diff --git a/src/docker-outside-of-docker/install.sh b/src/docker-outside-of-docker/install.sh
index b883227c0..e28f4b7ed 100755
--- a/src/docker-outside-of-docker/install.sh
+++ b/src/docker-outside-of-docker/install.sh
@@ -466,8 +466,6 @@ if [ "${ENABLE_NONROOT_DOCKER}" = "false" ] || [ "${USERNAME}" = "root" ]; then
     exit 0
 fi
 
-DOCKER_GID="$(grep -oP '^docker:x:\K[^:]+' /etc/group)"
-
 # If enabling non-root access and specified user is found, setup socat and add script
 chown -h "${USERNAME}":root "${TARGET_SOCKET}"
 check_packages socat
@@ -508,8 +506,11 @@ log "Ensuring ${USERNAME} has access to ${SOURCE_SOCKET} via ${TARGET_SOCKET}"
 # fall back on using socat to forward the docker socket to another unix socket so
 # that we can set permissions on it without affecting the host.
 if [ "${ENABLE_NONROOT_DOCKER}" = "true" ] && [ "${SOURCE_SOCKET}" != "${TARGET_SOCKET}" ] && [ "${USERNAME}" != "root" ] && [ "${USERNAME}" != "0" ]; then
+    DOCKER_GID="\$(getent group docker | cut -d: -f3)"
     SOCKET_GID=\$(stat -c '%g' ${SOURCE_SOCKET})
-    if [ "\${SOCKET_GID}" != "0" ] && [ "\${SOCKET_GID}" != "${DOCKER_GID}" ] && ! grep -E ".+:x:\${SOCKET_GID}" /etc/group; then
+    if [ "\${SOCKET_GID}" = "\${DOCKER_GID}" ] && [ -L "${TARGET_SOCKET}" ] && [ "${TARGET_SOCKET}" -ef "${SOURCE_SOCKET}" ]; then
+        log "Docker group matches socket GID \${SOCKET_GID}, nothing to do"
+    elif [ "\${SOCKET_GID}" != "0" ] && ! getent group "\${SOCKET_GID}" > /dev/null; then
         sudoIf groupmod --gid "\${SOCKET_GID}" docker
     else
         # Enable proxy if not already running
diff --git a/test/docker-outside-of-docker/docker_init_gid.sh b/test/docker-outside-of-docker/docker_init_gid.sh
new file mode 100755
index 000000000..749230945
--- /dev/null
+++ b/test/docker-outside-of-docker/docker_init_gid.sh
@@ -0,0 +1,105 @@
+#!/bin/bash
+
+set -e
+
+source dev-container-features-test-lib
+
+test_gid_case() (
+    set -e
+
+    local scenario="$1"
+    export GID_TEST_DIR
+    GID_TEST_DIR="$(mktemp -d)"
+    trap 'rm -rf "${GID_TEST_DIR}"' EXIT
+
+    echo 2000 > "${GID_TEST_DIR}/docker-gid"
+    echo 100 > "${GID_TEST_DIR}/socket-gid"
+    touch "${GID_TEST_DIR}/source.sock" "${GID_TEST_DIR}/groups"
+    ln -s "${GID_TEST_DIR}/source.sock" "${GID_TEST_DIR}/target.sock"
+
+    sed -e "s|/var/run/docker-host.sock|${GID_TEST_DIR}/source.sock|g" \
+        -e "s|/var/run/docker.sock|${GID_TEST_DIR}/target.sock|g" \
+        -e "s|/tmp/vscr-docker-from-docker|${GID_TEST_DIR}/proxy|g" \
+        /usr/local/share/docker-init.sh > "${GID_TEST_DIR}/docker-init.sh"
+
+    getent() {
+        if [ "$1" != group ]; then
+            return 1
+        fi
+        if [ "$2" = docker ] || [ "$2" = "$(cat "${GID_TEST_DIR}/docker-gid")" ]; then
+            echo "docker:x:$(cat "${GID_TEST_DIR}/docker-gid"):vscode"
+        else
+            awk -F: -v gid="$2" '$3 == gid { print; found = 1 } END { exit !found }' "${GID_TEST_DIR}/groups"
+        fi
+    }
+
+    stat() {
