diff --git a/.github/workflows/test.yml b/.github/workflows/test.yml
index 383498c..af71c57 100644
--- a/.github/workflows/test.yml
+++ b/.github/workflows/test.yml
@@ -80,6 +80,47 @@ jobs:
             exit 1
           fi
 
+  traceurl:
+    runs-on: "ubuntu-latest"
+    steps:
+      - uses: actions/checkout@v4
+      - name: "TraceURL with cloud-token"
+        id: traceurl-token
+        uses: ./
+        with:
+          version: latest
+          verb: core
+          args: version
+          cloud-token: dag_dagger_sBIv6DsjNerWvTqt2bSFeigBUqWxp9bhh3ONSSgeFnw
+      - name: "Check traceURL output (should be set)"
+        run: |
+          url='${{ steps.traceurl-token.outputs.traceURL }}'
+          if [[ "$url" =~ ^https://dagger.cloud/.+/traces/.+ ]]; then
+            echo "traceURL found: $url"
+            exit 0
+          else
+            echo "traceURL not found"
+            exit 1
+          fi
+      - name: "TraceURL without cloud-token"
+        id: traceurl-nil
+        uses: ./
+        with:
+          version: latest
+          verb: core
+          args: version
+      - name: "Check traceURL output (should NOT be set)"
+        run: |
+          url='${{ steps.traceurl-nil.outputs.traceURL }}'
+          if [[ "$url" =~ ^https://dagger.cloud/traces/setup ]]; then
+            echo "traceURL correctly not set"
+            exit 0
+          else
+            echo "traceURL was set: $url"
+            exit 1
+          fi
+
+
   version:
     runs-on: "ubuntu-latest"
     steps:
@@ -156,6 +197,7 @@ jobs:
             echo "does not match"
             exit 1
           fi
+
   call:
     runs-on: "ubuntu-latest"
     steps:
@@ -176,6 +218,7 @@ jobs:
             echo "does not match"
             exit 1
           fi
+
   nocall:
     runs-on: "ubuntu-latest"
     steps:
@@ -185,3 +228,4 @@ jobs:
       - name: "Test Install"
         run: |
           dagger core version
+
diff --git a/action.yml b/action.yml
index 8edf47b..03191cf 100644
--- a/action.yml
+++ b/action.yml
@@ -44,6 +44,9 @@ outputs:
   output:
     description: "Job output"
     value: ${{ steps.exec.outputs.stdout }}
+  traceURL:
+    description: "Dagger Cloud trace URL"
+    value: ${{ steps.exec.outputs.traceURL }}
 runs:
   using: "composite"
   steps:
@@ -79,13 +82,14 @@ runs:
         INPUT_MODULE: ${{ inputs.module }}
       run: |
         tmpout=$(mktemp)
+        tmperr=$(mktemp)
         cd ${{ inputs.workdir }} && { \
         DAGGER_CLOUD_TOKEN=${{ inputs.cloud-token }} \
         dagger \
         ${{ inputs.dagger-flags }} \
         ${{ inputs.verb }} \
         ${INPUT_MODULE:+-m $INPUT_MODULE} \
-        ${{ inputs.args || inputs.call }}; } | tee "${tmpout}"
+        ${{ inputs.args || inputs.call }}; } 1> >(tee "${tmpout}") 2> >(tee "${tmperr}" >&2)
 
         {
           # we need a delim that doesn't appear in the output - a hash of the
@@ -98,6 +102,12 @@ runs:
           echo "${delim}"
         } >> "$GITHUB_OUTPUT"
 
+        # Extract trace URL from stderr and set as traceURL output
+        trace_url=$((grep -Eo 'https://dagger.cloud(/[^ ]+/traces/[a-zA-Z0-9]+|/traces/setup)' "${tmperr}" || true) | head -n1)
+        if [[ -n "$trace_url" ]]; then
+          echo "traceURL=$trace_url" >> "$GITHUB_OUTPUT"
+        fi
+
     - if: (inputs.call != '' || inputs.args != '') && inputs.engine-stop == 'true'
       shell: bash
       run: |