diff --git a/api/v1alpha1/shared_types.go b/api/v1alpha1/shared_types.go
index 5f1438a294..343f1210c8 100644
--- a/api/v1alpha1/shared_types.go
+++ b/api/v1alpha1/shared_types.go
@@ -863,6 +863,8 @@ type Tracing struct {
 	// CustomTags defines the custom tags to add to each span.
 	// If provider is kubernetes, pod name and namespace are added by default.
 	//
+	// Deprecated: Use Tags instead.
+	//
 	// +optional
 	CustomTags map[string]CustomTag `json:"customTags,omitempty"`
 	// Tags defines the custom tags to add to each span.
diff --git a/charts/gateway-crds-helm/templates/generated/gateway.envoyproxy.io_backendtrafficpolicies.yaml b/charts/gateway-crds-helm/templates/generated/gateway.envoyproxy.io_backendtrafficpolicies.yaml
index 83a79f13b6..5915859840 100644
--- a/charts/gateway-crds-helm/templates/generated/gateway.envoyproxy.io_backendtrafficpolicies.yaml
+++ b/charts/gateway-crds-helm/templates/generated/gateway.envoyproxy.io_backendtrafficpolicies.yaml
@@ -2418,6 +2418,8 @@ spec:
                         description: |-
                           CustomTags defines the custom tags to add to each span.
                           If provider is kubernetes, pod name and namespace are added by default.
+
+                          Deprecated: Use Tags instead.
                         type: object
                       samplingFraction:
                         description: |-
diff --git a/charts/gateway-crds-helm/templates/generated/gateway.envoyproxy.io_envoyproxies.yaml b/charts/gateway-crds-helm/templates/generated/gateway.envoyproxy.io_envoyproxies.yaml
index 48e9e92049..f5e7979998 100644
--- a/charts/gateway-crds-helm/templates/generated/gateway.envoyproxy.io_envoyproxies.yaml
+++ b/charts/gateway-crds-helm/templates/generated/gateway.envoyproxy.io_envoyproxies.yaml
@@ -15045,6 +15045,8 @@ spec:
                         description: |-
                           CustomTags defines the custom tags to add to each span.
                           If provider is kubernetes, pod name and namespace are added by default.
+
+                          Deprecated: Use Tags instead.
                         type: object
                       provider:
                         description: Provider defines the tracing provider.
diff --git a/charts/gateway-helm/crds/generated/gateway.envoyproxy.io_backendtrafficpolicies.yaml b/charts/gateway-helm/crds/generated/gateway.envoyproxy.io_backendtrafficpolicies.yaml
index 053af4985a..1b554aa324 100644
--- a/charts/gateway-helm/crds/generated/gateway.envoyproxy.io_backendtrafficpolicies.yaml
+++ b/charts/gateway-helm/crds/generated/gateway.envoyproxy.io_backendtrafficpolicies.yaml
@@ -2417,6 +2417,8 @@ spec:
                         description: |-
                           CustomTags defines the custom tags to add to each span.
                           If provider is kubernetes, pod name and namespace are added by default.
+
+                          Deprecated: Use Tags instead.
                         type: object
                       samplingFraction:
                         description: |-
diff --git a/charts/gateway-helm/crds/generated/gateway.envoyproxy.io_envoyproxies.yaml b/charts/gateway-helm/crds/generated/gateway.envoyproxy.io_envoyproxies.yaml
index bb5c66eb20..775671bc8f 100644
--- a/charts/gateway-helm/crds/generated/gateway.envoyproxy.io_envoyproxies.yaml
+++ b/charts/gateway-helm/crds/generated/gateway.envoyproxy.io_envoyproxies.yaml
@@ -15044,6 +15044,8 @@ spec:
                         description: |-
                           CustomTags defines the custom tags to add to each span.
                           If provider is kubernetes, pod name and namespace are added by default.
+
+                          Deprecated: Use Tags instead.
                         type: object
                       provider:
