
   pgdata:
   venv:
+  prometheus-data:
diff --git a/docker/entrypoint.sh b/docker/entrypoint.sh
new file mode 100755
index 00000000..bc8e3f37
--- /dev/null
+++ b/docker/entrypoint.sh
@@ -0,0 +1,8 @@
+#!/bin/sh
+set -e
+
+echo "Running database migrations..."
+/app/.venv/bin/python scripts/provision_db.py
+
+echo "Starting API server..."
+exec /app/.venv/bin/fastapi run --host 0.0.0.0 src/main.py
diff --git a/docker/grafana-datasource.yml b/docker/grafana-datasource.yml
new file mode 100644
index 00000000..bb009bb2
--- /dev/null
+++ b/docker/grafana-datasource.yml
@@ -0,0 +1,9 @@
+apiVersion: 1
+
+datasources:
+  - name: Prometheus
+    type: prometheus
+    access: proxy
+    url: http://prometheus:9090
+    isDefault: true
+    editable: false
diff --git a/docker/prometheus.yml b/docker/prometheus.yml
new file mode 100644
index 00000000..18041391
--- /dev/null
+++ b/docker/prometheus.yml
@@ -0,0 +1,10 @@
+global:
+  scrape_interval: 15s
+
+scrape_configs:
+  - job_name: honcho-api
+    static_configs:
+      - targets: ["api:8000"]
+  - job_name: honcho-deriver
+    static_configs:
+      - targets: ["deriver:9090"]