diff --git a/src/Microsoft.SqlTools.ServiceLayer/HostLoader.cs b/src/Microsoft.SqlTools.ServiceLayer/HostLoader.cs
index aa46a8d9..bb5f2a85 100644
--- a/src/Microsoft.SqlTools.ServiceLayer/HostLoader.cs
+++ b/src/Microsoft.SqlTools.ServiceLayer/HostLoader.cs
@@ -4,6 +4,7 @@
 //
 
 using System;
+using System.IO;
 using System.Threading.Tasks;
 using Microsoft.SqlTools.Credentials;
 using Microsoft.SqlTools.Extensibility;
@@ -11,12 +12,14 @@ using Microsoft.SqlTools.Hosting;
 using Microsoft.SqlTools.Hosting.Protocol;
 using Microsoft.SqlTools.ServiceLayer.Admin;
 using Microsoft.SqlTools.ServiceLayer.Agent;
+using Microsoft.SqlTools.ServiceLayer.AzureBlob;
 using Microsoft.SqlTools.ServiceLayer.AzureFunctions;
 using Microsoft.SqlTools.ServiceLayer.Cms;
 using Microsoft.SqlTools.ServiceLayer.Connection;
 using Microsoft.SqlTools.ServiceLayer.DacFx;
 using Microsoft.SqlTools.ServiceLayer.DisasterRecovery;
 using Microsoft.SqlTools.ServiceLayer.EditData;
+using Microsoft.SqlTools.ServiceLayer.ExecutionPlan;
 using Microsoft.SqlTools.ServiceLayer.FileBrowser;
 using Microsoft.SqlTools.ServiceLayer.Hosting;
 using Microsoft.SqlTools.ServiceLayer.LanguageExtensibility;
@@ -25,6 +28,9 @@ using Microsoft.SqlTools.ServiceLayer.Metadata;
 #if INCLUDE_MIGRATION
 using Microsoft.SqlTools.ServiceLayer.Migration;
 #endif
+using Microsoft.SqlTools.ServiceLayer.ModelManagement;
+using Microsoft.SqlTools.ServiceLayer.NotebookConvert;
+using Microsoft.SqlTools.ServiceLayer.ObjectManagement;
 using Microsoft.SqlTools.ServiceLayer.Profiler;
 using Microsoft.SqlTools.ServiceLayer.QueryExecution;
 using Microsoft.SqlTools.ServiceLayer.SchemaCompare;
@@ -33,15 +39,9 @@ using Microsoft.SqlTools.ServiceLayer.Security;
 using Microsoft.SqlTools.ServiceLayer.ServerConfigurations;
 using Microsoft.SqlTools.ServiceLayer.SqlAssessment;
 using Microsoft.SqlTools.ServiceLayer.SqlContext;
-using Microsoft.SqlTools.ServiceLayer.Workspace;
-using Microsoft.SqlTools.ServiceLayer.NotebookConvert;
-using Microsoft.SqlTools.ServiceLayer.ModelManagement;
-using Microsoft.SqlTools.ServiceLayer.TableDesigner;
-using Microsoft.SqlTools.ServiceLayer.AzureBlob;
-using Microsoft.SqlTools.ServiceLayer.ExecutionPlan;
-using Microsoft.SqlTools.ServiceLayer.ObjectManagement;
-using System.IO;
 using Microsoft.SqlTools.ServiceLayer.SqlProjects;
+using Microsoft.SqlTools.ServiceLayer.TableDesigner;
+using Microsoft.SqlTools.ServiceLayer.Workspace;
 
