diff --git a/template/v3/dirs/etc/supervisor/conf.d/supervisord-code-editor.conf b/template/v3/dirs/etc/supervisor/conf.d/supervisord-code-editor.conf
index cac5669b..58e187d0 100644
--- a/template/v3/dirs/etc/supervisor/conf.d/supervisord-code-editor.conf
+++ b/template/v3/dirs/etc/supervisor/conf.d/supervisord-code-editor.conf
@@ -7,5 +7,6 @@ command=start-code-editor
 autostart=true
 autorestart=true
 stdout_logfile=/dev/fd/1   ; Redirect web server logs to stdout
+stderr_logfile=/dev/fd/1
 stdout_logfile_maxbytes = 0 ; Fix: https://github.com/Supervisor/supervisor/issues/935
 stderr_logfile_maxbytes = 0 ; Fix: https://github.com/Supervisor/supervisor/issues/935
diff --git a/template/v3/dirs/usr/local/bin/merge-settings-util.py b/template/v3/dirs/usr/local/bin/merge-settings-util.py
new file mode 100644
index 00000000..8b93cae1
--- /dev/null
+++ b/template/v3/dirs/usr/local/bin/merge-settings-util.py
@@ -0,0 +1,22 @@
+import json
+from sys import argv
+
+
+# merges json files file1 and file2, keys in file2 overwriting any keys that already exist in file1
+def main():
+    file1, file2 = argv[1], argv[2]
+    # Read JSON data from files
+    with open(file1, "r") as f1, open(file2, "r") as f2:
+        data1 = json.load(f1)
+        data2 = json.load(f2)
+
+    # Merge the data (simple update)
+    merged_data = {**data1, **data2}
+
+    # Write the merged data to a new file
+    with open(file1, "w") as f:
+        json.dump(merged_data, f)
+
+
+if __name__ == "__main__":
+    main()
diff --git a/template/v3/dirs/usr/local/bin/start-code-editor b/template/v3/dirs/usr/local/bin/start-code-editor
index bc97106c..d331ce4f 100755
--- a/template/v3/dirs/usr/local/bin/start-code-editor
+++ b/template/v3/dirs/usr/local/bin/start-code-editor
@@ -1,6 +1,44 @@
 #!/bin/bash
 set -e
 
+EFS_MOUNT_POINT="/opt/amazon/sagemaker"
+EBS_MOUNT_POINT="/home/sagemaker-user"
+
+persistent_settings_folder="${EBS_MOUNT_POINT}/sagemaker-code-editor-server-data"
+default_settings_folder="${EFS_MOUNT_POINT}/sagemaker-code-editor-server-data"
+
+override_machine_settings() {
+  # create a new settings file with preset defaults or merge the defaults into the existing settings file
+  local settings_relative_path="data/Machine"
+  local settings_file_path_suffix="${settings_relative_path}/settings.json"
+  local persistent_machine_settings_file="${persistent_settings_folder}/${settings_file_path_suffix}"
+  local default_machine_settings_file="${default_settings_folder}/${settings_file_path_suffix}"
+
+  if [ ! -f "$persistent_machine_settings_file" ]; then
+    # copy settings file to EBS if it doesn't exist in EBS
+    mkdir -p "${persistent_settings_folder}/${settings_relative_path}"
+    cp "$default_machine_settings_file" "$persistent_machine_settings_file"
+    echo "Created persistent settings file with default settings at $persistent_machine_settings_file"
+  else
+    # if it does exist then merge settings
+    echo "File already exists: ${persistent_machine_settings_file}. Merging default settings with existing settings."
+    python3 /usr/local/bin/merge-settings-util.py "$persistent_machine_settings_file" "$default_machine_settings_file"
+  fi
+}
+
+copy_user_settings() {
+  local settings_relative_path="data/User"
+  local settings_file_path_suffix="${settings_relative_path}/settings.json"
+  local persistent_user_settings_file="${persistent_settings_folder}/${settings_file_path_suffix}"
+  local default_user_settings_file="${default_settings_folder}/${settings_file_path_suffix}"
+  if [ ! -f "$persistent_user_settings_file" ]; then
+      # copy user settings file to EBS if it doesn't exist in EBS
+      mkdir -p "${persistent_settings_folder}/${settings_relative_path}"
+      cp "$default_user_settings_file" "$persistent_user_settings_file"
+      echo "Created persistent settings file with default settings at $persistent_user_settings_file"
+  fi
+}
+
 eval "$(micromamba shell hook --shell=bash)"
 
 # Activate conda environment 'base', which is the default environment for sagemaker-distribution
@@ -8,12 +46,14 @@ micromamba activate base
 
 # Start code-editor server
 if [ -n "$SAGEMAKER_APP_TYPE_LOWERCASE" ]; then
-  # SAGEMAKER_APP_TYPE is set, indicating the server is running within a SageMaker
-  # app. Configure the base url to be `/<app-type-in-lower-case>/default`.
+  # SAGEMAKER_APP_TYPE is set, indicating the server is running within a SageMaker app.
+  override_machine_settings
+  copy_user_settings
+  # Configure the base url to be `/<app-type-in-lower-case>/default`.
   sagemaker-code-editor --host 0.0.0.0 --port 8888 \
     --without-connection-token \
     --base-path "/$SAGEMAKER_APP_TYPE_LOWERCASE/default" \
-    --server-data-dir /opt/amazon/sagemaker/sagemaker-code-editor-server-data \
+    --server-data-dir $persistent_settings_folder \
     --extensions-dir /opt/amazon/sagemaker/sagemaker-code-editor-server-data/extensions \
     --user-data-dir /opt/amazon/sagemaker/sagemaker-code-editor-user-data
 else