diff --git a/.changelog/173.txt b/.changelog/173.txt
new file mode 100644
index 00000000..22f7ce3f
--- /dev/null
+++ b/.changelog/173.txt
@@ -0,0 +1,3 @@
+```release-note:feature
+waypoint: Support setting variables when installing add-ons.
+```
diff --git a/internal/commands/waypoint/add-ons/add_on.go b/internal/commands/waypoint/add-ons/add_on.go
index f2f7f35e..f23f844b 100644
--- a/internal/commands/waypoint/add-ons/add_on.go
+++ b/internal/commands/waypoint/add-ons/add_on.go
@@ -17,6 +17,9 @@ type AddOnOpts struct {
 	AddOnDefinitionName string
 	ApplicationName     string
 
+	Variables     map[string]string
+	VariablesFile string
+
 	testFunc func(c *cmd.Command, args []string) error
 }
 
diff --git a/internal/commands/waypoint/add-ons/create.go b/internal/commands/waypoint/add-ons/create.go
index 55e53fa0..8bf3da8f 100644
--- a/internal/commands/waypoint/add-ons/create.go
+++ b/internal/commands/waypoint/add-ons/create.go
@@ -8,6 +8,7 @@ import (
 
 	"github.com/hashicorp/hcp-sdk-go/clients/cloud-waypoint-service/preview/2023-08-18/client/waypoint_service"
 	"github.com/hashicorp/hcp-sdk-go/clients/cloud-waypoint-service/preview/2023-08-18/models"
+	"github.com/hashicorp/hcp/internal/commands/waypoint/internal"
 	"github.com/hashicorp/hcp/internal/pkg/cmd"
 	"github.com/hashicorp/hcp/internal/pkg/flagvalue"
 	"github.com/hashicorp/hcp/internal/pkg/heredoc"
@@ -64,6 +65,27 @@ $ hcp waypoint add-ons create -n=my-addon -a=my-application -d=my-addon-definiti
 					Value:        flagvalue.Simple("", &opts.ApplicationName),
 					Required:     true,
 				},
+				{
+					Name:         "var",
+					DisplayValue: "KEY=VALUE",
+					Description: "A variable to be used in the application. The" +
+						" flag can be repeated to specify multiple variables. " +
+						"Variables specified with the flag will override " +
+						"variables specified in a file.",
+					Value:      flagvalue.SimpleMap(nil, &opts.Variables),
+					Required:   false,
+					Repeatable: true,
+				},
+				{
+					Name:         "var-file",
+					DisplayValue: "FILE",
+					Description: "A file containing variables to be used in the " +
+						"application. The file should be in HCL format Variables" +
+						" in the file will be overridden by variables specified" +
+						" with the --var flag.",
+					Value:    flagvalue.Simple("", &opts.VariablesFile),
+					Required: false,
+				},
 			},
 		},
 	}
@@ -77,6 +99,43 @@ func addOnCreate(opts *AddOnOpts) error {
 		return err
 	}
 
+	// Variable Processing
+
+	// a map is used with the key being the variable name, so that
+	// flags can override file values.
+	ivs := make(map[string]*models.HashicorpCloudWaypointInputVariable)
+	if opts.VariablesFile != "" {
+		variables, err := internal.ParseInputVariablesFile(opts.VariablesFile)
+		if err != nil {
+			return errors.Wrapf(err, "%s failed to parse input variables file %q",
+				opts.IO.ColorScheme().FailureIcon(),
+				opts.VariablesFile,
+			)
+		}
+		for _, v := range variables {
+			ivs[v.Name] = &models.HashicorpCloudWaypointInputVariable{
+				Name:  v.Name,
+				Value: v.Value,
+			}
+		}
+	}
+
+	// Flags are processed second, so that they can override file values.
+	// Flags take precedence over file values.
+	for k, v := range opts.Variables {
+		ivs[k] = &models.HashicorpCloudWaypointInputVariable{
+			Name:  k,
+			Value: v,
+		}
+	}
+
+	var vars []*models.HashicorpCloudWaypointInputVariable
+	for _, v := range ivs {
+		vars = append(vars, v)
+	}
+
+	// End Variable Processing
+
 	_, err = opts.WS.WaypointServiceCreateAddOn(
 		&waypoint_service.WaypointServiceCreateAddOnParams{
 			NamespaceID: ns.ID,
diff --git a/internal/commands/waypoint/add-ons/create_test.go b/internal/commands/waypoint/add-ons/create_test.go
index 3aca76de..faa3ff56 100644
--- a/internal/commands/waypoint/add-ons/create_test.go
+++ b/internal/commands/waypoint/add-ons/create_test.go
@@ -48,11 +48,19 @@ func TestNewCmdCreate(t *testing.T) {
 				"-n=cli-test",
 				"--app=testApp",
 				"--add-on-definition-name=testAddOnDefinition",
+				"--var-file", "vars.hcl",
+				"--var", "key=value",
+				"--var", "key2=value2",
 			},
 			Expect: &AddOnOpts{
 				Name:                "cli-test",
 				ApplicationName:     "testApp",
 				AddOnDefinitionName: "testAddOnDefinition",
+				Variables: map[string]string{
+					"key":  "value",
+					"key2": "value2",
+				},
+				VariablesFile: "vars.hcl",
 			},
 		},
 	}
@@ -86,6 +94,8 @@ func TestNewCmdCreate(t *testing.T) {
 				r.Equal(c.Expect.Name, addOnOpts.Name)
 				r.Equal(c.Expect.ApplicationName, addOnOpts.ApplicationName)
 				r.Equal(c.Expect.AddOnDefinitionName, addOnOpts.AddOnDefinitionName)
+				r.Equal(c.Expect.Variables, addOnOpts.Variables)
+				r.Equal(c.Expect.VariablesFile, addOnOpts.VariablesFile)
 			}
 		})
 	}