diff --git a/Makefile b/Makefile
index 5be2f5454a9..83491d806b9 100644
--- a/Makefile
+++ b/Makefile
@@ -114,6 +114,10 @@ build-contract-tests-hooks:
 	mkdir -p $(BUILDDIR)
 	go build -mod=readonly $(BUILD_FLAGS) -o $(BUILDDIR)/ ./cmd/contract_tests
 
+build-e2e-chain-init:
+	mkdir -p $(BUILDDIR)
+	go build -mod=readonly $(BUILD_FLAGS) -o $(BUILDDIR)/ ./tests/e2e/chain_init
+
 go-mod-cache: go.sum
 	@echo "--> Download go modules to local cache"
 	@go mod download
@@ -241,6 +245,9 @@ benchmark:
 docker-build-debug:
 	@docker build -t osmosis:debug --build-arg BASE_IMG_TAG=debug -f Dockerfile .
 
+docker-build-e2e-chain-init:
+	@docker build -t osmosis-e2e-chain-init:debug -f tests/e2e/chain_init/chain-init.Dockerfile .
+
 ###############################################################################
 ###                                Linting                                  ###
 ###############################################################################
diff --git a/tests/e2e/README.md b/tests/e2e/README.md
index 846d854bdd4..a3de35e60dd 100644
--- a/tests/e2e/README.md
+++ b/tests/e2e/README.md
@@ -1,7 +1,15 @@
 # End-to-end Tests
 
-The package e2e defines an integration testing suite used for full end-to-end
-testing functionality.
+# Structure
+
+## `e2e` Package
+
+The `e2e` package defines an integration testing suite used for full end-to-end
+testing functionality. This package is decoupled from depending on the Osmosis codebase.
+It initializes the chains for testing via Docker files. As a result, the test suite may
+provide the desired Osmosis version to Docker containers during the initialization.
+This design allows for the opportunity of testing chain upgrades in the future by providing
+an older Osmosis version to the container, performing the chain upgrade, and running the latest test suite.
 
 The file e2e_suite_test.go defines the testing suite and contains the core
 bootstrapping logic that creates a testing environment via Docker containers.
@@ -11,3 +19,53 @@ The file e2e_test.go contains the actual end-to-end integration tests that
 utilize the testing suite.
 
 Currently, there is a single test in `e2e_test.go` to query the balances of a validator.
+
+## `chain` Package
+
+The `chain` package introduces the logic necessary for initializing a chain by creating a genesis
+file and all required configuration files such as the `app.toml`. This package directly depends on the Osmosis codebase.
+
+## `upgrade` Package
+
+The `upgrade` package starts chain initialization. In addition, there is a Dockerfile `init-e2e.Dockerfile`. 
+When executed, its container produces all files necessary for starting up a new chain. 
+These resulting files can be mounted on a volume and propagated to our production osmosis container to start the `osmosisd` service.
+
+The decoupling between chain initialization and start-up allows to minimize the differences between our test suite and the production environment.
+
+# Running Locally
+
+##### To build the binary that initializes the chain:
+
+```
+make build-e2e-chain-init
+```
+- The produced binary is an entrypoint to the `osmosis-e2e-chain-init:debug` image.
+
+##### To build the image for initializing the chain (`osmosis-e2e-chain-init:debug`):
+
+```
+make docker-build-e2e-chain-init
+```
+
+##### To run the chain initialization container locally:
+
+```
+mkdir < path >
+docker run -v < path >:/tmp/osmo-test osmosis-e2e-chain-init:debug --data-dir=/tmp/osmo-test
+sudo rm -r < path > # must be root to clean up
+```
+- runs a container with a volume mounted at < path > where all chain initialization files are placed.
+- < path > must be absolute.
+- `--data-dir` flag is needed for outputting the files into a directory inside the container
+
+Example:
+```
+docker run -v /home/roman/cosmos/osmosis/tmp:/tmp/osmo-test osmosis-e2e-chain-init:debug --data-dir=/tmp/osmo-test
+```
+
+##### To build the debug Osmosis image:
+
+```
+make docker-build-e2e-debug
+```
diff --git a/tests/e2e/chain/chain.go b/tests/e2e/chain/chain.go
index b43bbbf5ce9..0a4e0d3f4f3 100644
--- a/tests/e2e/chain/chain.go
+++ b/tests/e2e/chain/chain.go
@@ -2,7 +2,6 @@ package chain
 
