diff --git a/packages/instrumentation-pg/src/instrumentation.ts b/packages/instrumentation-pg/src/instrumentation.ts
index 79e34a5d80..522da1340c 100644
--- a/packages/instrumentation-pg/src/instrumentation.ts
+++ b/packages/instrumentation-pg/src/instrumentation.ts
@@ -35,7 +35,10 @@ import {
 } from './internal-types';
 import { PgInstrumentationConfig } from './types';
 import * as utils from './utils';
-import { addSqlCommenterComment } from '@opentelemetry/sql-common';
+import {
+  addSqlCommenterComment,
+  buildTraceparent,
+} from '@opentelemetry/sql-common';
 /** @knipignore */
 import { PACKAGE_NAME, PACKAGE_VERSION } from './version';
 import { SpanNames } from './enums/SpanNames';
@@ -66,6 +69,10 @@ function extractModuleExports(module: any) {
     : module; // CommonJS
 }
 
+const INTERNAL_SET_QUERY = Symbol(
+  'opentelemetry.instrumentation-pg.internal-set-query'
+);
+
 export class PgInstrumentation extends InstrumentationBase<PgInstrumentationConfig> {
   declare private _operationDuration: Histogram;
   declare private _connectionsCount: UpDownCounter;
@@ -307,6 +314,15 @@ export class PgInstrumentation extends InstrumentationBase<PgInstrumentationConf
     return (original: typeof pgTypes.Client.prototype.query) => {
       this._diag.debug('Patching pg.Client.prototype.query');
       return function query(this: PgClientExtended, ...args: unknown[]) {
+        // Skip our own internal SET application_name queries
+        if (
+          typeof args[0] === 'object' &&
+          args[0] !== null &&
+          (args[0] as any)[INTERNAL_SET_QUERY]
+        ) {
+          return original.apply(this, args as never);
+        }
+
         if (utils.shouldSkipInstrumentation(plugin.getConfig())) {
           return original.apply(this, args as never);
         }
@@ -466,6 +482,31 @@ export class PgInstrumentation extends InstrumentationBase<PgInstrumentationConf
           );
         }
 
+        // Inject trace context via SET application_name if enabled.
+        // The SET is pushed synchronously into pg's internal FIFO queue
+        // before the user's query, guaranteeing correct ordering. Note that
+        // pg processes one query at a time (readyForQuery gate), so the SET
+        // completes a full round-trip before the user's query is dispatched.
+        if (instrumentationConfig.enableTraceContextPropagation) {
+          const traceparent = buildTraceparent(span);
+          if (traceparent) {
+            const setQuery = {
+              text: `SET application_name = '${traceparent}'`,
+              [INTERNAL_SET_QUERY]: true,
+            };
+            try {
+              const setResult: unknown = original.apply(this, [
+                setQuery,
+              ] as never);
+              if (setResult instanceof Promise) {
+                setResult.catch(() => {});
+              }
+            } catch {
+              // Silently ignore SET failures to avoid breaking user queries
+            }
+          }
+        }
+
         let result: unknown;
         try {
           result = original.apply(this, args as never);
diff --git a/packages/instrumentation-pg/src/types.ts b/packages/instrumentation-pg/src/types.ts
index ff77d1bdd8..9258c02690 100644
--- a/packages/instrumentation-pg/src/types.ts
+++ b/packages/instrumentation-pg/src/types.ts
@@ -76,4 +76,17 @@ export interface PgInstrumentationConfig extends InstrumentationConfig {
    * @default false
    */
   ignoreConnectSpans?: boolean;
+
+  /**
+   * If true, injects the current span's W3C traceparent into the PostgreSQL
+   * session via `SET application_name` before each query.
+   *
+   * NOTE: This adds an extra `SET application_name` round-trip to the
+   * connection before each user query. The SET must complete before pg's
+   * internal queue dispatches the user's query, so expect roughly double
+   * the number of network round-trips when this option is enabled.
