diff --git a/.dockerignore b/.dockerignore
index 274ea4d..371b5e6 100644
--- a/.dockerignore
+++ b/.dockerignore
@@ -11,3 +11,6 @@ scripts/
 *.pyc
 __pycache__/
 .env
+
+# Ingore volumes created at run
+postgres_data/
\ No newline at end of file
diff --git a/Dockerfile b/Dockerfile
index 242c1aa..f52141b 100644
--- a/Dockerfile
+++ b/Dockerfile
@@ -8,7 +8,8 @@ RUN apt-get update && \
         libpq-dev \
         nginx \
         curl \
-        postgresql-client \
+        postgresql-15 \
+        postgresql-client-15 \
         supervisor \
         gettext-base \
         libcurl4-openssl-dev \
@@ -195,3 +196,12 @@ EOF
 
 # Start supervisor which will manage the setup, nginx, and gunicorn processes
 CMD ["/usr/bin/supervisord", "-c", "/etc/supervisor/conf.d/supervisord.conf"]
+
+# Copy entrypoint script
+COPY backend/entrypoint.sh /app/entrypoint.sh
+RUN chmod +x /app/entrypoint.sh
+
+# Expose Postgres data directory as a volume for persistence
+VOLUME ["/app/postgres_data"]
+
+ENTRYPOINT ["/app/entrypoint.sh"]
diff --git a/backend/entrypoint.sh b/backend/entrypoint.sh
new file mode 100644
index 0000000..5cd0c7a
--- /dev/null
+++ b/backend/entrypoint.sh
@@ -0,0 +1,75 @@
+#!/bin/bash
+set -e
+
+init_embedded_postgres() {
+  echo "[Entrypoint] Starting embedded Postgres..."
+  export PGDATA="/app/postgres_data"
+  export PGPORT=5432
+  export DB_HOST=localhost
+  export DB_PORT=5432
+
+  if [ ! -f "$PGDATA/PG_VERSION" ]; then
+    echo "[Entrypoint] Initializing Postgres data directory at $PGDATA..."
+    mkdir -p "$PGDATA"
+    chown -R postgres:postgres "$PGDATA"
+    su postgres -c "/usr/lib/postgresql/15/bin/initdb -D $PGDATA"
+  fi
+
+  echo "[Entrypoint] Launching Postgres server..."
+  su postgres -c "/usr/lib/postgresql/15/bin/pg_ctl -D $PGDATA -l $PGDATA/postgres.log start"
+
+  # Wait for Postgres to be ready
+  for i in {1..20}; do
+    if pg_isready -h localhost -p 5432; then
+      echo "[Entrypoint] Postgres is ready!"
+      break
+    fi
+    echo "[Entrypoint] Waiting for Postgres to be ready... ($i)"
+    sleep 1
+  done
+}
+
+create_db_if_needed() {
+  su postgres -c "psql -tAc \"SELECT 1 FROM pg_database WHERE datname = '$DB_NAME'\" | grep -q 1 || psql -c 'CREATE DATABASE \"$DB_NAME\";'"
+}
+
+create_user_if_needed() {
+  cat > /tmp/create_user.sql <<EOF
+DO \$\$ 
+BEGIN
+  IF NOT EXISTS (SELECT FROM pg_roles WHERE rolname = '$DB_USER') THEN
+    EXECUTE format('CREATE ROLE %I WITH LOGIN PASSWORD %L', '$DB_USER', '$DB_PASSWORD');
+  END IF;
+END
+\$\$;
+EOF
+  su postgres -c "psql -f /tmp/create_user.sql"
+  rm /tmp/create_user.sql
+}
+
+set_db_ownership_and_privileges() {
+  su postgres -c "psql -c \"GRANT ALL PRIVILEGES ON DATABASE \"$DB_NAME\" TO \"$DB_USER\";\""
+  su postgres -c "psql -d \"$DB_NAME\" -c 'ALTER DATABASE \"$DB_NAME\" OWNER TO \"$DB_USER\";'"
+  su postgres -c "psql -d \"$DB_NAME\" -c 'ALTER SCHEMA public OWNER TO \"$DB_USER\";'"
+  su postgres -c "psql -d \"$DB_NAME\" -c 'GRANT ALL ON SCHEMA public TO \"$DB_USER\";'"
+}
+
+# --- Main Script ---
+
+if [ "$USE_INTERNAL_DB" = "true" ]; then
+  init_embedded_postgres
+  create_db_if_needed
+  create_user_if_needed
+  set_db_ownership_and_privileges
+fi
+
+python /app/migrations/apply_migrations.py
+
+if [ "$USE_INTERNAL_DB" != "true" ]; then
+  python /app/fix_permissions.py
+else
+  echo "[Entrypoint] Skipping fix_permissions.py for embedded Postgres."
