diff --git a/src/CommunityToolkit.Aspire.Hosting.Azure.DataApiBuilder/README.md b/src/CommunityToolkit.Aspire.Hosting.Azure.DataApiBuilder/README.md
index 5337196f9..a8a316f3c 100644
--- a/src/CommunityToolkit.Aspire.Hosting.Azure.DataApiBuilder/README.md
+++ b/src/CommunityToolkit.Aspire.Hosting.Azure.DataApiBuilder/README.md
@@ -113,6 +113,42 @@ var dab = builder.AddDataAPIBuilder("dab")
     .WithImageTag("latest");
 ```
 
+### OpenTelemetry Instrumentation
+
+The Data API builder integration automatically configures OpenTelemetry (OTEL) instrumentation for distributed tracing and metrics. The integration uses the standard `.WithOtlpExporter()` method which sets up the necessary OTEL environment variables that Data API builder automatically recognizes.
+
+To enable OTEL telemetry in Data API builder, add the following configuration to your `dab-config.json` file:
+
+```json
+{
+  "runtime": {
+    "telemetry": {
+      "open-telemetry": {
+        "enabled": true,
+        "service-name": "@env('OTEL_SERVICE_NAME')",
+        "endpoint": "@env('OTEL_EXPORTER_OTLP_ENDPOINT')",
+        "exporter-protocol": "grpc",
+        "headers": "@env('OTEL_EXPORTER_OTLP_HEADERS')"
+      }
+    }
+  }
+}
+```
+
+The configuration includes the following settings:
+- `enabled`: Enables/disables OTEL telemetry (default: `false`)
+- `service-name`: Logical name for the service in traces. Uses the `@env('OTEL_SERVICE_NAME')` syntax to reference the environment variable automatically set by Aspire
+- `endpoint`: OTEL collector endpoint URL. Uses `@env('OTEL_EXPORTER_OTLP_ENDPOINT')` to reference the Aspire-provided endpoint
+- `exporter-protocol`: Protocol for exporting telemetry. Set to `grpc` for efficient binary transport
+- `headers`: Custom headers for OTEL export. Uses `@env('OTEL_EXPORTER_OTLP_HEADERS')` to reference Aspire-provided headers
+
+With this configuration, Data API builder will:
+- Export traces and metrics to the Aspire dashboard via OTLP (OpenTelemetry Protocol)
+- Automatically use the OTEL endpoint provided by the Aspire app host
+- Include telemetry for REST and GraphQL operations, database queries, and system metrics
+
+For more information about Data API builder telemetry, see the [official documentation](https://learn.microsoft.com/azure/data-api-builder/concept/monitor/open-telemetry).
+
 ## Known Issues
 
 The current imlpementation of the Data API builder .NET Aspire integration does not support HTTPS endpoints. However, this is only a dev-time consideration. Service discovery when published can use HTTPS without any problems.