diff --git a/__tests__/docker/install.test.itg.ts b/__tests__/docker/install.test.itg.ts
index 01c20eb..f25a547 100644
--- a/__tests__/docker/install.test.itg.ts
+++ b/__tests__/docker/install.test.itg.ts
@@ -36,13 +36,14 @@ describe('install', () => {
     process.env = originalEnv;
   });
   // prettier-ignore
-  test.each(['v24.0.5'])(
+  test.each(['v24.0.4'])(
     'install docker %s', async (version) => {
       await expect((async () => {
         const install = new Install({
           version: version,
           runDir: tmpDir,
-          contextName: 'foo'
+          contextName: 'foo',
+          daemonConfig: `{"debug":true,"features":{"containerd-snapshotter":true}}`
         });
         await install.download();
         await install.install();
diff --git a/package.json b/package.json
index 5f6eec6..8cfbc38 100644
--- a/package.json
+++ b/package.json
@@ -56,12 +56,14 @@
     "async-retry": "^1.3.3",
     "csv-parse": "^5.4.0",
     "handlebars": "^4.7.8",
+    "js-yaml": "^4.1.0",
     "jwt-decode": "^3.1.2",
     "semver": "^7.5.4",
     "tmp": "^0.2.1"
   },
   "devDependencies": {
     "@types/csv-parse": "^1.2.2",
+    "@types/js-yaml": "^4.0.5",
     "@types/node": "^16.18.21",
     "@types/semver": "^7.5.0",
     "@types/tmp": "^0.2.3",
diff --git a/src/docker/assets.ts b/src/docker/assets.ts
index 40fe128..75f1ff5 100644
--- a/src/docker/assets.ts
+++ b/src/docker/assets.ts
@@ -17,10 +17,6 @@
 import fs from 'fs';
 import {Context} from '../context';
 
-export const setupDockerLinuxSh = (): string => {
-  return get('docker-setup-linux.sh', setupDockerLinuxShData, '0755');
-};
-
 export const setupDockerWinPs1 = (): string => {
   return get('docker-setup-win.ps1', setupDockerWinPs1Data);
 };
@@ -45,43 +41,6 @@ const get = (filename: string, data: string, mode?: string): string => {
   return assetPath;
 };
 
-export const setupDockerLinuxShData = `
-#!/usr/bin/env bash
-
-set -eu
-
-: "\${TOOLDIR=}"
-: "\${RUNDIR=}"
-: "\${DOCKER_HOST=}"
-
-export PATH="$TOOLDIR::$PATH"
-
-if [ -z "$DOCKER_HOST" ]; then
-  echo >&2 'error: DOCKER_HOST required'
-  false
-fi
-
-if ! command -v dockerd &> /dev/null; then
-  echo >&2 'error: dockerd missing from PATH'
-  false
-fi
-
-mkdir -p "$RUNDIR"
-
-(
-  echo "Starting dockerd"
-  set -x
-  exec dockerd \\
-    --debug \\
-    --host="$DOCKER_HOST" \\
-    --exec-root="$RUNDIR/execroot" \\
-    --data-root="$RUNDIR/data" \\
-    --pidfile="$RUNDIR/docker.pid" \\
-    --userland-proxy=false \\
-    2>&1 | tee "$RUNDIR/dockerd.log"
-) &
-`;
-
 export const setupDockerWinPs1Data = `
 [CmdletBinding()]
 param(
@@ -92,7 +51,10 @@ param(
     [string]$RunDir,
 
     [Parameter(Mandatory = $true)]
-    [string]$DockerHost)
+    [string]$DockerHost,
+
+    [Parameter(Mandatory = $false)]
+    [string]$DaemonConfig)
 
 $pwver = (Get-ItemProperty -Path HKLM:\\SOFTWARE\\Microsoft\\PowerShell\\3\\PowerShellEngine -Name 'PowerShellVersion').PowerShellVersion
 Write-Host "PowerShell version: $pwver"
@@ -120,6 +82,12 @@ if (Get-Service docker -ErrorAction SilentlyContinue) {
 $env:DOCKER_HOST = $DockerHost
 Write-Host "DOCKER_HOST: $env:DOCKER_HOST"
 
+if ($DaemonConfig) {
+  Write-Host "Writing Docker daemon config"
+  New-Item -ItemType Directory -Force -Path "$env:ProgramData\\Docker\\config"
+  $DaemonConfig | Out-File -FilePath "$env:ProgramData\\Docker\\config\\daemon.json"
+}
+
 Write-Host "Creating service"
 New-Item -ItemType Directory "$RunDir\\moby-root" -ErrorAction SilentlyContinue | Out-Null
 New-Item -ItemType Directory "$RunDir\\moby-exec" -ErrorAction SilentlyContinue | Out-Null
@@ -246,7 +214,7 @@ forwardAgent: false
 #
 # Colima default behaviour: buildkit enabled
 # Default: {}
-docker: {}
+{{daemonConfig}}
 
