diff --git a/llama_stack/distribution/server/server.py b/llama_stack/distribution/server/server.py
index 8cc028769..e25bf0817 100644
--- a/llama_stack/distribution/server/server.py
+++ b/llama_stack/distribution/server/server.py
@@ -280,7 +280,18 @@ class TracingMiddleware:
             logger.debug(f"No matching endpoint found for path: {path}, falling back to FastAPI")
             return await self.app(scope, receive, send)
 
-        trace_context = await start_trace(trace_path, {"__location__": "server", "raw_path": path})
+        trace_attributes = {"__location__": "server", "raw_path": path}
+
+        # Extract W3C trace context headers and store as trace attributes
+        headers = dict(scope.get("headers", []))
+        traceparent = headers.get(b"traceparent", b"").decode()
+        if traceparent:
+            trace_attributes["traceparent"] = traceparent
+        tracestate = headers.get(b"tracestate", b"").decode()
+        if tracestate:
+            trace_attributes["tracestate"] = tracestate
+
+        trace_context = await start_trace(trace_path, trace_attributes)
 
         async def send_with_trace_id(message):
             if message["type"] == "http.response.start":
diff --git a/llama_stack/providers/inline/telemetry/meta_reference/telemetry.py b/llama_stack/providers/inline/telemetry/meta_reference/telemetry.py
index 67362dd36..1bc979894 100644
--- a/llama_stack/providers/inline/telemetry/meta_reference/telemetry.py
+++ b/llama_stack/providers/inline/telemetry/meta_reference/telemetry.py
@@ -16,6 +16,7 @@ from opentelemetry.sdk.resources import Resource
 from opentelemetry.sdk.trace import TracerProvider
 from opentelemetry.sdk.trace.export import BatchSpanProcessor
 from opentelemetry.semconv.resource import ResourceAttributes
+from opentelemetry.trace.propagation.tracecontext import TraceContextTextMapPropagator
 
 from llama_stack.apis.telemetry import (
     Event,
@@ -44,6 +45,7 @@ from llama_stack.providers.inline.telemetry.meta_reference.sqlite_span_processor
 )
 from llama_stack.providers.utils.telemetry.dataset_mixin import TelemetryDatasetMixin
 from llama_stack.providers.utils.telemetry.sqlite_trace_store import SQLiteTraceStore
+from llama_stack.providers.utils.telemetry.tracing import ROOT_SPAN_MARKERS
 
 from .config import TelemetryConfig, TelemetrySink
 
@@ -206,6 +208,15 @@ class TelemetryAdapter(TelemetryDatasetMixin, Telemetry):
                 event.attributes = {}
             event.attributes["__ttl__"] = ttl_seconds
 
+            # Extract these W3C trace context attributes so they are not written to
+            # underlying storage, as we just need them to propagate the trace context.
+            traceparent = event.attributes.pop("traceparent", None)
+            tracestate = event.attributes.pop("tracestate", None)
+            if traceparent:
+                # If we have a traceparent header value, we're not the root span.
+                for root_attribute in ROOT_SPAN_MARKERS:
+                    event.attributes.pop(root_attribute, None)
+
             if isinstance(event.payload, SpanStartPayload):
                 # Check if span already exists to prevent duplicates
                 if span_id in _GLOBAL_STORAGE["active_spans"]:
@@ -216,8 +227,12 @@ class TelemetryAdapter(TelemetryDatasetMixin, Telemetry):
                     parent_span_id = int(event.payload.parent_span_id, 16)
                     parent_span = _GLOBAL_STORAGE["active_spans"].get(parent_span_id)
                     context = trace.set_span_in_context(parent_span)
-                else:
-                    event.attributes["__root_span__"] = "true"
+                elif traceparent:
+                    carrier = {
+                        "traceparent": traceparent,
+                        "tracestate": tracestate,
+                    }
+                    context = TraceContextTextMapPropagator().extract(carrier=carrier)
 
                 span = tracer.start_span(
                     name=event.payload.name,
diff --git a/llama_stack/providers/utils/telemetry/tracing.py b/llama_stack/providers/utils/telemetry/tracing.py
index 0f4fdd0d8..4edfa6516 100644
--- a/llama_stack/providers/utils/telemetry/tracing.py
+++ b/llama_stack/providers/utils/telemetry/tracing.py
@@ -34,6 +34,8 @@ logger = get_logger(__name__, category="core")
 INVALID_SPAN_ID = 0x0000000000000000
 INVALID_TRACE_ID = 0x00000000000000000000000000000000
 
+ROOT_SPAN_MARKERS = ["__root__", "__root_span__"]
+
 
 def trace_id_to_str(trace_id: int) -> str:
     """Convenience trace ID formatting method
@@ -178,7 +180,8 @@ async def start_trace(name: str, attributes: dict[str, Any] = None) -> TraceCont
 
     trace_id = generate_trace_id()
     context = TraceContext(BACKGROUND_LOGGER, trace_id)
-    context.push_span(name, {"__root__": True, **(attributes or {})})
+    attributes = {marker: True for marker in ROOT_SPAN_MARKERS} | (attributes or {})
+    context.push_span(name, attributes)
 
     CURRENT_TRACE_CONTEXT.set(context)
     return context