diff --git a/src/Build/BackEnd/Components/BuildRequestEngine/BuildRequestEngine.cs b/src/Build/BackEnd/Components/BuildRequestEngine/BuildRequestEngine.cs
index 7d826969e87..2dbcd31ea0e 100644
--- a/src/Build/BackEnd/Components/BuildRequestEngine/BuildRequestEngine.cs
+++ b/src/Build/BackEnd/Components/BuildRequestEngine/BuildRequestEngine.cs
@@ -119,7 +119,7 @@ internal BuildRequestEngine()
         {
             _debugDumpState = Traits.Instance.DebugScheduler;
             _debugDumpPath = ChangeWaves.AreFeaturesEnabled(ChangeWaves.Wave17_0)
-                ? DebugUtils.DebugDumpPath()
+                ? DebugUtils.DebugPath
                 : Environment.GetEnvironmentVariable("MSBUILDDEBUGPATH");
             _debugForceCaching = Environment.GetEnvironmentVariable("MSBUILDDEBUGFORCECACHING") == "1";
 
diff --git a/src/Build/BackEnd/Components/Scheduler/Scheduler.cs b/src/Build/BackEnd/Components/Scheduler/Scheduler.cs
index 535fad8afc6..377e6805897 100644
--- a/src/Build/BackEnd/Components/Scheduler/Scheduler.cs
+++ b/src/Build/BackEnd/Components/Scheduler/Scheduler.cs
@@ -179,7 +179,7 @@ public Scheduler()
         {
             _debugDumpState = Traits.Instance.DebugScheduler;
             _debugDumpPath = ChangeWaves.AreFeaturesEnabled(ChangeWaves.Wave17_0)
-                ? DebugUtils.DebugDumpPath()
+                ? DebugUtils.DebugPath
                 : Environment.GetEnvironmentVariable("MSBUILDDEBUGPATH");
             _schedulingUnlimitedVariable = Environment.GetEnvironmentVariable("MSBUILDSCHEDULINGUNLIMITED");
             _nodeLimitOffset = 0;
diff --git a/src/Shared/CommunicationsUtilities.cs b/src/Shared/CommunicationsUtilities.cs
index 79175ba5a69..9f643cc6ea6 100644
--- a/src/Shared/CommunicationsUtilities.cs
+++ b/src/Shared/CommunicationsUtilities.cs
@@ -179,6 +179,13 @@ static internal int NodeConnectionTimeout
         /// </summary>
         internal static Dictionary<string, string> GetEnvironmentVariables()
         {
+#if !CLR2COMPATIBILITY
+            // The DebugUtils static constructor can set the MSBUILDDEBUGPATH environment variable to propagate the debug path to out of proc nodes.
+            // Need to ensure that constructor is called before this method returns in order to capture its env var write.
+            // Otherwise the env var is not captured and thus gets deleted when RequiestBuilder resets the environment based on the cached results of this method.
+            ErrorUtilities.VerifyThrowInternalNull(DebugUtils.DebugPath, nameof(DebugUtils.DebugPath));
+#endif
+
             Dictionary<string, string> table = new Dictionary<string, string>(200, StringComparer.OrdinalIgnoreCase); // Razzle has 150 environment variables
 
             if (NativeMethodsShared.IsWindows)
@@ -561,7 +568,7 @@ internal static void Trace(int nodeId, string format, params object[] args)
                         Environment.GetEnvironmentVariable("MSBUILDDEBUGPATH");
 #else
                         ChangeWaves.AreFeaturesEnabled(ChangeWaves.Wave17_0)
-                            ? DebugUtils.DebugDumpPath()
+                            ? DebugUtils.DebugPath
                             : Environment.GetEnvironmentVariable("MSBUILDDEBUGPATH");
 #endif
 
diff --git a/src/Shared/Debugging/DebugUtils.cs b/src/Shared/Debugging/DebugUtils.cs
index 03a12d7410c..03736d2ad73 100644
--- a/src/Shared/Debugging/DebugUtils.cs
+++ b/src/Shared/Debugging/DebugUtils.cs
@@ -1,6 +1,7 @@
 // Copyright (c) Microsoft. All rights reserved.
 // Licensed under the MIT license. See LICENSE file in the project root for full license information.
 
+using Microsoft.Build.Utilities;
 using System;
 using System.Diagnostics;
 using System.IO;
@@ -17,6 +18,25 @@ private enum NodeMode
             OutOfProcTaskHostNode
         }
 
+        static DebugUtils()
+        {
+            string environmentDebugPath = Environment.GetEnvironmentVariable("MSBUILDDEBUGPATH");
+            var debugDirectory = environmentDebugPath ?? Path.Combine(Directory.GetCurrentDirectory(), "MSBuild_Logs");
+
+            if (Traits.Instance.DebugEngine)
+            {
+                FileUtilities.EnsureDirectoryExists(debugDirectory);
+
+                // Out of proc nodes do not know the startup directory so set the environment variable for them.
+                if (string.IsNullOrWhiteSpace(environmentDebugPath))
+                {
+                    Environment.SetEnvironmentVariable("MSBUILDDEBUGPATH", debugDirectory);
+                }
+            }
+
+            DebugPath = debugDirectory;
+        }
+
         private static readonly Lazy<NodeMode> ProcessNodeMode = new(
         () =>
         {
@@ -57,27 +77,20 @@ private static bool CurrentProcessMatchesDebugName()
 
         public static readonly bool ShouldDebugCurrentProcess = CurrentProcessMatchesDebugName();
 
-        public static string DebugDumpPath()
-        {
-            var debugDirectory = Environment.GetEnvironmentVariable("MSBUILDDEBUGPATH") ?? Path.Combine(Directory.GetCurrentDirectory(), "MSBuild_Logs");
-            FileUtilities.EnsureDirectoryExists(debugDirectory);
-
-            return debugDirectory;
-        }
+        public static string DebugPath { get; }
 
         public static string FindNextAvailableDebugFilePath(string fileName)
         {
             var extension = Path.GetExtension(fileName);
             var fileNameWithoutExtension = Path.GetFileNameWithoutExtension(fileName);
 
-            var debugRoot = DebugDumpPath();
-            var fullPath = Path.Combine(debugRoot, fileName);
+            var fullPath = Path.Combine(DebugPath, fileName);
 
             var counter = 0;
             while (File.Exists(fullPath))
             {
                 fileName = $"{fileNameWithoutExtension}_{counter++}{extension}";
-                fullPath = Path.Combine(debugRoot, fileName);
+                fullPath = Path.Combine(DebugPath, fileName);
             }
 
             return fullPath;
diff --git a/src/Shared/ExceptionHandling.cs b/src/Shared/ExceptionHandling.cs
index d95f1743456..8ba3e225520 100644
--- a/src/Shared/ExceptionHandling.cs
+++ b/src/Shared/ExceptionHandling.cs
@@ -51,7 +51,7 @@ private static string GetDebugDumpPath()
                         Environment.GetEnvironmentVariable("MSBUILDDEBUGPATH");
 #else
                 ChangeWaves.AreFeaturesEnabled(ChangeWaves.Wave17_0)
-                    ? DebugUtils.DebugDumpPath()
+                    ? DebugUtils.DebugPath
                     : Environment.GetEnvironmentVariable("MSBUILDDEBUGPATH");
 #endif