diff --git a/src/commands/images/buildImage.ts b/src/commands/images/buildImage.ts
index db6660c458..9a504d3998 100644
--- a/src/commands/images/buildImage.ts
+++ b/src/commands/images/buildImage.ts
@@ -4,6 +4,7 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { IActionContext, UserCancelledError } from "@microsoft/vscode-azext-utils";
+import { quoted } from "@microsoft/vscode-container-client";
 import * as path from "path";
 import * as vscode from "vscode";
 import { ext } from "../../extensionVariables";
@@ -48,10 +49,10 @@ export async function buildImage(context: IActionContext, dockerFileUri: vscode.
             contextPath
         );
 
-        // Replace '${tag}' if needed. Tag is a special case because we don't want to prompt unless necessary, so must manually replace it.
-        if (tagRegex.test(terminalCommand.command)) {
+        const getImageName = async (): Promise<string> => {
             const absFilePath: string = path.join(rootFolder.uri.fsPath, dockerFileItem.relativeFilePath);
             const dockerFileKey = `buildTag_${absFilePath}`;
+
             const prevImageName: string | undefined = ext.context.workspaceState.get(dockerFileKey);
 
             // Get imageName based previous entries, else on name of subfolder containing the Dockerfile
@@ -65,7 +66,32 @@ export async function buildImage(context: IActionContext, dockerFileUri: vscode.
             addImageTaggingTelemetry(context, imageName, '.after');
 
             await ext.context.workspaceState.update(dockerFileKey, imageName);
-            terminalCommand.command = terminalCommand.command.replace(tagRegex, imageName);
+
+            return imageName;
+        };
+
+        // Replace '${tag}' if needed. Tag is a special case because we don't want to prompt unless necessary, so must manually replace it.
+        if (!terminalCommand.args || terminalCommand.args.length === 0) {
+            // This is a customized command, so parse the tag from the command
+            if (tagRegex.test(terminalCommand.command)) {
+                const imageName = await getImageName();
+                terminalCommand.command = terminalCommand.command.replace(tagRegex, imageName);
+            }
+        } else if (terminalCommand.args.some(arg => tagRegex.test(typeof (arg) === 'string' ? arg : arg.value))) {
+            // This is a default command, so look for ${tag} in the args
+            const imageName = await getImageName();
+
+            terminalCommand.args = terminalCommand.args.map(arg => {
+                if (typeof (arg) === 'string') {
+                    if (tagRegex.test(arg)) {
+                        arg = quoted(arg.replace(tagRegex, imageName));
+                    }
+                } else if (tagRegex.test(arg.value)) {
+                    arg = quoted(arg.value.replace(tagRegex, imageName));
+                }
+
+                return arg;
+            });
         }
 
         const client = await ext.runtimeManager.getClient();
diff --git a/src/commands/selectCommandTemplate.ts b/src/commands/selectCommandTemplate.ts
index 64f71e4ad4..66f4a061ad 100644
--- a/src/commands/selectCommandTemplate.ts
+++ b/src/commands/selectCommandTemplate.ts
@@ -4,7 +4,7 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { IActionContext, IAzureQuickPickItem, IAzureQuickPickOptions, UserCancelledError } from '@microsoft/vscode-azext-utils';
-import { PortBinding, VoidCommandResponse } from '@microsoft/vscode-container-client';
+import { PortBinding, quoted, VoidCommandResponse } from '@microsoft/vscode-container-client';
 import * as vscode from 'vscode';
 import { ext } from '../extensionVariables';
 import { isDockerComposeClient } from '../runtimes/OrchestratorRuntimeManager';
@@ -168,14 +168,35 @@ export async function selectCommandTemplate(
         throw new Error(vscode.l10n.t('No command template was found for command \'{0}\'', command));
     }
 
-    actionContext.telemetry.properties.isDefaultCommand = defaultTemplates.some(t => t.template === selectedTemplate.template) ? 'true' : 'false';
+    const isDefault = defaultTemplates.some(t => t.template === selectedTemplate.template);
+    actionContext.telemetry.properties.isDefaultCommand = isDefault ? 'true' : 'false';
     actionContext.telemetry.properties.isCommandRegexMatched = selectedTemplate.match ? 'true' : 'false';
 
-    // This is not really ideal (putting the full command line into `command` instead of `command` + `args`), but parsing a string into a command + args like that is really hard
-    // Fortunately, `TaskCommandRunnerFactory` does not really care
+
+    let resolvedCommand = resolveVariables(selectedTemplate.template, folder, additionalVariables);
+
+    if (!isDefault) {
+        // This is not really ideal (putting the full command line into `command` instead of `command` + `args`), but parsing a string into a command + args like that is really hard
+        // Fortunately, `TaskCommandRunnerFactory` does not really care
+        return {
+            command: resolvedCommand,
+            args: undefined,
+        };
+    }
+
+    // For the default command, we can make assumptions that allow us to parse into command + args for better shell support
+
+    const argsRegex = /(?:"[^"]*")|(?:[^"\s]*)/g;
+    const commandAndArgs = resolvedCommand.match(argsRegex).filter(arg => arg.length !== 0);
+    if (commandAndArgs.length > 0) {
+        resolvedCommand = commandAndArgs[0].replace(/"/g, '');
+    }
+
+    const resolvedArgs = commandAndArgs.slice(1).map(arg => arg.startsWith('"') ? quoted(arg.replace(/"/g, '')) : arg);
+
     return {
-        command: resolveVariables(selectedTemplate.template, folder, additionalVariables),
-        args: undefined,
+        command: resolvedCommand,
+        args: resolvedArgs,
     };
 }