+        [ "$1" = -c ] && [ "$2" = '%g' ] && [ "$3" = "${GID_TEST_DIR}/source.sock" ]
+        cat "${GID_TEST_DIR}/socket-gid"
+    }
+
+    groupmod() {
+        [ "$1" = --gid ] && [ "$3" = docker ]
+        echo "$2" > "${GID_TEST_DIR}/docker-gid"
+        echo "$*" > "${GID_TEST_DIR}/groupmod"
+    }
+
+    id() {
+        [ "$1" = -u ]
+        echo 0
+    }
+
+    socat() {
+        return 0
+    }
+
+    export -f getent stat groupmod id socat
+
+    case "${scenario}" in
+        matching|stale-target)
+            echo 100 > "${GID_TEST_DIR}/docker-gid"
+            if [ "${scenario}" = stale-target ]; then
+                rm "${GID_TEST_DIR}/target.sock"
+                touch "${GID_TEST_DIR}/target.sock"
+            fi
+            ;;
+        prefix)
+            echo 'other:x:1000:' > "${GID_TEST_DIR}/groups"
+            ;;
+        collision)
+            echo 'other:x:100:' > "${GID_TEST_DIR}/groups"
+            ;;
+        *) return 1 ;;
+    esac
+
+    bash "${GID_TEST_DIR}/docker-init.sh" true || return 1
+
+    case "${scenario}" in
+        matching)
+            [ -L "${GID_TEST_DIR}/target.sock" ] &&
+            [ "$(readlink "${GID_TEST_DIR}/target.sock")" = "${GID_TEST_DIR}/source.sock" ] &&
+            [ ! -e "${GID_TEST_DIR}/proxy.pid" ] &&
+            [ ! -e "${GID_TEST_DIR}/groupmod" ] &&
+            grep -q 'Docker group matches socket GID 100, nothing to do' "${GID_TEST_DIR}/proxy.log"
+            ;;
+        prefix)
+            [ "$(cat "${GID_TEST_DIR}/docker-gid")" = 100 ] &&
+            grep -qx -- '--gid 100 docker' "${GID_TEST_DIR}/groupmod" &&
+            [ -L "${GID_TEST_DIR}/target.sock" ] &&
+            [ ! -e "${GID_TEST_DIR}/proxy.pid" ]
+            ;;
+        collision|stale-target)
+            [ ! -L "${GID_TEST_DIR}/target.sock" ] &&
+            [ -s "${GID_TEST_DIR}/proxy.pid" ] &&
+            [ ! -e "${GID_TEST_DIR}/groupmod" ] &&
+            grep -q 'Enabling socket proxy.' "${GID_TEST_DIR}/proxy.log"
+            ;;
+    esac
+)
+
+check "runtime-matching-gid-preserves-symlink-without-proxy" test_gid_case matching
+check "prefix-only-gid-match-updates-docker-group-without-proxy" test_gid_case prefix
+check "exact-gid-collision-enables-proxy" test_gid_case collision
+check "matching-gid-with-stale-target-enables-proxy" test_gid_case stale-target
+
+reportResults
diff --git a/test/docker-outside-of-docker/scenarios.json b/test/docker-outside-of-docker/scenarios.json
index 166cb1b03..43ddd1015 100644
--- a/test/docker-outside-of-docker/scenarios.json
+++ b/test/docker-outside-of-docker/scenarios.json
@@ -242,7 +242,14 @@
             }
         },
         "containerUser": "vscode"
+    },
+    "docker_init_gid": {
+        "image": "mcr.microsoft.com/devcontainers/base:ubuntu-24.04",
+        "features": {
+            "docker-outside-of-docker": {
+                "moby": true
+            }
+        },
+        "containerUser": "vscode"
     }
 }
-
-  
\ No newline at end of file