                         description: Provider defines the tracing provider.
diff --git a/internal/gatewayapi/listener.go b/internal/gatewayapi/listener.go
index 2dc724a719..39ca07b071 100644
--- a/internal/gatewayapi/listener.go
+++ b/internal/gatewayapi/listener.go
@@ -786,6 +786,7 @@ func (t *Translator) processTracing(gw *gwapiv1.Gateway, envoyproxy *egv1a1.Envo
 		ServiceName:  serviceName,
 		SamplingRate: proxySamplingRate(tracing),
 		CustomTags:   tracing.CustomTags,
+		Tags:         tracing.Tags,
 		Destination: ir.RouteDestination{
 			Name:     destName,
 			Settings: ds,
diff --git a/internal/gatewayapi/testdata/backendtrafficpolicy-tracing.in.yaml b/internal/gatewayapi/testdata/backendtrafficpolicy-tracing.in.yaml
index ffcec998ea..bcafa8246e 100644
--- a/internal/gatewayapi/testdata/backendtrafficpolicy-tracing.in.yaml
+++ b/internal/gatewayapi/testdata/backendtrafficpolicy-tracing.in.yaml
@@ -64,3 +64,8 @@ backendTrafficPolicies:
               requestHeader:
                 name: "X-Request-Id"
                 defaultValue: "-"
+          # tags will override customTags
+          tags:
+            env1: "%ENVIRONMENT(ENVOY_POD_NAME)%"
+            literal1: "literal_value_1"
+            req1: "%REQUEST_HEADER(X-Request-Id)%"
diff --git a/internal/gatewayapi/testdata/backendtrafficpolicy-tracing.out.yaml b/internal/gatewayapi/testdata/backendtrafficpolicy-tracing.out.yaml
index 96dba4f327..0d3910df37 100644
--- a/internal/gatewayapi/testdata/backendtrafficpolicy-tracing.out.yaml
+++ b/internal/gatewayapi/testdata/backendtrafficpolicy-tracing.out.yaml
@@ -29,6 +29,10 @@ backendTrafficPolicies:
         samplingFraction:
           denominator: 100
           numerator: 1
+        tags:
+          env1: '%ENVIRONMENT(ENVOY_POD_NAME)%'
+          literal1: literal_value_1
+          req1: '%REQUEST_HEADER(X-Request-Id)%'
   status:
     ancestors:
     - ancestorRef:
@@ -241,6 +245,10 @@ xdsIR:
               samplingFraction:
                 denominator: 100
                 numerator: 1
+              tags:
+                env1: '%ENVIRONMENT(ENVOY_POD_NAME)%'
+                literal1: literal_value_1
+                req1: '%REQUEST_HEADER(X-Request-Id)%'
     readyListener:
       address: 0.0.0.0
       ipFamily: IPv4
diff --git a/internal/ir/xds.go b/internal/ir/xds.go
index 2be632dd36..de4d274169 100644
--- a/internal/ir/xds.go
+++ b/internal/ir/xds.go
@@ -2599,6 +2599,7 @@ type Tracing struct {
 	Authority    string                      `json:"authority,omitempty"`
 	SamplingRate float64                     `json:"samplingRate,omitempty"`
 	CustomTags   map[string]egv1a1.CustomTag `json:"customTags,omitempty"`
+	Tags         map[string]string           `json:"tags,omitempty"`
 	Destination  RouteDestination            `json:"destination,omitempty"`
 	Traffic      *TrafficFeatures            `json:"traffic,omitempty"`
 	Provider     egv1a1.TracingProvider      `json:"provider"`
diff --git a/internal/ir/zz_generated.deepcopy.go b/internal/ir/zz_generated.deepcopy.go
index 2bef3b3cd5..3f1a103344 100644
--- a/internal/ir/zz_generated.deepcopy.go
+++ b/internal/ir/zz_generated.deepcopy.go
@@ -4283,6 +4283,13 @@ func (in *Tracing) DeepCopyInto(out *Tracing) {
 			(*out)[key] = *val.DeepCopy()
 		}
 	}
+	if in.Tags != nil {
+		in, out := &in.Tags, &out.Tags
+		*out = make(map[string]string, len(*in))
+		for key, val := range *in {
+			(*out)[key] = val
+		}
+	}
 	in.Destination.DeepCopyInto(&out.Destination)
 	if in.Traffic != nil {
 		in, out := &in.Traffic, &out.Traffic
diff --git a/internal/xds/translator/route.go b/internal/xds/translator/route.go
index 1f5ab06d84..96a268c140 100644
--- a/internal/xds/translator/route.go
+++ b/internal/xds/translator/route.go
@@ -818,7 +818,7 @@ func buildRouteTracing(httpRoute *ir.HTTPRoute) (*routev3.Tracing, error) {
 	}
 
