diff --git a/backend/app/core/config.py b/backend/app/core/config.py
new file mode 100644
index 0000000..02f86d4
--- /dev/null
+++ b/backend/app/core/config.py
@@ -0,0 +1,223 @@
+"""
+Configuration module for UnitForge application.
+
+This module handles environment variable loading and provides
+default values for configuration settings.
+"""
+
+import os
+from pathlib import Path
+from typing import Optional, List
+import json
+import ast
+
+try:
+    from dotenv import load_dotenv
+    # Try to load .env file from project root
+    env_path = Path(__file__).parent.parent.parent.parent / '.env'
+    if env_path.exists():
+        load_dotenv(env_path)
+except ImportError:
+    # python-dotenv not installed, continue with os.getenv
+    pass
+
+
+class Settings:
+    """Application settings loaded from environment variables."""
+
+    def __init__(self):
+        """Initialize settings from environment variables."""
+        # Application info
+        self.app_name: str = os.getenv("APP_NAME", "UnitForge")
+        self.app_version: str = os.getenv("APP_VERSION", "1.0.0")
+        self.app_description: str = os.getenv(
+            "APP_DESCRIPTION", "Create, validate, and manage systemd unit files"
+        )
+
+        # External links
+        self.github_url: str = os.getenv(
+            "GITHUB_URL", "https://github.com/will666/unitforge"
+        )
+        self.documentation_url: str = os.getenv(
+            "DOCUMENTATION_URL", "https://unitforge.readthedocs.io/"
+        )
+        self.bug_reports_url: str = os.getenv(
+            "BUG_REPORTS_URL", "https://github.com/will666/unitforge/issues"
+        )
+
+        # Contact information
+        self.contact_email: str = os.getenv("CONTACT_EMAIL", "contact@unitforge.dev")
+
+        # Application settings
+        self.environment: str = os.getenv("ENVIRONMENT", "production")
+        self.log_level: str = os.getenv("LOG_LEVEL", "info")
+
+        # Server configuration
+        self.host: str = os.getenv("HOST", "0.0.0.0")
+        self.port: int = int(os.getenv("PORT", "8000"))
+        self.debug: bool = os.getenv("DEBUG", "").lower() in ("true", "1", "yes", "on")
+        self.reload: bool = os.getenv("RELOAD", "").lower() in ("true", "1", "yes", "on")
+        self.workers: int = int(os.getenv("WORKERS", "4"))
+
+        # API configuration
+        self.api_title: str = os.getenv("API_TITLE", self.app_name)
+        self.api_version: str = os.getenv("API_VERSION", self.app_version)
+        self.api_description: str = os.getenv("API_DESCRIPTION", self.app_description)
+        self.api_docs_url: str = os.getenv("DOCS_URL", "/api/docs")
+        self.api_redoc_url: str = os.getenv("REDOC_URL", "/api/redoc")
+
+        # Security settings
+        self.secret_key: Optional[str] = os.getenv("SECRET_KEY")
+        self.allowed_hosts: List[str] = self._parse_list("ALLOWED_HOSTS", ["*"])
+
+        # CORS settings
+        self.cors_origins: list = self._parse_cors_origins()
+
+        # File upload settings
+        self.max_upload_size: int = int(os.getenv("MAX_UPLOAD_SIZE", "1048576"))
+        self.allowed_extensions: List[str] = self._parse_list(
+            "ALLOWED_EXTENSIONS",
+            [".service", ".timer", ".socket", ".mount", ".target", ".path"]
+        )
+
+        # Template settings
+        self.template_cache_ttl: int = int(os.getenv("TEMPLATE_CACHE_TTL", "300"))
+        self.validation_cache_ttl: int = int(os.getenv("VALIDATION_CACHE_TTL", "60"))
+
+        # Paths
+        self.frontend_dir: str = os.getenv("FRONTEND_DIR", "frontend")
+        self.backend_dir: str = os.getenv("BACKEND_DIR", "backend")
+        self.static_dir: str = os.getenv("STATIC_DIR", "frontend/static")
+        self.templates_dir: str = os.getenv("TEMPLATES_DIR", "frontend/templates")
+
+        # Feature flags
+        self.enable_api_metrics: bool = self._get_bool("ENABLE_API_METRICS", False)
+        self.enable_request_logging: bool = self._get_bool("ENABLE_REQUEST_LOGGING", True)
+        self.enable_template_caching: bool = self._get_bool("ENABLE_TEMPLATE_CACHING", True)
+        self.enable_validation_caching: bool = self._get_bool("ENABLE_VALIDATION_CACHING", True)
+
+        # Performance settings
+        self.request_timeout: int = int(os.getenv("REQUEST_TIMEOUT", "30"))
+        self.keepalive_timeout: int = int(os.getenv("KEEPALIVE_TIMEOUT", "5"))
+        self.max_connections: int = int(os.getenv("MAX_CONNECTIONS", "100"))
+
+        # Logging configuration
+        self.log_format: str = os.getenv(
+            "LOG_FORMAT", "%(asctime)s - %(name)s - %(levelname)s - %(message)s"
+        )
+        self.log_date_format: str = os.getenv("LOG_DATE_FORMAT", "%Y-%m-%d %H:%M:%S")
+        self.access_log: bool = self._get_bool("ACCESS_LOG", True)
