diff --git a/internal/gen/bearerjwt/bearerjwt_test.go b/internal/gen/bearerjwt/bearerjwt_test.go
index fe329b649..f6a5d4e1d 100644
--- a/internal/gen/bearerjwt/bearerjwt_test.go
+++ b/internal/gen/bearerjwt/bearerjwt_test.go
@@ -96,13 +96,17 @@ func TestGenerateToken(t *testing.T) {
 	})
 
 	t.Run("accepts signing key from stdin", func(t *testing.T) {
-		utils.Config.Auth.SigningKeysPath = ""
-		utils.Config.Auth.SigningKeys = nil
 		claims := config.CustomClaims{
 			Role: "service_role",
 		}
-		// Setup in-memory fs
+		// Setup in-memory fs with minimal config (explicitly set signing_keys_path to empty to override template default)
 		fsys := afero.NewMemMapFs()
+		require.NoError(t, utils.WriteFile("supabase/config.toml", []byte(`
+project_id = "test"
+
+[auth]
+signing_keys_path = ""
+`), fsys))
 		testKey, err := json.Marshal(privateKeyRSA)
 		require.NoError(t, err)
 		t.Cleanup(fstest.MockStdin(t, string(testKey)))
@@ -128,8 +132,14 @@ func TestGenerateToken(t *testing.T) {
 
 	t.Run("throws error on invalid key", func(t *testing.T) {
 		claims := jwt.MapClaims{}
-		// Setup in-memory fs
+		// Setup in-memory fs with minimal config (explicitly set signing_keys_path to empty to override template default)
 		fsys := afero.NewMemMapFs()
+		require.NoError(t, utils.WriteFile("supabase/config.toml", []byte(`
+project_id = "test"
+
+[auth]
+signing_keys_path = ""
+`), fsys))
 		t.Cleanup(fstest.MockStdin(t, ""))
 		// Run test
 		err = Run(context.Background(), claims, io.Discard, fsys)
diff --git a/internal/init/init.go b/internal/init/init.go
index 01c70bcaf..ff22ade1b 100644
--- a/internal/init/init.go
+++ b/internal/init/init.go
@@ -12,7 +12,9 @@ import (
 
 	"github.com/go-errors/errors"
 	"github.com/spf13/afero"
+	"github.com/supabase/cli/internal/gen/signingkeys"
 	"github.com/supabase/cli/internal/utils"
+	"github.com/supabase/cli/pkg/config"
 	"github.com/tidwall/jsonc"
 )
 
@@ -34,7 +36,12 @@ var (
 )
 
 func Run(ctx context.Context, fsys afero.Fs, interactive bool, params utils.InitParams) error {
-	// 1. Write `config.toml`.
+	// 1. Generate default signing key if it doesn't exist.
+	if err := generateDefaultSigningKey(fsys); err != nil {
+		fmt.Fprintln(os.Stderr, utils.Yellow("Warning:"), "Failed to generate signing key:", err)
+	}
+
+	// 2. Write `config.toml`.
 	if err := utils.InitConfig(params, fsys); err != nil {
 		if errors.Is(err, os.ErrExist) {
 			utils.CmdSuggestion = fmt.Sprintf("Run %s to overwrite existing config file.", utils.Aqua("supabase init --force"))
@@ -42,14 +49,14 @@ func Run(ctx context.Context, fsys afero.Fs, interactive bool, params utils.Init
 		return err
 	}
 
-	// 2. Append to `.gitignore`.
+	// 3. Append to `.gitignore`.
 	if utils.IsGitRepo() {
 		if err := updateGitIgnore(utils.GitIgnorePath, fsys); err != nil {
 			return err
 		}
 	}
 
-	// 3. Prompt for IDE settings in interactive mode.
+	// 4. Prompt for IDE settings in interactive mode.
 	if interactive {
 		if err := PromptForIDESettings(ctx, fsys); err != nil {
 			return err
@@ -170,3 +177,39 @@ func WriteIntelliJConfig(fsys afero.Fs) error {
 	fmt.Println("Please install the Deno plugin for IntelliJ: " + utils.Bold("https://plugins.jetbrains.com/plugin/14382-deno"))
 	return nil
 }
+
+func generateDefaultSigningKey(fsys afero.Fs) error {
+	signingKeysPath := filepath.Join(utils.SupabaseDirPath, "signing_keys.json")
+
+	exists, err := afero.Exists(fsys, signingKeysPath)
+	if err != nil {
+		return errors.Errorf("failed to check signing key file: %w", err)
+	}
+	if exists {
+		return nil
+	}
+
+	privateJWK, err := signingkeys.GeneratePrivateKey(config.AlgRS256)
+	if err != nil {
+		return errors.Errorf("failed to generate signing key: %w", err)
+	}
+
+	if err := utils.MkdirIfNotExistFS(fsys, utils.SupabaseDirPath); err != nil {
+		return errors.Errorf("failed to create supabase directory: %w", err)
+	}
+
+	jwkArray := []config.JWK{*privateJWK}
+	f, err := fsys.OpenFile(signingKeysPath, os.O_WRONLY|os.O_CREATE|os.O_EXCL, 0600)
+	if err != nil {
+		return errors.Errorf("failed to create signing key file: %w", err)
+	}
+	defer f.Close()
+
+	enc := json.NewEncoder(f)
+	enc.SetIndent("", "  ")
+	if err := enc.Encode(jwkArray); err != nil {
+		return errors.Errorf("failed to encode signing key: %w", err)
+	}
+
+	return nil
+}
diff --git a/internal/init/init_test.go b/internal/init/init_test.go
index 3d54feb58..56b4f208a 100644
--- a/internal/init/init_test.go
+++ b/internal/init/init_test.go
@@ -4,6 +4,7 @@ import (
 	"context"
 	"encoding/json"
 	"os"
+	"path/filepath"
 	"testing"
 
 	"github.com/spf13/afero"
@@ -11,6 +12,7 @@ import (
 	"github.com/stretchr/testify/require"
 	"github.com/supabase/cli/internal/testing/fstest"
 	"github.com/supabase/cli/internal/utils"
+	"github.com/supabase/cli/pkg/config"
 )
 
 func TestInitCommand(t *testing.T) {
@@ -24,6 +26,11 @@ func TestInitCommand(t *testing.T) {
 		exists, err := afero.Exists(fsys, utils.ConfigPath)
 		assert.NoError(t, err)
 		assert.True(t, exists)
+		// Validate generated signing key
+		signingKeysPath := filepath.Join(utils.SupabaseDirPath, "signing_keys.json")
+		exists, err = afero.Exists(fsys, signingKeysPath)
+		assert.NoError(t, err)
+		assert.True(t, exists)
 		// Validate generated .gitignore
 		exists, err = afero.Exists(fsys, utils.GitIgnorePath)
 		assert.NoError(t, err)
@@ -197,3 +204,78 @@ func TestUpdateJsonFile(t *testing.T) {
 		assert.ErrorContains(t, err, "operation not permitted")
 	})
 }
+
+func TestGenerateDefaultSigningKey(t *testing.T) {
+	signingKeysPath := filepath.Join(utils.SupabaseDirPath, "signing_keys.json")
+
+	t.Run("generates signing key when file doesn't exist", func(t *testing.T) {
+		// Setup in-memory fs
+		fsys := afero.NewMemMapFs()
+		// Run test
+		assert.NoError(t, generateDefaultSigningKey(fsys))
+		// Validate file exists
+		exists, err := afero.Exists(fsys, signingKeysPath)
+		assert.NoError(t, err)
+		assert.True(t, exists)
+		// Validate file contents
+		content, err := afero.ReadFile(fsys, signingKeysPath)
+		assert.NoError(t, err)
+		var jwkArray []config.JWK
+		assert.NoError(t, json.Unmarshal(content, &jwkArray))
+		assert.Len(t, jwkArray, 1)
+		// Validate key structure
+		key := jwkArray[0]
+		assert.Equal(t, "RSA", key.KeyType)
+		assert.Equal(t, config.Algorithm("RS256"), key.Algorithm)
+		assert.NotEmpty(t, key.KeyID)
+		assert.NotEmpty(t, key.Modulus)
+		assert.NotEmpty(t, key.Exponent)
+		assert.NotEmpty(t, key.PrivateExponent)
+	})
+
+	t.Run("skips generation when file already exists", func(t *testing.T) {
+		// Setup in-memory fs with existing key file
+		fsys := afero.NewMemMapFs()
+		existingKey := []config.JWK{
+			{
+				KeyType:   "RSA",
+				KeyID:     "existing-key-id",
+				Algorithm: config.AlgRS256,
+			},
+		}
+		existingContent, err := json.Marshal(existingKey)
+		require.NoError(t, err)
+		require.NoError(t, utils.MkdirIfNotExistFS(fsys, utils.SupabaseDirPath))
+		require.NoError(t, afero.WriteFile(fsys, signingKeysPath, existingContent, 0600))
+		// Run test
+		assert.NoError(t, generateDefaultSigningKey(fsys))
+		// Validate file wasn't modified
+		content, err := afero.ReadFile(fsys, signingKeysPath)
+		assert.NoError(t, err)
+		var jwkArray []config.JWK
+		assert.NoError(t, json.Unmarshal(content, &jwkArray))
+		assert.Len(t, jwkArray, 1)
+		assert.Equal(t, "existing-key-id", jwkArray[0].KeyID)
+	})
+
+	t.Run("throws error on failure to create directory", func(t *testing.T) {
+		// Setup read-only fs
+		fsys := afero.NewReadOnlyFs(afero.NewMemMapFs())
+		// Run test
+		err := generateDefaultSigningKey(fsys)
+		// Check error
+		assert.Error(t, err)
+		assert.ErrorContains(t, err, "failed to create supabase directory")
+	})
+
+	t.Run("throws error on failure to create file", func(t *testing.T) {
+		// Setup fs that denies file creation
+		// OpenErrorFs will fail when trying to open/create the file
+		fsys := &fstest.OpenErrorFs{DenyPath: signingKeysPath}
+		// Run test
+		err := generateDefaultSigningKey(fsys)
+		// Check error - OpenErrorFs will fail on OpenFile call
+		assert.Error(t, err)
+		assert.ErrorContains(t, err, "failed to create signing key file")
+	})
+}
diff --git a/internal/init/templates/.gitignore b/internal/init/templates/.gitignore
index ad9264f0b..435708ab0 100644
--- a/internal/init/templates/.gitignore
+++ b/internal/init/templates/.gitignore
@@ -1,6 +1,7 @@
 # Supabase
 .branches
 .temp
+signing_keys.json
 
 # dotenvx
 .env.keys
diff --git a/pkg/config/config.go b/pkg/config/config.go
index 6e9ef96bb..f02e6b223 100644
--- a/pkg/config/config.go
+++ b/pkg/config/config.go
@@ -882,10 +882,8 @@ func (c *config) Validate(fsys fs.FS) error {
 			}
 		}
 		if len(c.Auth.SigningKeysPath) > 0 {
-			if f, err := fsys.Open(c.Auth.SigningKeysPath); err != nil {
-				return errors.Errorf("failed to read signing keys: %w", err)
-			} else if c.Auth.SigningKeys, err = fetcher.ParseJSON[[]JWK](f); err != nil {
-				return errors.Errorf("failed to decode signing keys: %w", err)
+			if err := c.loadSigningKeys(fsys); err != nil {
+				return err
 			}
 		}
 		if err := c.Auth.Hook.validate(); err != nil {
@@ -946,6 +944,26 @@ func (c *config) Validate(fsys fs.FS) error {
 	return nil
 }
 
+func (c *config) loadSigningKeys(fsys fs.FS) error {
+	f, err := fsys.Open(c.Auth.SigningKeysPath)
+	if err != nil {
+		if errors.Is(err, os.ErrNotExist) {
+			fmt.Fprintf(os.Stderr, "WARN: signing keys file not found: %s - will be created during init\n", c.Auth.SigningKeysPath)
+			return nil
+		}
+		return fmt.Errorf("failed to read signing keys: %w", err)
+	}
+	defer f.Close()
+
+	signingKeys, err := fetcher.ParseJSON[[]JWK](f)
+	if err != nil {
+		return fmt.Errorf("failed to decode signing keys: %w", err)
+	}
+
+	c.Auth.SigningKeys = signingKeys
+	return nil
+}
+
 func assertEnvLoaded(s string) error {
 	if matches := envPattern.FindStringSubmatch(s); len(matches) > 1 {
 		fmt.Fprintln(os.Stderr, "WARN: environment variable is unset:", matches[1])
diff --git a/pkg/config/templates/config.toml b/pkg/config/templates/config.toml
index f27e6064d..bd03eb745 100644
--- a/pkg/config/templates/config.toml
+++ b/pkg/config/templates/config.toml
@@ -153,7 +153,7 @@ jwt_expiry = 3600
 # JWT issuer URL. If not set, defaults to the local API URL (http://127.0.0.1:<port>/auth/v1).
 # jwt_issuer = ""
 # Path to JWT signing key. DO NOT commit your signing keys file to git.
-# signing_keys_path = "./signing_keys.json"
+signing_keys_path = "./signing_keys.json"
 # If disabled, the refresh token will never expire.
 enable_refresh_token_rotation = true
 # Allows refresh tokens to be reused after expiry, up to the specified interval in seconds.