diff --git a/config.example.toml b/config.example.toml
index 0a0eb33..3258ee1 100644
--- a/config.example.toml
+++ b/config.example.toml
@@ -8,6 +8,12 @@ portal_socket = "$XDG_RUNTIME_DIR/wo-portal.sock"
 enable_syscalls = true
 focus_notify = true
 
+# Environment variables passed to all spawned child processes.
+# DISPLAY defaults to ":0" so X11 apps (e.g. Steam) work even before
+# XWayland is ready.  XWayland overrides DISPLAY with the actual value.
+[compositor.environment]
+DISPLAY = ":0"
+
 [[root]]
 name = "main"
 url = "http://localhost:5173"
diff --git a/src/config.rs b/src/config.rs
index 0d8e0da..67559cc 100644
--- a/src/config.rs
+++ b/src/config.rs
@@ -1,4 +1,5 @@
 use serde::Deserialize;
+use std::collections::HashMap;
 use std::path::PathBuf;
 use anyhow::{Context, Result};
 
@@ -89,6 +90,13 @@ pub struct CompositorConfig {
     /// Cursor size in pixels (default: 24)
     #[serde(default = "default_cursor_size")]
     pub cursor_size: u32,
+
+    /// Extra environment variables to set before spawning child processes.
+    /// Defaults include DISPLAY=":0" so X11 applications (e.g. Steam) can
+    /// fall back to a sensible value when XWayland hasn't started yet.
+    /// XWayland will override DISPLAY with the actual value once ready.
+    #[serde(default = "default_environment")]
+    pub environment: HashMap<String, String>,
 }
 
 impl Default for CompositorConfig {
@@ -110,6 +118,7 @@ impl Default for CompositorConfig {
             applications: vec![],
             cursor_theme: default_cursor_theme(),
             cursor_size: default_cursor_size(),
+            environment: default_environment(),
         }
     }
 }
@@ -278,6 +287,12 @@ fn default_true()        -> bool { true }
 fn default_cursor_theme() -> String { "breeze_cursors".into() }
 fn default_cursor_size() -> u32 { 24 }
 
+fn default_environment() -> HashMap<String, String> {
+    let mut env = HashMap::new();
+    env.insert("DISPLAY".into(), ":0".into());
+    env
+}
+
 fn expand_path(s: &str) -> String {
     shellexpand::full(s)
         .map(|cow| cow.into_owned())
@@ -320,6 +335,21 @@ impl Config {
     pub fn config_dir() -> PathBuf {
         dirs_config()
     }
+
+    /// Apply configured environment variables to the current process so all
+    /// subsequently-spawned children inherit them.  Existing env vars are
+    /// **not** overwritten so that, e.g., a DISPLAY already set by the
+    /// parent session or XWayland takes priority.
+    pub fn apply_environment(&self) {
+        for (key, value) in &self.compositor.environment {
+            if std::env::var(key).is_err() {
+                tracing::info!("Setting environment {key}={value} (from config default)");
+                std::env::set_var(key, value);
+            } else {
+                tracing::debug!("Environment {key} already set, skipping config default");
+            }
+        }
+    }
 }
 
 fn config_path() -> PathBuf {
diff --git a/src/main.rs b/src/main.rs
index 34fe228..a1d65a4 100644
--- a/src/main.rs
+++ b/src/main.rs
@@ -403,6 +403,10 @@ fn main() -> Result<(), anyhow::Error> {
 
     let config = Config::load().context("loading config")?;
 
+    // Apply configured environment variables (e.g. DISPLAY=:0) so that all
+    // children inherit them.  XWayland will override DISPLAY later if needed.
+    config.apply_environment();
+
     // Determine backend priority: nested (gles) is prioritized with DRM fallback
     let force_drm = matches!(config.compositor.nested, Some(false));
 
diff --git a/src/nested.rs b/src/nested.rs
index 67a3a85..8e34c1b 100644
--- a/src/nested.rs
+++ b/src/nested.rs
@@ -85,6 +85,10 @@ pub fn run_nested(config: Config) -> Result<()> {
 
     info!("Starting nested compositor mode");
 
+    // Apply configured environment variables (e.g. DISPLAY=:0) early so that
+    // all children inherit them.  XWayland will override DISPLAY later.
+    config.apply_environment();
+
     if config.compositor.exit_on_escape {
         info!("Press ESC to exit");
     } else {