diff --git a/examples/rag/custom_provider.yaml b/examples/rag/custom_provider.yaml
new file mode 100644
index 000000000..78364d92e
--- /dev/null
+++ b/examples/rag/custom_provider.yaml
@@ -0,0 +1,40 @@
+# This example demonstrates using a custom provider for RAG embedding models.
+# For instance, you can use a local Ollama instance or any OpenAI-compatible
+# API endpoint for generating embeddings.
+
+providers:
+  local-ollama:
+    base_url: http://localhost:11434/v1
+
+models:
+  local-embed:
+    provider: local-ollama
+    model: nomic-embed-text
+
+agents:
+  root:
+    model: openai/gpt-5-mini
+    description: assistant with RAG using custom embedding provider
+    instruction: |
+      You are a helpful assistant with access to a knowledge base.
+      Use the search tool to find relevant information before answering.
+    toolsets:
+      - type: rag
+        ref: knowledge_base
+
+rag:
+  knowledge_base:
+    tool:
+      description: search the knowledge base for relevant information
+    docs:
+      - ./docs
+    strategies:
+      - type: chunked-embeddings
+        embedding_model: local-embed    # References the model defined above using the custom provider
+        database: ./custom_provider.db
+        vector_dimensions: 768
+        chunking:
+          size: 1000
+          overlap: 100
+    results:
+      limit: 5
diff --git a/pkg/config/runtime.go b/pkg/config/runtime.go
index cc1e8fb80..2c1dccfba 100644
--- a/pkg/config/runtime.go
+++ b/pkg/config/runtime.go
@@ -25,6 +25,7 @@ type Config struct {
 	GlobalCodeMode bool
 	WorkingDir     string
 	Models         map[string]latest.ModelConfig
+	Providers      map[string]latest.ProviderConfig
 
 	// Hook overrides from CLI flags
 	HookPreToolUse   []string
@@ -40,6 +41,7 @@ func (runConfig *RuntimeConfig) Clone() *RuntimeConfig {
 	}
 	clone.EnvFiles = slices.Clone(runConfig.EnvFiles)
 	clone.Models = maps.Clone(runConfig.Models)
+	clone.Providers = maps.Clone(runConfig.Providers)
 	clone.DefaultModel = runConfig.DefaultModel.Clone()
 	clone.HookPreToolUse = slices.Clone(runConfig.HookPreToolUse)
 	clone.HookPostToolUse = slices.Clone(runConfig.HookPostToolUse)
diff --git a/pkg/rag/builder.go b/pkg/rag/builder.go
index a243513ec..72ffb5e5d 100644
--- a/pkg/rag/builder.go
+++ b/pkg/rag/builder.go
@@ -5,12 +5,11 @@ import (
 	"errors"
 	"fmt"
 	"log/slog"
-	"maps"
-	"slices"
 
 	"github.com/docker/docker-agent/pkg/config/latest"
 	"github.com/docker/docker-agent/pkg/environment"
 	"github.com/docker/docker-agent/pkg/model/provider"
+	"github.com/docker/docker-agent/pkg/model/provider/options"
 	"github.com/docker/docker-agent/pkg/rag/rerank"
 	"github.com/docker/docker-agent/pkg/rag/strategy"
 	"github.com/docker/docker-agent/pkg/rag/types"
@@ -21,7 +20,16 @@ type ManagersBuildConfig struct {
 	ParentDir     string
 	ModelsGateway string
 	Env           environment.Provider
-	Models        map[string]latest.ModelConfig // Model configurations from config
+	Models        map[string]latest.ModelConfig    // Model configurations from config
+	Providers     map[string]latest.ProviderConfig // Custom provider configurations from config
+}
+
+// NewProvider creates a model provider using the build config's environment,
+// gateway, and custom provider settings.
+func (c ManagersBuildConfig) NewProvider(ctx context.Context, cfg *latest.ModelConfig) (provider.Provider, error) {
+	return provider.New(ctx, cfg, c.Env,
+		options.WithGateway(c.ModelsGateway),
+		options.WithProviders(c.Providers))
 }
 
 // NewManager constructs a single RAG manager from a RAGConfig.
@@ -46,6 +54,7 @@ func NewManager(
 		ParentDir:     buildCfg.ParentDir,
 		SharedDocs:    GetAbsolutePaths(buildCfg.ParentDir, ragCfg.Docs),
 		Models:        buildCfg.Models,
+		Providers:     buildCfg.Providers,
 		Env:           buildCfg.Env,
 		ModelsGateway: buildCfg.ModelsGateway,
 		RespectVCS:    ragCfg.GetRespectVCS(),
@@ -146,20 +155,21 @@ func buildRerankingConfig(
 		"model_ref", rerankCfg.Model)
 
