diff --git a/vscode-extension/src/extension.ts b/vscode-extension/src/extension.ts
index f6cdf38bf..fc5090b39 100644
--- a/vscode-extension/src/extension.ts
+++ b/vscode-extension/src/extension.ts
@@ -60,7 +60,7 @@ export function activate(context: vscode.ExtensionContext) {
     vscode.commands.registerCommand(
       COMMANDS.SETUP_ENVIRONMENT_VARIABLES,
       () => {
-        setupEnvironmentVariables();
+        setupEnvironmentVariables(context);
       }
     )
   );
@@ -730,7 +730,7 @@ async function checkPip() {
  * 2) If .env file doesn't exist
  *    b) Add template file containing helper lines from 1a above
  */
-async function setupEnvironmentVariables() {
+async function setupEnvironmentVariables(context: vscode.ExtensionContext) {
   // Use home dir because env variables should be global. I get the argument
   // for having in the workspace dir. I personally feel this is more
   // annoying to setup every time you create a new project when using the
@@ -748,6 +748,8 @@ async function setupEnvironmentVariables() {
       } else if (!text.endsWith(".env")) {
         return "File path must end in .env file";
       }
+      // TODO: Check that file path is a "/.env" file (linux) or "\.env" (Windows)
+
       // TODO: Check that env path is contained within workspace hierarchy
       // (Ex: can't have .env file in a sibling dir otherwise AIConfig
       // loadenv can't read it)
@@ -763,53 +765,42 @@ async function setupEnvironmentVariables() {
   }
 
   if (fs.existsSync(envPath)) {
-    // Append some lines in code to help guide users
-    // https://ai.google.dev/tutorials/setup
-    // https://platform.openai.com/api-keys
-    // Also add HF one
     vscode.window.showInformationMessage(
       "Env file already exists, will implement next PR"
     );
   } else {
-    // File doesn't exist in path
-    vscode.window.showInformationMessage(
-      "Env file does not already, will implement next PR"
+    // Create the .env file from the sample
+    const envTemplatePath = vscode.Uri.joinPath(
+      context.extensionUri,
+      "static",
+      "env_template.env"
     );
-  }
 
-  // // Create the model registry file from the sample
-  // const sampleModelRegistryPath = vscode.Uri.joinPath(
-  //   context.extensionUri,
-  //   "static",
-  //   "example_aiconfig_model_registry.py"
-  // );
+    try {
+      await vscode.workspace.fs.copy(
+        envTemplatePath,
+        vscode.Uri.file(envPath),
+        { overwrite: false }
+      );
+    } catch (err) {
+      vscode.window.showErrorMessage(
+        `Error creating new file ${envTemplatePath}: ${err}`
+      );
+    }
 
-  // try {
-  //   await vscode.workspace.fs.copy(
-  //     sampleModelRegistryPath,
-  //     vscode.Uri.file(modelRegistryPath),
-  //     { overwrite: false }
-  //   );
-  // } catch (err) {
-  //   vscode.window.showErrorMessage(
-  //     `Error creating new file ${modelRegistryPath}. Error is ${err}`
-  //   );
-  // }
-
-  // const doc = await vscode.workspace.openTextDocument(modelRegistryPath);
-  // if (doc) {
-  //   vscode.window.showTextDocument(doc);
-  //   vscode.window.showInformationMessage(
-  //     "Please customize your new model registry."
-  //   );
-  // }
-
-  // let config = vscode.workspace.getConfiguration(EXTENSION_NAME);
-  // await handleCustomModelRegistryUpdate(
-  //   config,
-  //   aiconfigEditorManager,
-  //   modelRegistryPath
-  // );
+    const doc = await vscode.workspace.openTextDocument(envPath);
+    if (doc) {
+      vscode.window.showTextDocument(doc, {
+        preview: false,
+        // Tried using vscode.ViewColumn.Active but that overrides existing
+        // walkthrough window
+        viewColumn: vscode.ViewColumn.Beside,
+      });
+      vscode.window.showInformationMessage(
+        "Please define your environment variables."
+      );
+    }
+  }
 }
 
 async function shareAIConfig(
diff --git a/vscode-extension/static/env_template.env b/vscode-extension/static/env_template.env
new file mode 100644
index 000000000..d75aee355
--- /dev/null
+++ b/vscode-extension/static/env_template.env
@@ -0,0 +1,15 @@
+# Uncomment the following lines to set these common env variables for 
+# accessing generative AI models. If your model requires other env variables
+# you can also set those in this file
+
+## Used for models from OpenAI such as Chat GPT and Dall-E
+## You can get your api key from https://platform.openai.com/api-keys
+# OPENAI_API_KEY=<your key here>
+
+## Used for models from Google such as Gemini and Gemma
+## You can get your api key from https://ai.google.dev/tutorials/setup
+# GOOGLE_API_KEY=<your key here> 
+
+## Used for models hosted on Hugging Face: https://huggingface.co/models
+## You can get your token from https://huggingface.co/settings/tokens
+# HUGGING_FACE_API_TOKEN=<your_token_here>