diff --git a/packages/node/src/sdk.ts b/packages/node/src/sdk.ts
index 9e55fd4b5a84..fee681921bb3 100644
--- a/packages/node/src/sdk.ts
+++ b/packages/node/src/sdk.ts
@@ -13,6 +13,7 @@ import {
   logger,
   nodeStackLineParser,
   stackParserFromStackParserOptions,
+  tracingContextFromHeaders,
 } from '@sentry/utils';
 
 import { setNodeAsyncContextStrategy } from './async';
@@ -129,8 +130,9 @@ export function init(options: NodeOptions = {}): void {
     options.dsn = process.env.SENTRY_DSN;
   }
 
-  if (options.tracesSampleRate === undefined && process.env.SENTRY_TRACES_SAMPLE_RATE) {
-    const tracesSampleRate = parseFloat(process.env.SENTRY_TRACES_SAMPLE_RATE);
+  const sentryTracesSampleRate = process.env.SENTRY_TRACES_SAMPLE_RATE;
+  if (options.tracesSampleRate === undefined && sentryTracesSampleRate) {
+    const tracesSampleRate = parseFloat(sentryTracesSampleRate);
     if (isFinite(tracesSampleRate)) {
       options.tracesSampleRate = tracesSampleRate;
     }
@@ -171,6 +173,8 @@ export function init(options: NodeOptions = {}): void {
   if (options.autoSessionTracking) {
     startSessionTracking();
   }
+
+  updateScopeFromEnvVariables();
 }
 
 /**
@@ -285,3 +289,19 @@ function startSessionTracking(): void {
     if (session && !terminalStates.includes(session.status)) hub.endSession();
   });
 }
+
+/**
+ * Update scope and propagation context based on environmental variables.
+ *
+ * See https://github.com/getsentry/rfcs/blob/main/text/0071-continue-trace-over-process-boundaries.md
+ * for more details.
+ */
+function updateScopeFromEnvVariables(): void {
+  const sentryUseEnvironment = (process.env.SENTRY_USE_ENVIRONMENT || '').toLowerCase();
+  if (!['false', 'n', 'no', 'off', '0'].includes(sentryUseEnvironment)) {
+    const sentryTraceEnv = process.env.SENTRY_TRACE;
+    const baggageEnv = process.env.SENTRY_BAGGAGE;
+    const { propagationContext } = tracingContextFromHeaders(sentryTraceEnv, baggageEnv);
+    getCurrentHub().getScope().setPropagationContext(propagationContext);
+  }
+}
diff --git a/packages/node/test/index.test.ts b/packages/node/test/index.test.ts
index ab9bd41adaf9..60b37b44acb1 100644
--- a/packages/node/test/index.test.ts
+++ b/packages/node/test/index.test.ts
@@ -488,4 +488,47 @@ describe('SentryNode initialization', () => {
       expect(instrumenter).toEqual('otel');
     });
   });
+
+  describe('propagation context', () => {
+    beforeEach(() => {
+      process.env.SENTRY_TRACE = '12312012123120121231201212312012-1121201211212012-0';
+      process.env.SENTRY_BAGGAGE = 'sentry-release=1.0.0,sentry-environment=production';
+
+      getCurrentHub().getScope().clear();
+    });
+
+    afterEach(() => {
+      delete process.env.SENTRY_TRACE;
+      delete process.env.SENTRY_BAGGAGE;
+    });
+
+    it('reads from environmental variables', () => {
+      init({ dsn });
+
+      // @ts-expect-error accessing private method for test
+      expect(getCurrentHub().getScope()._propagationContext).toEqual({
+        traceId: '12312012123120121231201212312012',
+        parentSpanId: '1121201211212012',
+        spanId: expect.any(String),
+        sampled: false,
+        dsc: {
+          release: '1.0.0',
+          environment: 'production',
+        },
+      });
+    });
+
+    it.each(['false', 'False', 'FALSE', 'n', 'no', 'No', 'NO', 'off', 'Off', 'OFF', '0'])(
+      'does not read from environmental variable if SENTRY_USE_ENVIRONMENT is set to %s',
+      useEnvValue => {
+        process.env.SENTRY_USE_ENVIRONMENT = useEnvValue;
+        init({ dsn });
+
+        // @ts-expect-error accessing private method for test
+        expect(getCurrentHub().getScope()._propagationContext.traceId).not.toEqual('12312012123120121231201212312012');
+
+        delete process.env.SENTRY_USE_ENVIRONMENT;
+      },
+    );
+  });
 });
diff --git a/packages/utils/src/tracing.ts b/packages/utils/src/tracing.ts
index 7eee5312ce6d..445c271a0ee5 100644
--- a/packages/utils/src/tracing.ts
+++ b/packages/utils/src/tracing.ts
@@ -1,4 +1,7 @@
-import type { TraceparentData } from '@sentry/types';
+import type { DynamicSamplingContext, PropagationContext, TraceparentData } from '@sentry/types';
+
+import { baggageHeaderToDynamicSamplingContext } from './baggage';
+import { uuid4 } from './misc';
 
 export const TRACEPARENT_REGEXP = new RegExp(
   '^[ \\t]*' + // whitespace
@@ -36,3 +39,40 @@ export function extractTraceparentData(traceparent: string): TraceparentData | u
     parentSpanId: matches[2],
   };
 }
+
+/**
+ * Create tracing context from incoming headers.
+ */
+export function tracingContextFromHeaders(
+  sentryTrace: Parameters<typeof extractTraceparentData>[0] = '',
+  baggage: Parameters<typeof baggageHeaderToDynamicSamplingContext>[0] = '',
+): {
+  traceparentData: ReturnType<typeof extractTraceparentData>;
+  dynamicSamplingContext: ReturnType<typeof baggageHeaderToDynamicSamplingContext>;
+  propagationContext: PropagationContext;
+} {
+  const traceparentData = extractTraceparentData(sentryTrace);
+  const dynamicSamplingContext = baggageHeaderToDynamicSamplingContext(baggage);
+
+  const { traceId, parentSpanId, parentSampled } = traceparentData || {};
+
+  const propagationContext: PropagationContext = {
+    traceId: traceId || uuid4(),
+    spanId: uuid4().substring(16),
+    sampled: parentSampled === undefined ? false : parentSampled,
+  };
+
+  if (parentSpanId) {
+    propagationContext.parentSpanId = parentSpanId;
+  }
+
+  if (dynamicSamplingContext) {
+    propagationContext.dsc = dynamicSamplingContext as DynamicSamplingContext;
+  }
+
+  return {
+    traceparentData,
+    dynamicSamplingContext,
+    propagationContext,
+  };
+}