 	// Resolve model config - check if it's a reference to a defined model or inline
-	modelCfg, err := resolveModelConfig(rerankCfg.Model, buildCfg)
+	modelCfgVal, err := strategy.ResolveModelConfig(rerankCfg.Model, buildCfg.Models)
 	if err != nil {
 		slog.Error("Failed to resolve reranking model",
 			"model_ref", rerankCfg.Model,
 			"error", err)
 		return nil, fmt.Errorf("failed to resolve reranking model %q: %w", rerankCfg.Model, err)
 	}
+	modelCfg := &modelCfgVal
 
 	slog.Debug("Resolved reranking model config",
 		"provider", modelCfg.Provider,
 		"model", modelCfg.Model)
 
 	// Create provider for reranking model
-	rerankProvider, err := provider.New(ctx, modelCfg, buildCfg.Env)
+	rerankProvider, err := buildCfg.NewProvider(ctx, modelCfg)
 	if err != nil {
 		slog.Error("Failed to create reranking provider",
 			"provider", modelCfg.Provider,
@@ -206,55 +216,6 @@ func buildRerankingConfig(
 	}, nil
 }
 
-// resolveModelConfig resolves a model name to a ModelConfig
-// Handles both inline model references (e.g., "dmr/model-name") and defined model names
-func resolveModelConfig(modelName string, buildCfg ManagersBuildConfig) (*latest.ModelConfig, error) {
-	// Check if it's an inline model reference (contains a '/')
-	if modelName != "" {
-		parts := splitModelRef(modelName)
-		if len(parts) == 2 {
-			// Inline model reference like "dmr/hf.co/model" or "openai/gpt-5"
-			slog.Debug("Using inline model reference",
-				"provider", parts[0],
-				"model", parts[1])
-			return &latest.ModelConfig{
-				Provider: parts[0],
-				Model:    parts[1],
-			}, nil
-		}
-	}
-
-	// Try to find model in defined models
-	if modelCfg, exists := buildCfg.Models[modelName]; exists {
-		slog.Debug("Using defined model from config",
-			"model_name", modelName,
-			"provider", modelCfg.Provider,
-			"model", modelCfg.Model)
-		return &modelCfg, nil
-	}
-
-	slog.Error("Model not found in configuration",
-		"model_name", modelName,
-		"available_models", getModelNames(buildCfg.Models))
-	return nil, fmt.Errorf("model %q not found in configuration", modelName)
-}
-
-// getModelNames extracts model names from the models map for logging
-func getModelNames(models map[string]latest.ModelConfig) []string {
-	return slices.Collect(maps.Keys(models))
-}
-
-// splitModelRef splits a model reference into provider and model parts
-func splitModelRef(ref string) []string {
-	// Handle common patterns: "provider/model"
-	for i := range len(ref) {
-		if ref[i] == '/' {
-			return []string{ref[:i], ref[i+1:]}
-		}
-	}
-	return []string{ref}
-}
-
 // buildStrategyConfigs builds the strategy configs for the RAG.
 // Returns a slice of strategy configs and a channel for receiving strategy events.
 func buildStrategyConfigs(
diff --git a/pkg/rag/strategy/embedding.go b/pkg/rag/strategy/embedding.go
index cc8239995..0848bf0c5 100644
--- a/pkg/rag/strategy/embedding.go
+++ b/pkg/rag/strategy/embedding.go
@@ -9,7 +9,6 @@ import (
 	"github.com/docker/docker-agent/pkg/config"
 	"github.com/docker/docker-agent/pkg/config/latest"
 	"github.com/docker/docker-agent/pkg/model/provider"
-	"github.com/docker/docker-agent/pkg/model/provider/options"
 	"github.com/docker/docker-agent/pkg/modelsdev"
 	"github.com/docker/docker-agent/pkg/rag/embed"
 )
@@ -41,8 +40,7 @@ func CreateEmbeddingProvider(ctx context.Context, modelName string, buildCtx Bui
 			return nil, fmt.Errorf("model '%s' not found: %w", modelName, err)
 		}
 
-		embedModel, err = provider.New(ctx, &modelCfg, buildCtx.Env,
-			options.WithGateway(buildCtx.ModelsGateway))
+		embedModel, err = buildCtx.NewProvider(ctx, &modelCfg)
 		if err != nil {
 			return nil, fmt.Errorf("failed to create embedding model: %w", err)
 		}
@@ -80,8 +78,7 @@ func createAutoEmbeddingModel(ctx context.Context, buildCtx BuildContext) (provi
 			Model:    autoModelCfg.Model,
 		}
 