 namespace Microsoft.SqlTools.ServiceLayer
 {
diff --git a/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/SqlCmdVariables/AddSqlCmdVariable.cs b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/SqlCmdVariables/AddSqlCmdVariable.cs
new file mode 100644
index 00000000..5230948e
--- /dev/null
+++ b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/SqlCmdVariables/AddSqlCmdVariable.cs
@@ -0,0 +1,36 @@
+//
+// Copyright (c) Microsoft. All rights reserved.
+// Licensed under the MIT license. See LICENSE file in the project root for full license information.
+//
+
+using Microsoft.SqlTools.Hosting.Protocol.Contracts;
+using Microsoft.SqlTools.ServiceLayer.Utility;
+
+namespace Microsoft.SqlTools.ServiceLayer.SqlProjects.Contracts
+{
+    /// <summary>
+    /// Parameters for adding a SQLCMD variable to a project
+    /// </summary>
+    public class AddSqlCmdVariableParams : SqlProjectParams
+    {
+        /// <summary>
+        /// Name of the SQLCMD variable
+        /// </summary>
+        public string Name { get; set; }
+
+        /// <summary>
+        /// Default value of the SQLCMD variable
+        /// </summary>
+        public string DefaultValue { get; set; }
+
+        /// <summary>
+        /// Value of the SQLCMD variable, with or without the $()
+        /// </summary>
+        public string Value { get; set; }
+    }
+
+    public class AddSqlCmdVariableRequest
+    {
+        public static readonly RequestType<AddSqlCmdVariableParams, ResultStatus> Type = RequestType<AddSqlCmdVariableParams, ResultStatus>.Create("sqlprojects/addSqlCmdVariable");
+    }
+}
diff --git a/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/SqlCmdVariables/DeleteSqlCmdVariable.cs b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/SqlCmdVariables/DeleteSqlCmdVariable.cs
new file mode 100644
index 00000000..21c86e0e
--- /dev/null
+++ b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/SqlCmdVariables/DeleteSqlCmdVariable.cs
@@ -0,0 +1,26 @@
+//
+// Copyright (c) Microsoft. All rights reserved.
+// Licensed under the MIT license. See LICENSE file in the project root for full license information.
+//
+
+using Microsoft.SqlTools.Hosting.Protocol.Contracts;
+using Microsoft.SqlTools.ServiceLayer.Utility;
+
+namespace Microsoft.SqlTools.ServiceLayer.SqlProjects.Contracts
+{
+    /// <summary>
+    /// Parameters for deleting a SQLCMD variable from a project
+    /// </summary>
+    public class DeleteSqlCmdVariableParams : SqlProjectParams
+    {
+        /// <summary>
+        /// Name of the SQLCMD variable to be deleted
+        /// </summary>
+        public string Name { get; set; }
+    }
+
+    public class DeleteSqlCmdVariableRequest
+    {
+        public static readonly RequestType<DeleteSqlCmdVariableParams, ResultStatus> Type = RequestType<DeleteSqlCmdVariableParams, ResultStatus>.Create("sqlprojects/deleteSqlCmdVariable");
+    }
+}
diff --git a/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/SqlCmdVariables/UpdateSqlCmdvariable.cs b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/SqlCmdVariables/UpdateSqlCmdvariable.cs
new file mode 100644
index 00000000..10a6f59a
--- /dev/null
+++ b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/Contracts/SqlCmdVariables/UpdateSqlCmdvariable.cs
@@ -0,0 +1,15 @@
+//
+// Copyright (c) Microsoft. All rights reserved.
+// Licensed under the MIT license. See LICENSE file in the project root for full license information.
+//
+
+using Microsoft.SqlTools.Hosting.Protocol.Contracts;
+using Microsoft.SqlTools.ServiceLayer.Utility;
+
+namespace Microsoft.SqlTools.ServiceLayer.SqlProjects.Contracts
+{
+    public class UpdateSqlCmdVariableRequest
+    {
+        public static readonly RequestType<AddSqlCmdVariableParams, ResultStatus> Type = RequestType<AddSqlCmdVariableParams, ResultStatus>.Create("sqlprojects/updateSqlCmdVariable");
+    }
+}
diff --git a/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/SqlProjectsService.cs b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/SqlProjectsService.cs
index 4e6b661c..d55f6cc6 100644
--- a/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/SqlProjectsService.cs
+++ b/src/Microsoft.SqlTools.ServiceLayer/SqlProjects/SqlProjectsService.cs
@@ -43,10 +43,15 @@ namespace Microsoft.SqlTools.ServiceLayer.SqlProjects
             serviceHost.SetRequestHandler(CloseSqlProjectRequest.Type, HandleCloseSqlProjectRequest, isParallelProcessingSupported: true);
             serviceHost.SetRequestHandler(NewSqlProjectRequest.Type, HandleNewSqlProjectRequest, isParallelProcessingSupported: true);
 