 	tracing := httpRoute.Traffic.Telemetry.Tracing
-	tags, err := buildTracingTags(tracing.CustomTags)
+	tags, err := buildTracingTags(tracing.CustomTags, tracing.Tags)
 	if err != nil {
 		return nil, fmt.Errorf("failed to build route tracing tags:%w", err)
 	}
diff --git a/internal/xds/translator/tracing.go b/internal/xds/translator/tracing.go
index 95dd20e573..2a5466fe6c 100644
--- a/internal/xds/translator/tracing.go
+++ b/internal/xds/translator/tracing.go
@@ -93,7 +93,7 @@ func buildHCMTracing(tracing *ir.Tracing) (*hcm.HttpConnectionManager_Tracing, e
 		return nil, fmt.Errorf("failed to marshal tracing configuration: %w", err)
 	}
 
-	tags, err := buildTracingTags(tracing.CustomTags)
+	tags, err := buildTracingTags(tracing.CustomTags, tracing.Tags)
 	if err != nil {
 		return nil, fmt.Errorf("failed to build tracing tags: %w", err)
 	}
@@ -161,27 +161,28 @@ func processClusterForTracing(tCtx *types.ResourceVersionTable, tracing *ir.Trac
 	})
 }
 
-func buildTracingTags(tracingTags map[string]egv1a1.CustomTag) ([]*tracingtype.CustomTag, error) {
-	tags := make([]*tracingtype.CustomTag, 0, len(tracingTags))
+func buildTracingTags(tracingTags map[string]egv1a1.CustomTag, tags map[string]string) ([]*tracingtype.CustomTag, error) {
+	out := make(map[string]*tracingtype.CustomTag)
+
 	// TODO: consider add some default tags for better UX
 	for k, v := range tracingTags {
 		switch v.Type {
 		case egv1a1.CustomTagTypeLiteral:
-			tags = append(tags, &tracingtype.CustomTag{
+			out[k] = &tracingtype.CustomTag{
 				Tag: k,
 				Type: &tracingtype.CustomTag_Literal_{
 					Literal: &tracingtype.CustomTag_Literal{
 						Value: v.Literal.Value,
 					},
 				},
-			})
+			}
 		case egv1a1.CustomTagTypeEnvironment:
 			defaultVal := ""
 			if v.Environment.DefaultValue != nil {
 				defaultVal = *v.Environment.DefaultValue
 			}
 
-			tags = append(tags, &tracingtype.CustomTag{
+			out[k] = &tracingtype.CustomTag{
 				Tag: k,
 				Type: &tracingtype.CustomTag_Environment_{
 					Environment: &tracingtype.CustomTag_Environment{
@@ -189,14 +190,14 @@ func buildTracingTags(tracingTags map[string]egv1a1.CustomTag) ([]*tracingtype.C
 						DefaultValue: defaultVal,
 					},
 				},
-			})
+			}
 		case egv1a1.CustomTagTypeRequestHeader:
 			defaultVal := ""
 			if v.RequestHeader.DefaultValue != nil {
 				defaultVal = *v.RequestHeader.DefaultValue
 			}
 
-			tags = append(tags, &tracingtype.CustomTag{
+			out[k] = &tracingtype.CustomTag{
 				Tag: k,
 				Type: &tracingtype.CustomTag_RequestHeader{
 					RequestHeader: &tracingtype.CustomTag_Header{
@@ -204,15 +205,31 @@ func buildTracingTags(tracingTags map[string]egv1a1.CustomTag) ([]*tracingtype.C
 						DefaultValue: defaultVal,
 					},
 				},
-			})
+			}
 		default:
 			return nil, fmt.Errorf("unknown custom tag type: %s", v.Type)
 		}
 	}
+
+	// same key in tags will override tracingTags
+	for k, v := range tags {
+		out[k] = &tracingtype.CustomTag{
+			Tag: k,
+			Type: &tracingtype.CustomTag_Value{
+				Value: v,
+			},
+		}
+	}
+
+	result := make([]*tracingtype.CustomTag, 0, len(out))
+	for _, v := range out {
+		result = append(result, v)
+	}
+
 	// sort tags by tag name, make result consistent
-	sort.Slice(tags, func(i, j int) bool {
-		return tags[i].Tag < tags[j].Tag
+	sort.Slice(result, func(i, j int) bool {
+		return result[i].Tag < result[j].Tag
 	})
 
-	return tags, nil
+	return result, nil
 }
diff --git a/release-notes/current.yaml b/release-notes/current.yaml
index 1eaac34961..604e78a8a2 100644
--- a/release-notes/current.yaml
+++ b/release-notes/current.yaml
@@ -27,6 +27,7 @@ new features: |
   Added support for custom span name.
   Added support for TLS telemetry gRPC backends.
   Added support for addIfAbsent header action in ClientTrafficPolicy EarlyRequestHeaders and LateResponseHeaders to add headers only when they don't already exist.
+  Added support for tracing tag, which allows to use Envoy string command operators such as `%ENVIRONMENT(...)%`.
 