 # Virtual Machine type (qemu, vz)
 # NOTE: this is macOS 13 only. For Linux and macOS <13.0, qemu is always used.
diff --git a/src/docker/install.ts b/src/docker/install.ts
index bd6c819..03c0d3a 100644
--- a/src/docker/install.ts
+++ b/src/docker/install.ts
@@ -19,6 +19,7 @@ import fs from 'fs';
 import os from 'os';
 import path from 'path';
 import retry from 'async-retry';
+import yaml from 'js-yaml';
 import * as handlebars from 'handlebars';
 import * as util from 'util';
 import * as core from '@actions/core';
@@ -29,7 +30,7 @@ import * as tc from '@actions/tool-cache';
 import {Context} from '../context';
 import {Exec} from '../exec';
 import {Util} from '../util';
-import {colimaYamlData, dockerServiceLogsPs1, qemuEntitlements, setupDockerLinuxSh, setupDockerWinPs1} from './assets';
+import {colimaYamlData, dockerServiceLogsPs1, qemuEntitlements, setupDockerWinPs1} from './assets';
 import {GitHubRelease} from '../types/github';
 
 export interface InstallOpts {
@@ -37,6 +38,7 @@ export interface InstallOpts {
   channel?: string;
   runDir: string;
   contextName?: string;
+  daemonConfig?: string;
 }
 
 export class Install {
@@ -44,6 +46,7 @@ export class Install {
   private readonly version: string;
   private readonly channel: string;
   private readonly contextName: string;
+  private readonly daemonConfig?: string;
   private _version: string | undefined;
   private _toolDir: string | undefined;
 
@@ -52,6 +55,7 @@ export class Install {
     this.version = opts.version || 'latest';
     this.channel = opts.channel || 'stable';
     this.contextName = opts.contextName || 'setup-docker-action';
+    this.daemonConfig = opts.daemonConfig;
   }
 
   get toolDir(): string {
@@ -137,10 +141,15 @@ export class Install {
     }
 
     await core.group('Creating colima config', async () => {
+      let daemonConfig = yaml.dump({docker: {}});
+      if (this.daemonConfig) {
+        daemonConfig = yaml.dump(yaml.load(JSON.stringify({docker: JSON.parse(this.daemonConfig)})));
+      }
       const colimaCfg = handlebars.compile(colimaYamlData)({
         hostArch: Install.platformArch(),
         dockerVersion: this._version,
-        dockerChannel: this.channel
+        dockerChannel: this.channel,
+        daemonConfig: daemonConfig
       });
       core.info(`Writing colima config to ${path.join(colimaDir, 'colima.yaml')}`);
       fs.writeFileSync(path.join(colimaDir, 'colima.yaml'), colimaCfg);
@@ -192,44 +201,65 @@ export class Install {
     const dockerHost = `unix://${path.join(this.runDir, 'docker.sock')}`;
     await io.mkdirP(this.runDir);
 