+
+        # CLI configuration
+        self.cli_verbose: bool = self._get_bool("CLI_VERBOSE", False)
+        self.cli_color: bool = self._get_bool("CLI_COLOR", True)
+        self.cli_progress: bool = self._get_bool("CLI_PROGRESS", True)
+
+        # Validation settings
+        self.strict_validation: bool = self._get_bool("STRICT_VALIDATION", False)
+        self.show_warnings: bool = self._get_bool("SHOW_WARNINGS", True)
+        self.max_validation_errors: int = int(os.getenv("MAX_VALIDATION_ERRORS", "50"))
+
+        # Template generation defaults
+        self.default_user: str = os.getenv("DEFAULT_USER", "www-data")
+        self.default_group: str = os.getenv("DEFAULT_GROUP", "www-data")
+        self.default_restart_policy: str = os.getenv("DEFAULT_RESTART_POLICY", "on-failure")
+        self.default_wanted_by: str = os.getenv("DEFAULT_WANTED_BY", "multi-user.target")
+
+        # Security headers
+        self.security_headers: bool = self._get_bool("SECURITY_HEADERS", True)
+        self.hsts_max_age: int = int(os.getenv("HSTS_MAX_AGE", "31536000"))
+        self.csp_enabled: bool = self._get_bool("CSP_ENABLED", True)
+
+        # Monitoring
+        self.health_check_enabled: bool = self._get_bool("HEALTH_CHECK_ENABLED", True)
+        self.metrics_enabled: bool = self._get_bool("METRICS_ENABLED", False)
+        self.tracing_enabled: bool = self._get_bool("TRACING_ENABLED", False)
+
+        # Asset optimization
+        self.hot_reload: bool = self._get_bool("HOT_RELOAD", False)
+        self.source_maps: bool = self._get_bool("SOURCE_MAPS", False)
+        self.minify_assets: bool = self._get_bool("MINIFY_ASSETS", True)
+        self.compress_responses: bool = self._get_bool("COMPRESS_RESPONSES", True)
+
+        # Documentation
+        self.docs_auto_reload: bool = self._get_bool("DOCS_AUTO_RELOAD", False)
+        self.api_docs_enabled: bool = self._get_bool("API_DOCS_ENABLED", True)
+        self.swagger_ui_enabled: bool = self._get_bool("SWAGGER_UI_ENABLED", True)
+        self.redoc_enabled: bool = self._get_bool("REDOC_ENABLED", True)
+
+    def _get_bool(self, key: str, default: bool = False) -> bool:
+        """Get boolean value from environment variable."""
+        value = os.getenv(key, "").lower()
+        if value in ("true", "1", "yes", "on"):
+            return True
+        elif value in ("false", "0", "no", "off"):
+            return False
+        return default
+
+    def _parse_list(self, key: str, default: List[str]) -> List[str]:
+        """Parse list from environment variable."""
+        value = os.getenv(key)
+        if not value:
+            return default
+
+        # Try to parse as JSON list first
+        try:
+            parsed = json.loads(value)
+            if isinstance(parsed, list):
+                return [str(item) for item in parsed]
+        except (json.JSONDecodeError, ValueError):
+            pass
+
+        # Try to parse as Python literal
+        try:
+            parsed = ast.literal_eval(value)
+            if isinstance(parsed, list):
+                return [str(item) for item in parsed]
+        except (ValueError, SyntaxError):
+            pass
+
+        # Fall back to comma-separated values
+        return [item.strip() for item in value.split(",") if item.strip()]
+
+    def _parse_cors_origins(self) -> list:
+        """Parse CORS origins from environment variable."""
+        origins_str = os.getenv("CORS_ORIGINS", "*")
+        if origins_str == "*":
+            return ["*"]
+
+        # Try to parse as list first
+        try:
+            parsed = self._parse_list("CORS_ORIGINS", [])
+            if parsed:
+                return parsed
+        except Exception:
+            pass
+
+        # Fall back to comma-separated values
+        return [origin.strip() for origin in origins_str.split(",") if origin.strip()]
+
+    def get_template_context(self) -> dict:
+        """Get context variables for template rendering."""
+        return {
+            "app_name": self.app_name,
+            "app_version": self.app_version,
+            "app_description": self.app_description,
+            "github_url": self.github_url,
+            "documentation_url": self.documentation_url,
+            "bug_reports_url": self.bug_reports_url,
+            "api_docs_url": self.api_docs_url,
+            "contact_email": self.contact_email,
+        }
+
+    def is_development(self) -> bool:
+        """Check if running in development environment."""
+        return self.environment.lower() == "development" or self.debug
+
+    def is_production(self) -> bool:
+        """Check if running in production environment."""
+        return self.environment.lower() == "production" and not self.debug
+
+
+# Global settings instance
+settings = Settings()