-		model, err := provider.New(ctx, &modelCfg, buildCtx.Env,
-			options.WithGateway(buildCtx.ModelsGateway))
+		model, err := buildCtx.NewProvider(ctx, &modelCfg)
 		if err != nil {
 			lastErr = err
 			continue
diff --git a/pkg/rag/strategy/semantic_embeddings.go b/pkg/rag/strategy/semantic_embeddings.go
index 615cf62d3..e42257cb3 100644
--- a/pkg/rag/strategy/semantic_embeddings.go
+++ b/pkg/rag/strategy/semantic_embeddings.go
@@ -16,7 +16,6 @@ import (
 	"github.com/docker/docker-agent/pkg/config/latest"
 	"github.com/docker/docker-agent/pkg/js"
 	"github.com/docker/docker-agent/pkg/model/provider"
-	"github.com/docker/docker-agent/pkg/model/provider/options"
 	"github.com/docker/docker-agent/pkg/rag/chunk"
 	"github.com/docker/docker-agent/pkg/rag/types"
 	"github.com/docker/docker-agent/pkg/tools"
@@ -89,8 +88,7 @@ func NewSemanticEmbeddingsFromConfig(ctx context.Context, cfg latest.RAGStrategy
 		return nil, fmt.Errorf("invalid chat_model %q: %w", chatModelName, err)
 	}
 
-	chatProvider, err := provider.New(ctx, &chatModelCfg, buildCtx.Env,
-		options.WithGateway(buildCtx.ModelsGateway))
+	chatProvider, err := buildCtx.NewProvider(ctx, &chatModelCfg)
 	if err != nil {
 		return nil, fmt.Errorf("failed to create chat model provider: %w", err)
 	}
diff --git a/pkg/rag/strategy/strategy.go b/pkg/rag/strategy/strategy.go
index e7801e843..eb1b6e74d 100644
--- a/pkg/rag/strategy/strategy.go
+++ b/pkg/rag/strategy/strategy.go
@@ -6,20 +6,31 @@ import (
 
 	"github.com/docker/docker-agent/pkg/config/latest"
 	"github.com/docker/docker-agent/pkg/environment"
+	"github.com/docker/docker-agent/pkg/model/provider"
+	"github.com/docker/docker-agent/pkg/model/provider/options"
 	"github.com/docker/docker-agent/pkg/rag/types"
 )
 
-// BuildContext contains everything needed to build a strategy
+// BuildContext contains everything needed to build a strategy.
 type BuildContext struct {
 	RAGName       string
 	ParentDir     string
 	SharedDocs    []string
 	Models        map[string]latest.ModelConfig
+	Providers     map[string]latest.ProviderConfig
 	Env           environment.Provider
 	ModelsGateway string
 	RespectVCS    bool // Whether to respect VCS ignore files (e.g., .gitignore) when collecting files
 }
 
+// NewProvider creates a model provider using the build context's environment,
+// gateway, and custom provider settings.
+func (c BuildContext) NewProvider(ctx context.Context, cfg *latest.ModelConfig) (provider.Provider, error) {
+	return provider.New(ctx, cfg, c.Env,
+		options.WithGateway(c.ModelsGateway),
+		options.WithProviders(c.Providers))
+}
+
 // BuildStrategy builds a strategy from config
 // Explicitly dispatches to the appropriate constructor based on type
 func BuildStrategy(ctx context.Context, cfg latest.RAGStrategyConfig, buildCtx BuildContext, events chan<- types.Event) (*Config, error) {
diff --git a/pkg/teamloader/registry.go b/pkg/teamloader/registry.go
index df128b7a1..8f39572a7 100644
--- a/pkg/teamloader/registry.go
+++ b/pkg/teamloader/registry.go
@@ -369,6 +369,7 @@ func createRAGTool(ctx context.Context, toolset latest.Toolset, parentDir string
 		ModelsGateway: runConfig.ModelsGateway,
 		Env:           runConfig.EnvProvider(),
 		Models:        runConfig.Models,
+		Providers:     runConfig.Providers,
 	})
 	if err != nil {
 		return nil, fmt.Errorf("failed to create RAG manager: %w", err)
diff --git a/pkg/teamloader/teamloader.go b/pkg/teamloader/teamloader.go
index 04b023724..028c43513 100644
--- a/pkg/teamloader/teamloader.go
+++ b/pkg/teamloader/teamloader.go
@@ -123,6 +123,7 @@ func LoadWithConfig(ctx context.Context, agentSource config.Source, runConfig *c
 
 	// Make model definitions available to toolset creators (e.g., RAG reranking)
 	runConfig.Models = cfg.Models
+	runConfig.Providers = cfg.Providers
 
 	// Load agents
 	parentDir := cmp.Or(agentSource.ParentDir(), runConfig.WorkingDir)