diff --git a/pkg/operator/configobservation/configobservercontroller/observe_config_controller.go b/pkg/operator/configobservation/configobservercontroller/observe_config_controller.go
index f8697a9eb..ca4a65e75 100644
--- a/pkg/operator/configobservation/configobservercontroller/observe_config_controller.go
+++ b/pkg/operator/configobservation/configobservercontroller/observe_config_controller.go
@@ -10,6 +10,7 @@ import (
 	"github.com/openshift/library-go/pkg/operator/configobserver"
 	"github.com/openshift/library-go/pkg/operator/configobserver/cloudprovider"
 	"github.com/openshift/library-go/pkg/operator/configobserver/featuregates"
+	"github.com/openshift/library-go/pkg/operator/configobserver/proxy"
 	"github.com/openshift/library-go/pkg/operator/events"
 	"github.com/openshift/library-go/pkg/operator/resourcesynccontroller"
 	"github.com/openshift/library-go/pkg/operator/v1helpers"
@@ -47,6 +48,7 @@ func NewConfigObserver(
 				FeatureGateLister_:    configinformers.Config().V1().FeatureGates().Lister(),
 				InfrastructureLister_: configinformers.Config().V1().Infrastructures().Lister(),
 				NetworkLister:         configinformers.Config().V1().Networks().Lister(),
+				ProxyLister_:          configinformers.Config().V1().Proxies().Lister(),
 
 				ResourceSync:    resourceSyncer,
 				ConfigMapLister: kubeInformersForNamespaces.InformersFor(operatorclient.TargetNamespace).Core().V1().ConfigMaps().Lister(),
@@ -59,6 +61,7 @@ func NewConfigObserver(
 					configinformers.Config().V1().FeatureGates().Informer().HasSynced,
 					configinformers.Config().V1().Infrastructures().Informer().HasSynced,
 					configinformers.Config().V1().Networks().Informer().HasSynced,
+					configinformers.Config().V1().Proxies().Informer().HasSynced,
 				),
 			},
 			cloudprovider.NewCloudProviderObserver(
@@ -68,6 +71,7 @@ func NewConfigObserver(
 			featuregates.NewObserveFeatureFlagsFunc(nil, []string{"extendedArguments", "feature-gates"}),
 			network.ObserveClusterCIDRs,
 			network.ObserveServiceClusterIPRanges,
+			proxy.NewProxyObserveFunc([]string{"targetconfigcontroller", "proxy"}),
 			serviceca.ObserveServiceCA,
 			clustername.ObserveInfraID,
 		),
@@ -82,6 +86,7 @@ func NewConfigObserver(
 	configinformers.Config().V1().FeatureGates().Informer().AddEventHandler(c.EventHandler())
 	configinformers.Config().V1().Infrastructures().Informer().AddEventHandler(c.EventHandler())
 	configinformers.Config().V1().Networks().Informer().AddEventHandler(c.EventHandler())
+	configinformers.Config().V1().Proxies().Informer().AddEventHandler(c.EventHandler())
 
 	return c
 }
diff --git a/pkg/operator/configobservation/interfaces.go b/pkg/operator/configobservation/interfaces.go
index 79d8699d0..4a7f5bf94 100644
--- a/pkg/operator/configobservation/interfaces.go
+++ b/pkg/operator/configobservation/interfaces.go
@@ -15,6 +15,7 @@ type Listers struct {
 	FeatureGateLister_    configlistersv1.FeatureGateLister
 	InfrastructureLister_ configlistersv1.InfrastructureLister
 	NetworkLister         configlistersv1.NetworkLister
+	ProxyLister_          configlistersv1.ProxyLister
 	ConfigMapLister       corev1listers.ConfigMapLister
 
 	ResourceSync       resourcesynccontroller.ResourceSyncer
@@ -29,6 +30,10 @@ func (l Listers) FeatureGateLister() configlistersv1.FeatureGateLister {
 	return l.FeatureGateLister_
 }
 
+func (l Listers) ProxyLister() configlistersv1.ProxyLister {
+	return l.ProxyLister_
+}
+
 func (l Listers) ResourceSyncer() resourcesynccontroller.ResourceSyncer {
 	return l.ResourceSync
 }
diff --git a/pkg/operator/targetconfigcontroller/targetconfigcontroller.go b/pkg/operator/targetconfigcontroller/targetconfigcontroller.go
index 2deb38a18..e2f72a783 100644
--- a/pkg/operator/targetconfigcontroller/targetconfigcontroller.go
+++ b/pkg/operator/targetconfigcontroller/targetconfigcontroller.go
@@ -6,9 +6,11 @@ import (
 	"encoding/json"
 	"fmt"
 	"reflect"
+	"sort"
 	"strings"
 	"time"
 
+	yaml "gopkg.in/yaml.v2"
 	corev1 "k8s.io/api/core/v1"
 	apierrors "k8s.io/apimachinery/pkg/api/errors"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
@@ -291,6 +293,20 @@ func managePod(configMapsGetter corev1client.ConfigMapsGetter, secretsGetter cor
 		required.Spec.Containers[0].Args = append(required.Spec.Containers[0].Args, "--tls-private-key-file=/etc/kubernetes/static-pod-resources/secrets/serving-cert/tls.key")
 	}
 
+	var observedConfig map[string]interface{}
+	if err := yaml.Unmarshal(operatorSpec.ObservedConfig.Raw, &observedConfig); err != nil {
+		return nil, false, fmt.Errorf("failed to unmarshal the observedConfig: %v", err)
+	}
+	proxyConfig, _, err := unstructured.NestedStringMap(observedConfig, "targetconfigcontroller", "proxy")
+	if err != nil {
+		return nil, false, fmt.Errorf("couldn't get the proxy config from observedConfig: %v", err)
+	}
+
+	proxyEnvVars := proxyMapToEnvVars(proxyConfig)
+	for i, container := range required.Spec.Containers {
+		required.Spec.Containers[i].Env = append(container.Env, proxyEnvVars...)
+	}
+
 	configMap := resourceread.ReadConfigMapV1OrDie(v411_00_assets.MustAsset("v4.1.0/kube-controller-manager/pod-cm.yaml"))
 	configMap.Data["pod.yaml"] = resourceread.WritePodV1OrDie(required)
 	configMap.Data["forceRedeploymentReason"] = operatorSpec.ForceRedeploymentReason
@@ -536,3 +552,18 @@ func (c *TargetConfigController) namespaceEventHandler() cache.ResourceEventHand
 		},
 	}
 }
+
+func proxyMapToEnvVars(proxyConfig map[string]string) []corev1.EnvVar {
+	if proxyConfig == nil {
+		return nil
+	}
+
+	envVars := []corev1.EnvVar{}
+	for k, v := range proxyConfig {
+		envVars = append(envVars, corev1.EnvVar{Name: k, Value: v})
+	}
+
+	// need to sort the slice so that kube-apiserver-pod configmap does not change all the time
+	sort.Slice(envVars, func(i, j int) bool { return envVars[i].Name < envVars[j].Name })
+	return envVars
+}