+   *
+   * @default false
+   */
+  enableTraceContextPropagation?: boolean;
 }
diff --git a/packages/instrumentation-pg/test/pg.test.ts b/packages/instrumentation-pg/test/pg.test.ts
index b17ea4feed..1af7a866d8 100644
--- a/packages/instrumentation-pg/test/pg.test.ts
+++ b/packages/instrumentation-pg/test/pg.test.ts
@@ -1125,6 +1125,180 @@ describe('pg', () => {
     });
   });
 
+  describe('enableTraceContextPropagation', () => {
+    function expectedSetApplicationName(span: { spanContext(): any }) {
+      const sc = span.spanContext();
+      const traceparent = `00-${sc.traceId}-${sc.spanId}-0${Number(sc.traceFlags || 0).toString(16)}`;
+      return `SET application_name = '${traceparent}'`;
+    }
+
+    it('should not send SET application_name when enableTraceContextPropagation is not specified', async () => {
+      const span = tracer.startSpan('test span');
+      await context.with(trace.setSpan(context.active(), span), async () => {
+        const query = 'SELECT NOW()';
+        const res = await client.query(query);
+        assert.ok(res);
+
+        const executedQueries = getExecutedQueries();
+        assert.equal(executedQueries.length, 1);
+        assert.equal(executedQueries[0].text, query);
+      });
+    });
+
+    it('should send SET application_name before the user query when enableTraceContextPropagation=true', async () => {
+      instrumentation.setConfig({
+        enableTraceContextPropagation: true,
+      });
+
+      const span = tracer.startSpan('test span');
+      await context.with(trace.setSpan(context.active(), span), async () => {
+        const query = 'SELECT NOW()';
+        const res = await client.query(query);
+        assert.ok(res);
+
+        const executedQueries = getExecutedQueries();
+        assert.equal(
+          executedQueries.length,
+          2,
+          'Expected 2 queries: SET application_name + user query'
+        );
+
+        const [querySpan] = memoryExporter.getFinishedSpans();
+
+        assert.equal(
+          executedQueries[0].text,
+          expectedSetApplicationName(querySpan),
+          'SET application_name should contain the exact traceparent of the query span'
+        );
+
+        assert.equal(executedQueries[1].text, query);
+      });
+    });
+
+    it('should set application_name for prepared statements', async () => {
+      instrumentation.setConfig({
+        enableTraceContextPropagation: true,
+      });
+
+      const span = tracer.startSpan('test span');
+      await context.with(trace.setSpan(context.active(), span), async () => {
+        const res = await client.query({
+          name: 'prepared-trace-ctx',
+          text: 'SELECT $1::text',
+          values: ['hello'],
+        });
+        assert.ok(res);
+
+        const executedQueries = getExecutedQueries();
+        assert.equal(
+          executedQueries.length,
+          2,
+          'Expected 2 queries: SET application_name + prepared statement'
+        );
+        const [querySpan] = memoryExporter.getFinishedSpans();
+        assert.equal(
+          executedQueries[0].text,
+          expectedSetApplicationName(querySpan),
+          'SET application_name should contain exact traceparent before prepared statement'
+        );
+        assert.equal(executedQueries[1].text, 'SELECT $1::text');
+      });
+    });
+
+    it('should work together with addSqlCommenterCommentToQueries', async () => {
+      instrumentation.setConfig({
+        enableTraceContextPropagation: true,
+        addSqlCommenterCommentToQueries: true,
+      });
+
+      const span = tracer.startSpan('test span');
+      await context.with(trace.setSpan(context.active(), span), async () => {
+        const query = 'SELECT NOW()';
+        const res = await client.query(query);
+        assert.ok(res);
+
+        const executedQueries = getExecutedQueries();
+        assert.equal(
+          executedQueries.length,
+          2,
+          'Expected 2 queries: SET application_name + commented query'
+        );
+
+        const [querySpan] = memoryExporter.getFinishedSpans();
+        assert.equal(
+          executedQueries[0].text,
+          expectedSetApplicationName(querySpan),
+          'First query should be SET application_name with exact traceparent'
+        );
+
+        // Second should have SQL Commenter comment appended
+        assert.ok(
+          executedQueries[1].text?.includes('/*'),
+          'User query should have SQL Commenter comment'
+        );
+        assert.ok(
+          executedQueries[1].text?.startsWith('SELECT NOW()'),
+          'User query should start with original text'
+        );
+      });
+    });
+
+    it('should set correct application_name for concurrent queries on the same connection', async () => {
+      instrumentation.setConfig({
+        enableTraceContextPropagation: true,
+      });
+
+      // Fire 3 queries concurrently without awaiting each individually.
