diff --git a/tool/cmd/main.go b/tool/cmd/main.go
index 1260d6463..861a86b9f 100644
--- a/tool/cmd/main.go
+++ b/tool/cmd/main.go
@@ -38,6 +38,7 @@ func main() {
 			&cli.BoolFlag{
 				Name:    "debug",
 				Aliases: []string{"d"},
+				Sources: cli.EnvVars(util.EnvOtelcDebug),
 				Usage:   "Enable debug mode",
 				Value:   false,
 			},
@@ -111,21 +112,29 @@ func initLogger(ctx context.Context, cmd *cli.Command) (context.Context, error)
 	}
 
 	logFilename := filepath.Join(buildTempDir, debugLogFilename)
-	writer, err := os.OpenFile(logFilename, os.O_CREATE|os.O_APPEND|os.O_WRONLY, 0o644)
+	logFile, err := os.OpenFile(logFilename, os.O_CREATE|os.O_APPEND|os.O_WRONLY, 0o644)
 	if err != nil {
 		return ctx, ex.Wrapf(err, "failed to open log file %q", logFilename)
 	}
 
+	level := slog.LevelInfo
+	if cmd.Bool("debug") {
+		level = slog.LevelDebug
+		if setErr := os.Setenv(util.EnvOtelcDebug, "1"); setErr != nil {
+			return ctx, ex.Wrapf(setErr, "set %s", util.EnvOtelcDebug)
+		}
+	}
+
 	// Log timestamps and levels are omitted: they add noise when correlating
 	// with Go toolchain output and the log file is for human debugging only.
-	handler := slog.NewTextHandler(writer, &slog.HandlerOptions{
+	handler := slog.NewTextHandler(logFile, &slog.HandlerOptions{
 		ReplaceAttr: func(_ []string, a slog.Attr) slog.Attr {
 			if a.Key == slog.TimeKey || a.Key == slog.LevelKey {
 				return slog.Attr{}
 			}
 			return a
 		},
-		Level: slog.LevelInfo,
+		Level: level,
 	})
 	logger := slog.New(handler)
 	ctx = util.ContextWithLogger(ctx, logger)
diff --git a/tool/cmd/main_test.go b/tool/cmd/main_test.go
new file mode 100644
index 000000000..8e9d02dba
--- /dev/null
+++ b/tool/cmd/main_test.go
@@ -0,0 +1,97 @@
+// Copyright The OpenTelemetry Authors
+// SPDX-License-Identifier: Apache-2.0
+
+package main
+
+import (
+	"context"
+	"log/slog"
+	"os"
+	"path/filepath"
+	"testing"
+
+	"github.com/open-telemetry/opentelemetry-go-compile-instrumentation/tool/util"
+	"github.com/urfave/cli/v3"
+)
+
+func TestInitLogger(t *testing.T) {
+	runWithFlags := func(t *testing.T, debug bool) context.Context {
+		t.Helper()
+		tmpDir, mkErr := os.MkdirTemp( //nolint:usetesting // open log file handle prevents cleanup
+			"",
+			"otelc-logger-test-*",
+		)
+		if mkErr != nil {
+			t.Fatal(mkErr)
+		}
+		t.Cleanup(func() { os.RemoveAll(tmpDir) })
+
+		ctxCh := make(chan context.Context, 1)
+		app := &cli.Command{
+			Flags: []cli.Flag{
+				&cli.StringFlag{Name: "work-dir", Value: tmpDir},
+				&cli.BoolFlag{Name: "debug", Sources: cli.EnvVars(util.EnvOtelcDebug)},
+			},
+			Action: func(ctx context.Context, cmd *cli.Command) error {
+				ctx, err := initLogger(ctx, cmd)
+				if err != nil {
+					return err
+				}
+				ctxCh <- ctx
+				return nil
+			},
+		}
+
+		args := []string{"otelc"}
+		if debug {
+			args = append(args, "--debug")
+		}
+		if err := app.Run(context.Background(), args); err != nil {
+			t.Fatal(err)
+		}
+
+		gotCtx := <-ctxCh
+
+		logPath := filepath.Join(tmpDir, debugLogFilename)
+		if _, err := os.Stat(logPath); err != nil {
+			t.Fatalf("expected log file at %s: %v", logPath, err)
+		}
+
+		return gotCtx
+	}
+
+	t.Run("default level is info", func(t *testing.T) {
+		t.Setenv(util.EnvOtelcDebug, "")
+		ctx := runWithFlags(t, false)
+		logger := util.LoggerFromContext(ctx)
+		if logger.Enabled(context.Background(), slog.LevelDebug) {
+			t.Error("expected debug logging to be disabled")
+		}
+	})
+
+	t.Run("debug flag enables debug level", func(t *testing.T) {
+		t.Setenv(util.EnvOtelcDebug, "")
+		ctx := runWithFlags(t, true)
+		logger := util.LoggerFromContext(ctx)
+		if !logger.Enabled(context.Background(), slog.LevelDebug) {
+			t.Error("expected debug logging to be enabled")
+		}
+	})
+
+	t.Run("debug flag sets env for subprocess propagation", func(t *testing.T) {
+		t.Setenv(util.EnvOtelcDebug, "")
+		_ = runWithFlags(t, true)
+		if got := os.Getenv(util.EnvOtelcDebug); got != "1" {
+			t.Errorf("expected %s=1, got %q", util.EnvOtelcDebug, got)
+		}
+	})
+
+	t.Run("env var enables debug without flag", func(t *testing.T) {
+		t.Setenv(util.EnvOtelcDebug, "1")
+		ctx := runWithFlags(t, false)
+		logger := util.LoggerFromContext(ctx)
+		if !logger.Enabled(context.Background(), slog.LevelDebug) {
+			t.Error("expected debug logging to be enabled via env var")
+		}
+	})
+}
diff --git a/tool/util/shared.go b/tool/util/shared.go
index 8696fdc3d..7575e1907 100644
--- a/tool/util/shared.go
+++ b/tool/util/shared.go
@@ -19,6 +19,9 @@ const (
 	// EnvOtelcStats enables per-toolexec timing stats when set to "1".
 	// Set automatically when --stats is used; propagated to child processes.
 	EnvOtelcStats = "OTELC_STATS"
+	// EnvOtelcDebug enables debug-level logging when set to "1".
+	// Set automatically when --debug is used; propagated to child processes.
+	EnvOtelcDebug = "OTELC_DEBUG"
 	BuildTempDir  = ".otelc-build"
 	OtelcRoot     = "github.com/open-telemetry/opentelemetry-go-compile-instrumentation"
 )