 import (
 	"fmt"
-	"io/ioutil"
 )
 
 const (
@@ -16,15 +15,10 @@ type Chain struct {
 	Validators []*Validator
 }
 
-func new(id string) (*Chain, error) {
-	tmpDir, err := ioutil.TempDir("", "osmosis-e2e-testnet-")
-	if err != nil {
-		return nil, err
-	}
-
+func new(id, dataDir string) (*Chain, error) {
 	return &Chain{
 		Id:      id,
-		DataDir: tmpDir,
+		DataDir: dataDir,
 	}, nil
 }
 
diff --git a/tests/e2e/chain/main.go b/tests/e2e/chain/main.go
index 3f9a341d638..20453d7186d 100644
--- a/tests/e2e/chain/main.go
+++ b/tests/e2e/chain/main.go
@@ -1,7 +1,7 @@
 package chain
 
-func Init(id string) (*Chain, error) {
-	chain, err := new(id)
+func Init(id, dataDir string) (*Chain, error) {
+	chain, err := new(id, dataDir)
 	if err != nil {
 		return nil, err
 	}
diff --git a/tests/e2e/chain_init/chain-init.Dockerfile b/tests/e2e/chain_init/chain-init.Dockerfile
new file mode 100644
index 00000000000..91e5346b0df
--- /dev/null
+++ b/tests/e2e/chain_init/chain-init.Dockerfile
@@ -0,0 +1,23 @@
+# syntax=docker/dockerfile:1
+
+## Build Image
+FROM golang:1.18-bullseye as build
+
+WORKDIR /osmosis
+COPY . /osmosis
+
+# From https://github.com/CosmWasm/wasmd/blob/master/Dockerfile
+# For more details see https://github.com/CosmWasm/wasmvm#builds-of-libwasmvm 
+ADD https://github.com/CosmWasm/wasmvm/releases/download/v1.0.0-beta7/libwasmvm_muslc.a /lib/libwasmvm_muslc.a
+RUN sha256sum /lib/libwasmvm_muslc.a | grep d0152067a5609bfdfb3f0d5d6c0f2760f79d5f2cd7fd8513cafa9932d22eb350
+RUN BUILD_TAGS=muslc make build-e2e-chain-init
+
+## Deploy image
+FROM ubuntu
+
+COPY --from=build /osmosis/build/chain_init /bin/chain_init
+
+ENV HOME /osmosis
+WORKDIR $HOME
+
+ENTRYPOINT [ "chain_init" ]
diff --git a/tests/e2e/chain_init/main.go b/tests/e2e/chain_init/main.go
new file mode 100644
index 00000000000..edb26b0c199
--- /dev/null
+++ b/tests/e2e/chain_init/main.go
@@ -0,0 +1,29 @@
+package main
+
+import (
+	"flag"
+	"fmt"
+	"os"
+
+	"github.com/osmosis-labs/osmosis/v7/tests/e2e/chain"
+)
+
+func main() {
+	var dataDir string
+	flag.StringVar(&dataDir, "data-dir", "", "chain data directory")
+	flag.Parse()
+
+	if len(dataDir) == 0 {
+		panic("data-dir is required")
+	}
+
+	if err := os.MkdirAll(dataDir, 0o755); err != nil {
+		panic(err)
+	}
+
+	chain, err := chain.Init(chain.ChainAID, dataDir)
+	if err != nil {
+		panic(err)
+	}
+	fmt.Println(chain)
+}
diff --git a/tests/e2e/e2e_setup_test.go b/tests/e2e/e2e_setup_test.go
index 2885c31a330..b3f8988df21 100644
--- a/tests/e2e/e2e_setup_test.go
+++ b/tests/e2e/e2e_setup_test.go
@@ -254,7 +254,9 @@ func (s *IntegrationTestSuite) runIBCRelayer() {
 
 func (s *IntegrationTestSuite) configureChain(chainId string) {
 	s.T().Logf("starting e2e infrastructure for chain-id: %s", chainId)
-	newChain, err := chain.Init(chainId)
+	tmpDir, err := ioutil.TempDir("", "osmosis-e2e-testnet-")
+	s.Require().NoError(err)
+	newChain, err := chain.Init(chainId, tmpDir)
 	s.chains = append(s.chains, newChain)
 	s.Require().NoError(err)
 }