+    const daemonConfigPath = path.join(this.runDir, 'daemon.json');
+    await fs.writeFileSync(daemonConfigPath, '{}');
+
+    let daemonConfig = undefined;
+    const daemonConfigDefaultPath = '/etc/docker/daemon.json';
+    if (fs.existsSync(daemonConfigDefaultPath)) {
+      await core.group('Default Docker daemon config found', async () => {
+        core.info(JSON.stringify(JSON.parse(fs.readFileSync(daemonConfigDefaultPath, {encoding: 'utf8'})), null, 2));
+      });
+      daemonConfig = JSON.parse(fs.readFileSync(daemonConfigDefaultPath, {encoding: 'utf8'}));
+    }
+    if (this.daemonConfig) {
+      daemonConfig = Object.assign(daemonConfig || {}, JSON.parse(this.daemonConfig));
+    }
+
+    if (daemonConfig) {
+      const daemonConfigStr = JSON.stringify(daemonConfig, null, 2);
+      await core.group('Writing Docker daemon config', async () => {
+        fs.writeFileSync(daemonConfigPath, daemonConfigStr);
+        core.info(daemonConfigStr);
+      });
+    }
+
     await core.group('Start Docker daemon', async () => {
       const bashPath: string = await io.which('bash', true);
-      const proc = await child_process.spawn(`sudo -E ${bashPath} ${setupDockerLinuxSh()}`, [], {
-        detached: true,
-        shell: true,
-        stdio: ['ignore', process.stdout, process.stderr],
-        env: Object.assign({}, process.env, {
-          TOOLDIR: this.toolDir,
-          RUNDIR: this.runDir,
-          DOCKER_HOST: dockerHost
-        }) as {
-          [key: string]: string;
+      const cmd = `${this.toolDir}/dockerd --host="${dockerHost}" --config-file="${daemonConfigPath}" --exec-root="${this.runDir}/execroot" --data-root="${this.runDir}/data" --pidfile="${this.runDir}/docker.pid" --userland-proxy=false`;
+      core.info(`[command] ${cmd}`); // https://github.com/actions/toolkit/blob/3d652d3133965f63309e4b2e1c8852cdbdcb3833/packages/exec/src/toolrunner.ts#L47
+      const proc = await child_process.spawn(
+        // We can't use Exec.exec here because we need to detach the process to
+        // avoid killing it when the action finishes running. Even if detached,
+        // we also need to run dockerd in a subshell and unref the process so
+        // GitHub Action doesn't wait for it to finish.
+        `sudo -E ${bashPath} << EOF
+( ${cmd} 2>&1 | tee "${this.runDir}/dockerd.log" ) &
+EOF`,
+        [],
+        {
+          detached: true,
+          shell: true,
+          stdio: ['ignore', process.stdout, process.stderr]
         }
-      });
+      );
       proc.unref();
-      const retries = 20;
+      await Util.sleep(3);
+      const retries = 10;
       await retry(
         async bail => {
-          await Exec.getExecOutput(`docker version`, undefined, {
-            ignoreReturnCode: true,
-            silent: true,
-            env: Object.assign({}, process.env, {
-              DOCKER_HOST: dockerHost
-            }) as {
-              [key: string]: string;
-            }
-          })
-            .then(res => {
-              if (res.stderr.length > 0 && res.exitCode != 0) {
-                bail(new Error(res.stderr));
-                return false;
+          try {
+            await Exec.getExecOutput(`docker version`, undefined, {
+              silent: true,
+              env: Object.assign({}, process.env, {
+                DOCKER_HOST: dockerHost
+              }) as {
+                [key: string]: string;
               }
-              return res.exitCode == 0;
-            })
-            .catch(error => {
-              bail(error);
-              return false;
             });
+          } catch (e) {
+            bail(e);
+          }
         },
         {
           retries: retries,
@@ -251,11 +281,32 @@ export class Install {
   private async installWindows(): Promise<void> {
     const dockerHost = 'npipe:////./pipe/setup_docker_action';
 
+    let daemonConfig = undefined;
+    const daemonConfigPath = path.join(this.runDir, 'daemon.json');
+    if (fs.existsSync(daemonConfigPath)) {
+      await core.group('Default Docker daemon config found', async () => {
+        core.info(JSON.stringify(JSON.parse(fs.readFileSync(daemonConfigPath, {encoding: 'utf8'})), null, 2));
+      });
+      daemonConfig = JSON.parse(fs.readFileSync(daemonConfigPath, {encoding: 'utf8'}));
+    }
+    if (this.daemonConfig) {
+      daemonConfig = Object.assign(daemonConfig || {}, JSON.parse(this.daemonConfig));
+    }
+
+    let daemonConfigStr = '{}';
+    if (daemonConfig) {
+      daemonConfigStr = JSON.stringify(daemonConfig, null, 2);
+      await core.group('Docker daemon config', async () => {
+        core.info(daemonConfigStr);
+      });
+    }
+
     await core.group('Install Docker daemon service', async () => {
       const setupCmd = await Util.powershellCommand(setupDockerWinPs1(), {
         ToolDir: this.toolDir,
         RunDir: this.runDir,
-        DockerHost: dockerHost
+        DockerHost: dockerHost,
+        DaemonConfig: daemonConfigStr
       });
       await Exec.exec(setupCmd.command, setupCmd.args);
       const logCmd = await Util.powershellCommand(dockerServiceLogsPs1());
diff --git a/yarn.lock b/yarn.lock
index b5000ab..c5c5cab 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -974,6 +974,7 @@ __metadata:
     "@actions/tool-cache": ^2.0.1
     "@octokit/plugin-rest-endpoint-methods": ^7.2.3
     "@types/csv-parse": ^1.2.2
+    "@types/js-yaml": ^4.0.5
     "@types/node": ^16.18.21
     "@types/semver": ^7.5.0
     "@types/tmp": ^0.2.3
@@ -990,6 +991,7 @@ __metadata:
     eslint-plugin-prettier: ^4.2.1
     handlebars: ^4.7.8
     jest: ^29.5.0
+    js-yaml: ^4.1.0
     jwt-decode: ^3.1.2
     prettier: ^2.8.7
     rimraf: ^4.4.1
@@ -1825,6 +1827,13 @@ __metadata:
   languageName: node
   linkType: hard
 
+"@types/js-yaml@npm:^4.0.5":
+  version: 4.0.5
+  resolution: "@types/js-yaml@npm:4.0.5"
+  checksum: 7dcac8c50fec31643cc9d6444b5503239a861414cdfaa7ae9a38bc22597c4d850c4b8cec3d82d73b3fbca408348ce223b0408d598b32e094470dfffc6d486b4d
+  languageName: node
+  linkType: hard
+
 "@types/json-schema@npm:^7.0.9":
   version: 7.0.9
   resolution: "@types/json-schema@npm:7.0.9"