diff --git a/.gitignore b/.gitignore
index a7905e501a2..7ff4c1c3197 100644
--- a/.gitignore
+++ b/.gitignore
@@ -70,3 +70,4 @@ cli/azd/extensions/microsoft.azd.demo/microsoft.azd.demo.exe
 cli/azd/extensions/microsoft.azd.concurx/concurx
 cli/azd/extensions/microsoft.azd.concurx/concurx.exe
 cli/azd/azd-test
+cli/azd/azd
diff --git a/cli/azd/pkg/project/importer.go b/cli/azd/pkg/project/importer.go
index ae290c79de6..84d9afa1658 100644
--- a/cli/azd/pkg/project/importer.go
+++ b/cli/azd/pkg/project/importer.go
@@ -246,6 +246,18 @@ func (im *ImportManager) ProjectInfrastructure(ctx context.Context, projectConfi
 		infraRoot = filepath.Join(projectConfig.Path, infraRoot)
 	}
 
+	// Auto-detect provider if not explicitly set
+	if infraOptions.Provider == provisioning.NotSpecified {
+		detectedProvider, err := detectProviderFromFiles(infraRoot)
+		if err != nil {
+			return nil, err
+		}
+		if detectedProvider != provisioning.NotSpecified {
+			log.Printf("auto-detected infrastructure provider: %s", detectedProvider)
+			infraOptions.Provider = detectedProvider
+		}
+	}
+
 	// short-circuit: If layers are defined, we know it's an explicit infrastructure
 	if len(infraOptions.Layers) > 0 {
 		return &Infra{
@@ -291,6 +303,55 @@ func (im *ImportManager) ProjectInfrastructure(ctx context.Context, projectConfi
 	}, nil
 }
 
+// detectProviderFromFiles scans the infra directory and detects the IaC provider
+// based on file extensions present. Returns an error if both bicep and terraform files exist.
+func detectProviderFromFiles(infraPath string) (provisioning.ProviderKind, error) {
+	files, err := os.ReadDir(infraPath)
+	if err != nil {
+		if os.IsNotExist(err) {
+			return provisioning.NotSpecified, nil
+		}
+		return provisioning.NotSpecified, fmt.Errorf("reading infra directory: %w", err)
+	}
+
+	hasBicep := false
+	hasTerraform := false
+
+	for _, file := range files {
+		if file.IsDir() {
+			continue
+		}
+
+		ext := filepath.Ext(file.Name())
+		switch ext {
+		case ".bicep", ".bicepparam":
+			hasBicep = true
+		case ".tf", ".tfvars":
+			hasTerraform = true
+		}
+
+		// Early exit if both found
+		if hasBicep && hasTerraform {
+			break
+		}
+	}
+
+	// Decision logic
+	switch {
+	case hasBicep && hasTerraform:
+		return provisioning.NotSpecified, fmt.Errorf(
+			"both Bicep and Terraform files detected in %s. "+
+				"Please specify 'infra.provider' in azure.yaml as either 'bicep' or 'terraform'",
+			infraPath)
+	case hasBicep:
+		return provisioning.Bicep, nil
+	case hasTerraform:
+		return provisioning.Terraform, nil
+	default:
+		return provisioning.NotSpecified, nil
+	}
+}
+
 // pathHasModule returns true if there is a file named "<module>" or "<module.bicep>" in path.