+fi
+
+cd /app && python -c "import subprocess; subprocess.run([\"pybabel\", \"compile\", \"-d\", \"locales\"], check=False)"
+exec /usr/bin/supervisord -c /etc/supervisor/conf.d/supervisord.conf 
\ No newline at end of file
diff --git a/docker-compose.yml b/docker-compose.yml
index 3b9efd4..23ef34b 100644
--- a/docker-compose.yml
+++ b/docker-compose.yml
@@ -1,5 +1,3 @@
-version: '3'
-
 services:
   warracker:
     build: .
@@ -8,6 +6,8 @@ services:
     volumes:
       - ./uploads:/data/uploads
       - ./backend/migrations:/app/migrations
+      # Uncomment the next line to persist embedded Postgres data (when using USE_INTERNAL_DB=true)
+      # - ./postgres_data:/app/postgres_data
     environment:
       - DB_HOST=warrackerdb
       - DB_NAME=warranty_test
@@ -15,6 +15,9 @@ services:
       - DB_PASSWORD=${DB_PASSWORD:-warranty_password}
       - DB_ADMIN_USER=warracker_admin
       - DB_ADMIN_PASSWORD=${DB_ADMIN_PASSWORD:-change_this_password_in_production}
+      # To use embedded Postgres, uncomment the next line:
+      # - USE_INTERNAL_DB=true
+      # When using embedded Postgres, DB_HOST/DB_PORT are ignored and set automatically
       - SMTP_HOST=${SMTP_HOST:-localhost}
       - SMTP_PORT=${SMTP_PORT:-1025}
       - SMTP_USERNAME=${SMTP_USERNAME:-notifications@warracker.com}
@@ -40,6 +43,7 @@ services:
       - WARRACKER_MEMORY_MODE=${WARRACKER_MEMORY_MODE:-optimized} # Options: optimized (default), ultra-light, performance
       - MAX_UPLOAD_MB=${MAX_UPLOAD_MB:-16} # Reduced from 32MB default for memory efficiency
       - NGINX_MAX_BODY_SIZE_VALUE=${NGINX_MAX_BODY_SIZE_VALUE:-16M} # Match upload limit
+    # If using external DB, keep depends_on
     depends_on:
       warrackerdb:
         condition: service_healthy
@@ -48,12 +52,14 @@ services:
       bash -c "
         exec /usr/bin/supervisord -c /etc/supervisor/conf.d/supervisord.conf
       "
-    
+    # If using embedded DB, you can remove depends_on and command overrides
+
+  # External Postgres service (optional, not needed if using embedded DB)
   warrackerdb:
     image: "postgres:15-alpine"
     volumes:
       - postgres_data:/var/lib/postgresql/data
-      - ./backend/init.sql:/docker-entrypoint-initdb.d/init.sql
+      - ./backend/migrations:/docker-entrypoint-initdb.d
     environment:
       - POSTGRES_DB=warranty_test
       - POSTGRES_USER=warranty_user