-            // SQL object script calls
+            // SQL object script functions
             serviceHost.SetRequestHandler(AddSqlObjectScriptRequest.Type, HandleAddSqlObjectScriptRequest, isParallelProcessingSupported: false);
             serviceHost.SetRequestHandler(DeleteSqlObjectScriptRequest.Type, HandleDeleteSqlObjectScriptRequest, isParallelProcessingSupported: false);
             serviceHost.SetRequestHandler(ExcludeSqlObjectScriptRequest.Type, HandleExcludeSqlObjectScriptRequest, isParallelProcessingSupported: false);
+
+            // SQLCMD variable functions
+            serviceHost.SetRequestHandler(AddSqlCmdVariableRequest.Type, HandleAddSqlCmdVariableRequest, isParallelProcessingSupported: false);
+            serviceHost.SetRequestHandler(DeleteSqlCmdVariableRequest.Type, HandleDeleteSqlCmdVariableRequest, isParallelProcessingSupported: false);
+            serviceHost.SetRequestHandler(UpdateSqlCmdVariableRequest.Type, HandleUpdateSqlCmdVariableRequest, isParallelProcessingSupported: false);
         }
 
         #region Handlers
@@ -75,7 +80,7 @@ namespace Microsoft.SqlTools.ServiceLayer.SqlProjects
 
         #endregion
 
-        #region Sql object script calls
+        #region SQL object script functions
 
         internal async Task HandleAddSqlObjectScriptRequest(SqlProjectScriptParams requestParams, RequestContext<ResultStatus> requestContext)
         {
@@ -94,6 +99,30 @@ namespace Microsoft.SqlTools.ServiceLayer.SqlProjects
 
         #endregion
 
+        #region SQLCMD variable functions
+
+        internal async Task HandleAddSqlCmdVariableRequest(AddSqlCmdVariableParams requestParams, RequestContext<ResultStatus> requestContext)
+        {
+            await RunWithErrorHandling(() => GetProject(requestParams.ProjectUri).SqlCmdVariables.Add(new SqlCmdVariable(requestParams.Name, requestParams.DefaultValue, requestParams.Value)), requestContext);
+        }
+
+        internal async Task HandleDeleteSqlCmdVariableRequest(DeleteSqlCmdVariableParams requestParams, RequestContext<ResultStatus> requestContext)
+        {
+            await RunWithErrorHandling(() => GetProject(requestParams.ProjectUri).SqlCmdVariables.Delete(requestParams.Name), requestContext);
+        }
+
+        internal async Task HandleUpdateSqlCmdVariableRequest(AddSqlCmdVariableParams requestParams, RequestContext<ResultStatus> requestContext)
+        {
+            await RunWithErrorHandling(() =>
+            {
+                SqlProject project = GetProject(requestParams.ProjectUri);
+                project.SqlCmdVariables.Delete(requestParams.Name); // idempotent (won't throw if doesn't exist)
+                project.SqlCmdVariables.Add(new SqlCmdVariable(requestParams.Name, requestParams.DefaultValue, requestParams.Value));
+            }, requestContext);
+        }
+
+        #endregion
+
         #endregion
 
         #region Helper methods
diff --git a/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SqlProjects/SqlProjectsServiceTests.cs b/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SqlProjects/SqlProjectsServiceTests.cs
index 53274822..d661c2e7 100644
--- a/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SqlProjects/SqlProjectsServiceTests.cs
+++ b/test/Microsoft.SqlTools.ServiceLayer.IntegrationTests/SqlProjects/SqlProjectsServiceTests.cs
@@ -4,6 +4,7 @@
 //
 
 using System.IO;
+using System.Linq;
 using System.Threading.Tasks;
 using Microsoft.SqlServer.Dac.Projects;
 using Microsoft.SqlTools.ServiceLayer.IntegrationTests.Utility;
@@ -105,7 +106,7 @@ namespace Microsoft.SqlTools.ServiceLayer.IntegrationTests.SqlProjects
 