 func pathHasModule(path, module string) (bool, error) {
 	files, err := os.ReadDir(path)
diff --git a/cli/azd/pkg/project/importer_test.go b/cli/azd/pkg/project/importer_test.go
index dc2af3497c7..f5121ad0b83 100644
--- a/cli/azd/pkg/project/importer_test.go
+++ b/cli/azd/pkg/project/importer_test.go
@@ -771,3 +771,126 @@ func TestImportManagerServiceStableWithDependencies(t *testing.T) {
 	assert.True(t, backendIdx < frontendIdx, "backend should come before frontend")
 	assert.True(t, authIdx < frontendIdx, "auth should come before frontend")
 }
+
+func TestDetectProviderFromFiles(t *testing.T) {
+	tests := []struct {
+		name           string
+		files          []string
+		expectedResult provisioning.ProviderKind
+		expectError    bool
+		errorContains  string
+	}{
+		{
+			name:           "only bicep files",
+			files:          []string{"main.bicep", "modules.bicep"},
+			expectedResult: provisioning.Bicep,
+			expectError:    false,
+		},
+		{
+			name:           "only bicepparam files",
+			files:          []string{"main.bicepparam"},
+			expectedResult: provisioning.Bicep,
+			expectError:    false,
+		},
+		{
+			name:           "only terraform files",
+			files:          []string{"main.tf", "variables.tf"},
+			expectedResult: provisioning.Terraform,
+			expectError:    false,
+		},
+		{
+			name:           "only tfvars files",
+			files:          []string{"terraform.tfvars"},
+			expectedResult: provisioning.Terraform,
+			expectError:    false,
+		},
+		{
+			name:           "both bicep and terraform files",
+			files:          []string{"main.bicep", "main.tf"},
+			expectedResult: provisioning.NotSpecified,
+			expectError:    true,
+			errorContains:  "both Bicep and Terraform files detected",
+		},
+		{
+			name:           "no IaC files",
+			files:          []string{"readme.md", "config.json"},
+			expectedResult: provisioning.NotSpecified,
+			expectError:    false,
+		},
+		{
+			name:           "empty directory",
+			files:          []string{},
+			expectedResult: provisioning.NotSpecified,
+			expectError:    false,
+		},
+		{
+			name:           "mixed with bicep and non-IaC files",
+			files:          []string{"main.bicep", "readme.md", "config.json"},
+			expectedResult: provisioning.Bicep,
+			expectError:    false,
+		},
+		{
+			name:           "mixed with terraform and non-IaC files",
+			files:          []string{"main.tf", "readme.md", "LICENSE"},
+			expectedResult: provisioning.Terraform,
+			expectError:    false,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			// Create temporary directory
+			tmpDir, err := os.MkdirTemp("", "test-detect-provider-*")
+			require.NoError(t, err)
+			defer os.RemoveAll(tmpDir)
+
+			// Create test files
+			for _, fileName := range tt.files {
+				filePath := filepath.Join(tmpDir, fileName)
+				err := os.WriteFile(filePath, []byte("test content"), 0600)
+				require.NoError(t, err)
+			}
+
+			// Test detectProviderFromFiles
+			result, err := detectProviderFromFiles(tmpDir)
+
+			if tt.expectError {
+				require.Error(t, err)
+				require.Contains(t, err.Error(), tt.errorContains)
+			} else {
+				require.NoError(t, err)
+			}
+
+			require.Equal(t, tt.expectedResult, result)
+		})
+	}
+}
+
+func TestDetectProviderFromFilesNonExistentDirectory(t *testing.T) {
+	// Test with non-existent directory
+	result, err := detectProviderFromFiles("/nonexistent/path/that/does/not/exist")
+	require.NoError(t, err, "should not error when directory doesn't exist")
+	require.Equal(t, provisioning.NotSpecified, result)
+}
+
+func TestDetectProviderFromFilesIgnoresDirectories(t *testing.T) {
+	// Create temporary directory structure
+	tmpDir, err := os.MkdirTemp("", "test-detect-provider-dirs-*")
+	require.NoError(t, err)
+	defer os.RemoveAll(tmpDir)
+
+	// Create subdirectories with IaC-like names
+	err = os.Mkdir(filepath.Join(tmpDir, "main.bicep"), 0755)
+	require.NoError(t, err)
+	err = os.Mkdir(filepath.Join(tmpDir, "main.tf"), 0755)
+	require.NoError(t, err)
+
+	// Create a real Bicep file
+	err = os.WriteFile(filepath.Join(tmpDir, "resources.bicep"), []byte("test"), 0600)
+	require.NoError(t, err)
+
+	// Should detect Bicep and ignore directories
+	result, err := detectProviderFromFiles(tmpDir)
+	require.NoError(t, err)
+	require.Equal(t, provisioning.Bicep, result)
+}