diff --git a/apps/api/Dockerfile b/apps/api/Dockerfile
index a48acd7..9e9e51a 100644
--- a/apps/api/Dockerfile
+++ b/apps/api/Dockerfile
@@ -35,8 +35,8 @@ ENV PATH=/home/appuser/.local/bin:$PATH
 # Copy application code
 COPY --chown=appuser:appgroup . .
 
-# Create directories for repo storage
-RUN mkdir -p /data/repos && chown -R appuser:appgroup /data/repos
+# Create directories for repo and instance storage
+RUN mkdir -p /data/repos /data/instances && chown -R appuser:appgroup /data
 
 # Copy wait-for-db script
 COPY wait-for-db.sh /usr/local/bin/wait-for-db.sh
diff --git a/apps/api/src/config.py b/apps/api/src/config.py
index 0b91a50..6c68615 100644
--- a/apps/api/src/config.py
+++ b/apps/api/src/config.py
@@ -49,6 +49,9 @@ class Settings(BaseSettings):
 
     # Repository storage
     repo_base_path: str = "/data/repos"
+    
+    # Tool instance storage
+    instance_base_path: str = "/data/instances"
 
     model_config = SettingsConfigDict(env_file=".env", extra="ignore", populate_by_name=True)
 
diff --git a/apps/api/src/services/docker.py b/apps/api/src/services/docker.py
index 993a9b4..9bde1ed 100644
--- a/apps/api/src/services/docker.py
+++ b/apps/api/src/services/docker.py
@@ -23,16 +23,19 @@ def render_compose_template(template: str, variables: dict[str, Any]) -> str:
     return result
 
 
-def ensure_instance_directory(instance_id: str, base_path: str = "data/instances") -> str:
+def ensure_instance_directory(instance_id: str, base_path: str | None = None) -> str:
     """Create and return the instance directory path.
 
     Args:
         instance_id: Unique instance identifier
-        base_path: Base directory for all instances
+        base_path: Base directory for all instances (defaults to Settings.instance_base_path)
 
     Returns:
         Absolute path to instance directory
     """
+    if base_path is None:
+        from src.config import Settings
+        base_path = Settings().instance_base_path
     instance_dir = Path(base_path) / instance_id
     instance_dir.mkdir(parents=True, exist_ok=True)
     return str(instance_dir.absolute())
diff --git a/docker-compose.traefik.yml b/docker-compose.traefik.yml
index 9348009..00fa1c0 100644
--- a/docker-compose.traefik.yml
+++ b/docker-compose.traefik.yml
@@ -80,6 +80,7 @@ services:
       SESSION_SECRET: ${SESSION_SECRET:-change-me-in-production}
       SESSION_TTL_HOURS: ${SESSION_TTL_HOURS:-24}
       REPO_BASE_PATH: /data/repos
+      INSTANCE_BASE_PATH: /data/instances
       API_DOMAIN: ${API_DOMAIN}
       WEB_DOMAIN: ${WEB_DOMAIN}
       AUTHENTIK_DOMAIN: ${AUTHENTIK_DOMAIN}
@@ -92,6 +93,7 @@ services:
       AUTHENTIK_TOKEN_URL: ${AUTHENTIK_TOKEN_URL:-}
     volumes:
       - repo_data:/data/repos
+      - instance_data:/data/instances
       - avatar_uploads:/app/uploads
     depends_on:
       postgres:
@@ -114,6 +116,7 @@ volumes:
   postgres_data:
   redis_data:
   repo_data:
+  instance_data:
   avatar_uploads:
 
 networks:
diff --git a/docker-compose.yml b/docker-compose.yml
index 6bf265e..561171c 100644
--- a/docker-compose.yml
+++ b/docker-compose.yml
@@ -53,10 +53,12 @@ services:
       POSTGRES_HOST: postgres
       POSTGRES_PORT: 5432
       REDIS_URL: redis://redis:6379/0
-      JWT_SECRET: ${JWT_SECRET:-change-me-in-production}
+      SESSION_SECRET: ${SESSION_SECRET:-change-me-in-production}
       REPO_BASE_PATH: /data/repos
+      INSTANCE_BASE_PATH: /data/instances
     volumes:
       - repo_data:/data/repos
+      - instance_data:/data/instances
     ports:
       - "8000:8000"
     depends_on:
@@ -90,6 +92,7 @@ volumes:
   postgres_data:
   redis_data:
   repo_data:
+  instance_data:
 
 networks:
   backend: