diff --git a/.github/workflows/gen-upgrade-on-manual-input.yml b/.github/workflows/gen-upgrade-on-manual-input.yml
index 2b8a02b8ca1..081c176d662 100644
--- a/.github/workflows/gen-upgrade-on-manual-input.yml
+++ b/.github/workflows/gen-upgrade-on-manual-input.yml
@@ -1,7 +1,8 @@
 # When user trigger this workflow with custom version input, this action will do 3 things:
-# 1) it will create a directory with an empty upgrade handler in app/upgrades folder
-# 2) will increase an E2E_UPGRADE_VERSION variable in Makefile
-# 3) create a pull request with these changes to main
+# 1) create a directory with an empty upgrade handler in app/upgrades folder
+# 2) increase E2E_UPGRADE_VERSION variable in Makefile
+# 3) update OSMOSIS_E2E_UPGRADE_VERSION variable in .vscode/launch.json
+# 4) create a pull request with these changes to main
 
 # Please note that if the given version (or release major version) is smaller than the latest
 # existing upgrade handler version in `app/upgrades/`, this will be a no-op.
@@ -58,6 +59,7 @@ jobs:
             Update report
             - Created a new empty upgrade handler
             - Increased E2E_UPGRADE_VERSION in Makefile by 1
+            - Increased OSMOSIS_E2E_UPGRADE_VERSION in .vscode/launch.json by 1
           labels: |
             T:auto
             C:e2e
diff --git a/scripts/empty_upgrade_handler_gen.sh b/scripts/empty_upgrade_handler_gen.sh
index 17608e73cd9..f8df838d66c 100755
--- a/scripts/empty_upgrade_handler_gen.sh
+++ b/scripts/empty_upgrade_handler_gen.sh
@@ -1,8 +1,10 @@
 #!/bin/bash
 
 # 1) this script creates an empty directory in app/upgrades called "vX" where X is a previous version + 1 with an empty upgrade handler.
-# 2) increases E2E_UPGRADE_VERSION in makefile by 1
-# 3) adds new version to app.go
+# 2) adds new version to app.go
+# 3) update OSMOSIS_E2E_UPGRADE_VERSION variable in .vscode/launch.json
+# 4) increases E2E_UPGRADE_VERSION in makefile by 1
+# 5) bumps up previous e2e-init version in tests/e2e/containers/config.go
 
 # Also insures that all the imports make use of a current module version from go mod:
 # (see:    module=$(go mod edit -json | jq ".Module.Path")      in this script)
@@ -88,5 +90,33 @@ func CreateUpgradeHandler(
  NEW_IMPORT="$version_create $module/app/upgrades/$version_create$bracks"
  sed -i "s|.*$PREV_IMPORT.*|\t$PREV_IMPORT\n\t$NEW_IMPORT|" $app_file
 
- # change e2e version in makefile
- sed -i "s/E2E_UPGRADE_VERSION := ${bracks}v$latest_version$bracks/E2E_UPGRADE_VERSION := ${bracks}$version_create$bracks/" ./Makefile
\ No newline at end of file
+# change e2e version in makefile
+sed -i "s/E2E_UPGRADE_VERSION := ${bracks}v$latest_version$bracks/E2E_UPGRADE_VERSION := ${bracks}$version_create$bracks/" ./Makefile
+
+# bumps up prev e2e version
+e2e_file=./tests/e2e/containers/config.go
+PREV_OSMOSIS_DEV_TAG=$(curl -L -s 'https://registry.hub.docker.com/v2/repositories/osmolabs/osmosis-dev/tags?page=1&page_size=100'            | jq -r '.results[] | .name | select(.|test("^(?:v|)[0-9]+\\.[0-9]+(?:$|\\.[0-9]+$)"))' | grep --max-count=1 "")
+PREV_OSMOSIS_E2E_TAG=$(curl -L -s 'https://registry.hub.docker.com/v2/repositories/osmolabs/osmosis-e2e-init-chain/tags?page=1&page_size=100' | jq -r '.results[] | .name | select(.|test("^(?:v|)[0-9]+\\.[0-9]+(?:$|\\.[0-9]+$)"))' | grep --max-count=1 "")
+
+# previousVersionOsmoTag  = PREV_OSMOSIS_DEV_TAG
+if [[ $version_create == v$(($(echo $PREV_OSMOSIS_DEV_TAG | awk -F . '{print $1}')+1)) ]]; then	
+    echo "Found previous osmosis-dev tag $PREV_OSMOSIS_DEV_TAG"
+	sed -i '/previousVersionOsmoTag/s/".*"/'"\"$PREV_OSMOSIS_DEV_TAG\""'/' $e2e_file
+else
+    PREV_OSMOSIS_DEV_TAG=v$((${version_create:1}-1)).0.0
+    echo "Using pre-defined osmosis-dev tag: $PREV_OSMOSIS_DEV_TAG"
+    sed -i '/previousVersionOsmoTag/s/".*"/'"\"$PREV_OSMOSIS_DEV_TAG\""'/' $e2e_file
+fi
+
+# previousVersionInitTag  = PREV_OSMOSIS_E2E_TAG
+if [[ $version_create == v$(($(echo $PREV_OSMOSIS_E2E_TAG | awk -F . '{print $1}' | grep -Eo '[0-9]*')+1)) ]]; then	
+    echo "Found previous osmosis-e2e-init-chain tag $PREV_OSMOSIS_E2E_TAG"
+	sed -i '/previousVersionInitTag/s/".*"/'"\"$PREV_OSMOSIS_E2E_TAG\""'/' $e2e_file
+else
+    PREV_OSMOSIS_E2E_TAG=v$((${version_create:1}-1)).0.0
+    echo "Using pre-defined osmosis-e2e-init-chain tag: $PREV_OSMOSIS_E2E_TAG"
+    sed -i '/previousVersionInitTag/s/".*"/'"\"$PREV_OSMOSIS_E2E_TAG\""'/' $e2e_file
+fi
+
+# update OSMOSIS_E2E_UPGRADE_VERSION in launch.json
+sed -i "s/${bracks}OSMOSIS_E2E_UPGRADE_VERSION${bracks}: ${bracks}v$latest_version${bracks}/${bracks}OSMOSIS_E2E_UPGRADE_VERSION${bracks}: ${bracks}$version_create${bracks}/" ./.vscode/launch.json