             // Validate adding a SQL object script
             MockRequest<ResultStatus> requestMock = new();
-            string scriptRelativePath =  "MyTable.sql";
+            string scriptRelativePath = "MyTable.sql";
             string scriptFullPath = Path.Join(Path.GetDirectoryName(projectUri), scriptRelativePath);
             await File.WriteAllTextAsync(scriptFullPath, "CREATE TABLE [MyTable] ([Id] INT)");
             Assert.IsTrue(File.Exists(scriptFullPath), $"{scriptFullPath} expected to be on disk");
@@ -155,6 +156,61 @@ namespace Microsoft.SqlTools.ServiceLayer.IntegrationTests.SqlProjects
             Assert.AreEqual(0, service.Projects[projectUri].SqlObjectScripts.Count, "SqlObjectScripts count after delete");
             Assert.IsFalse(File.Exists(scriptFullPath), $"{scriptFullPath} expected to have been deleted from disk");
         }
+
+        [Test]
+        public async Task TestSqlCmdVariablesAddDelete()
+        {
+            SqlProjectsService service = new();
+            string projectUri = await service.CreateSqlProject();
+
+            Assert.AreEqual(0, service.Projects[projectUri].SqlCmdVariables.Count, "Baseline number of SQLCMD variables not as expected");
+
+            // Validate adding a SQLCMD variable
+            MockRequest<ResultStatus> requestMock = new();
+
+            const string variableName = "TestVarName";
+
+            await service.HandleAddSqlCmdVariableRequest(new AddSqlCmdVariableParams()
+            {
+                ProjectUri = projectUri,
+                Name = variableName,
+                DefaultValue = "$(TestVarDefaultValue)",
+                Value = "$(TestVarValue)"
+            }, requestMock.Object);
+
+            requestMock.AssertSuccess(nameof(service.HandleAddSqlCmdVariableRequest));
+            Assert.AreEqual(1, service.Projects[projectUri].SqlCmdVariables.Count, "Number of SQLCMD variables after addition not as expected");
+            Assert.IsTrue(service.Projects[projectUri].SqlCmdVariables.Contains(variableName), $"List of SQLCMD variables expected to contain {variableName}");
+
+            // Validate updating a SQLCMD variable
+            const string updatedDefaultValue = "$(UpdatedDefaultValue)";
+            const string updatedValue = "$(UpdatedValue)";
+
+            requestMock = new();
+            await service.HandleUpdateSqlCmdVariableRequest(new AddSqlCmdVariableParams()
+            {
+                ProjectUri = projectUri,
+                Name = variableName,
+                DefaultValue = updatedDefaultValue,
+                Value = updatedValue
+            }, requestMock.Object);
+
+            requestMock.AssertSuccess(nameof(service.HandleUpdateSqlCmdVariableRequest));
+            Assert.AreEqual(1, service.Projects[projectUri].SqlCmdVariables.Count, "Number of SQLCMD variables after update not as expected");
+            Assert.AreEqual(updatedDefaultValue, service.Projects[projectUri].SqlCmdVariables.First().DefaultValue, "Updated default value");
+            Assert.AreEqual(updatedValue, service.Projects[projectUri].SqlCmdVariables.First().Value, "Updated value");
+
+            // Validate deleting a SQLCMD variable
+            requestMock = new();
+            await service.HandleDeleteSqlCmdVariableRequest(new DeleteSqlCmdVariableParams()
+            {
+                ProjectUri = projectUri,
+                Name = variableName,
+            }, requestMock.Object);
+
+            requestMock.AssertSuccess(nameof(service.HandleDeleteSqlCmdVariableRequest));
+            Assert.AreEqual(0, service.Projects[projectUri].SqlCmdVariables.Count, "Number of SQLCMD variables after deletion not as expected");
+        }
     }
 
     internal static class SqlProjectsExtensions