+      // All 6 items (3x SET + 3x query) are pushed synchronously into
+      // pg's queryQueue, and we verify they are correctly paired.
+      const results = await Promise.all([
+        context.with(
+          trace.setSpan(context.active(), tracer.startSpan('span-A')),
+          () => client.query('SELECT 1 AS a')
+        ),
+        context.with(
+          trace.setSpan(context.active(), tracer.startSpan('span-B')),
+          () => client.query('SELECT 2 AS b')
+        ),
+        context.with(
+          trace.setSpan(context.active(), tracer.startSpan('span-C')),
+          () => client.query('SELECT 3 AS c')
+        ),
+      ]);
+
+      assert.ok(results[0]);
+      assert.ok(results[1]);
+      assert.ok(results[2]);
+
+      const executedQueries = getExecutedQueries();
+      assert.equal(
+        executedQueries.length,
+        6,
+        'Expected 6 queries: 3x SET + 3x user query'
+      );
+
+      const finishedSpans = memoryExporter.getFinishedSpans();
+      assert.equal(finishedSpans.length, 3, 'Expected 3 query spans');
+
+      // Verify correct pairing: SET-A, Q-A, SET-B, Q-B, SET-C, Q-C
+      // Each SET should match the exact traceparent of its corresponding query span.
+      for (let i = 0; i < 3; i++) {
+        const setQuery = executedQueries[i * 2];
+        const userQuery = executedQueries[i * 2 + 1];
+
+        assert.equal(
+          setQuery.text,
+          expectedSetApplicationName(finishedSpans[i]),
+          `Query ${i * 2} should be SET application_name with exact traceparent for span ${i}`
+        );
+        assert.ok(
+          !userQuery.text?.startsWith('SET application_name'),
+          `Query ${i * 2 + 1} should be the user query, not SET`
+        );
+      }
+    });
+  });
+
   describe('exception event recording', () => {
     const assertExceptionEvents = (pgSpan: any) => {
       assert.strictEqual(
diff --git a/packages/sql-common/src/index.ts b/packages/sql-common/src/index.ts
index 20dbd6bb4f..9cb248a8fb 100644
--- a/packages/sql-common/src/index.ts
+++ b/packages/sql-common/src/index.ts
@@ -11,6 +11,26 @@ import {
 } from '@opentelemetry/api';
 import { W3CTraceContextPropagator } from '@opentelemetry/core';
 
+const propagator = new W3CTraceContextPropagator();
+const TRACE_PARENT_HEADER = 'traceparent';
+
+/**
+ * Builds a W3C traceparent string from a span.
+ * Returns undefined if the span context is invalid or tracing is suppressed.
+ *
+ * Format: "00-{traceId}-{spanId}-{flags}"
+ * See: https://www.w3.org/TR/trace-context/#traceparent-header
+ */
+export function buildTraceparent(span: Span): string | undefined {
+  const carrier: Record<string, string> = {};
+  propagator.inject(
+    trace.setSpan(ROOT_CONTEXT, span),
+    carrier,
+    defaultTextMapSetter
+  );
+  return carrier[TRACE_PARENT_HEADER];
+}
+
 // NOTE: This function currently is returning false-positives
 // in cases where comment characters appear in string literals
 // ("SELECT '-- not a comment';" would return true, although has no comment)