 bug fixes: |
   Fixed configured OIDC authorization endpoint being overridden by discovered endpoints from issuer's well-known URL.
diff --git a/site/content/en/latest/api/extension_types.md b/site/content/en/latest/api/extension_types.md
index 75d7c6b879..cf4903007a 100644
--- a/site/content/en/latest/api/extension_types.md
+++ b/site/content/en/latest/api/extension_types.md
@@ -4252,7 +4252,7 @@ _Appears in:_
 | Field | Type | Required | Default | Description |
 | ---   | ---  | ---      | ---     | ---         |
 | `samplingFraction` | _[Fraction](https://gateway-api.sigs.k8s.io/reference/1.4/spec/#fraction)_ |  false  |  | SamplingFraction represents the fraction of requests that should be<br />selected for tracing if no prior sampling decision has been made. |
-| `customTags` | _object (keys:string, values:[CustomTag](#customtag))_ |  false  |  | CustomTags defines the custom tags to add to each span.<br />If provider is kubernetes, pod name and namespace are added by default. |
+| `customTags` | _object (keys:string, values:[CustomTag](#customtag))_ |  false  |  | CustomTags defines the custom tags to add to each span.<br />If provider is kubernetes, pod name and namespace are added by default.<br />Deprecated: Use Tags instead. |
 | `tags` | _object (keys:string, values:string)_ |  false  |  | Tags defines the custom tags to add to each span.<br />Envoy [command operators](https://www.envoyproxy.io/docs/envoy/latest/configuration/observability/access_log/usage#command-operators) may be used in the value.<br />The [format string documentation](https://www.envoyproxy.io/docs/envoy/latest/configuration/observability/access_log/usage#config-access-log-format-strings) provides more information.<br />If provider is kubernetes, pod name and namespace are added by default.<br />Same keys take precedence over CustomTags. |
 | `spanName` | _[TracingSpanName](#tracingspanname)_ |  false  |  | SpanName defines the name of the span which will be used for tracing.<br />Envoy [command operators](https://www.envoyproxy.io/docs/envoy/latest/configuration/observability/access_log/usage#command-operators) may be used in the value.<br />The [format string documentation](https://www.envoyproxy.io/docs/envoy/latest/configuration/observability/access_log/usage#config-access-log-format-strings) provides more information.<br />If not set, the span name is provider specific.<br />e.g. Datadog use `ingress` as the default client span name,<br />and `router <UPSTREAM_CLUSTER> egress` as the server span name. |
 | `samplingRate` | _integer_ |  false  |  | SamplingRate controls the rate at which traffic will be<br />selected for tracing if no prior sampling decision has been made.<br />Defaults to 100, valid values [0-100]. 100 indicates 100% sampling.<br />Only one of SamplingRate or SamplingFraction may be specified.<br />If neither field is specified, all requests will be sampled. |
@@ -5329,7 +5329,7 @@ _Appears in:_
 | Field | Type | Required | Default | Description |
 | ---   | ---  | ---      | ---     | ---         |
 | `samplingFraction` | _[Fraction](https://gateway-api.sigs.k8s.io/reference/1.4/spec/#fraction)_ |  false  |  | SamplingFraction represents the fraction of requests that should be<br />selected for tracing if no prior sampling decision has been made. |
-| `customTags` | _object (keys:string, values:[CustomTag](#customtag))_ |  false  |  | CustomTags defines the custom tags to add to each span.<br />If provider is kubernetes, pod name and namespace are added by default. |
+| `customTags` | _object (keys:string, values:[CustomTag](#customtag))_ |  false  |  | CustomTags defines the custom tags to add to each span.<br />If provider is kubernetes, pod name and namespace are added by default.<br />Deprecated: Use Tags instead. |
 | `tags` | _object (keys:string, values:string)_ |  false  |  | Tags defines the custom tags to add to each span.<br />Envoy [command operators](https://www.envoyproxy.io/docs/envoy/latest/configuration/observability/access_log/usage#command-operators) may be used in the value.<br />The [format string documentation](https://www.envoyproxy.io/docs/envoy/latest/configuration/observability/access_log/usage#config-access-log-format-strings) provides more information.<br />If provider is kubernetes, pod name and namespace are added by default.<br />Same keys take precedence over CustomTags. |
 | `spanName` | _[TracingSpanName](#tracingspanname)_ |  false  |  | SpanName defines the name of the span which will be used for tracing.<br />Envoy [command operators](https://www.envoyproxy.io/docs/envoy/latest/configuration/observability/access_log/usage#command-operators) may be used in the value.<br />The [format string documentation](https://www.envoyproxy.io/docs/envoy/latest/configuration/observability/access_log/usage#config-access-log-format-strings) provides more information.<br />If not set, the span name is provider specific.<br />e.g. Datadog use `ingress` as the default client span name,<br />and `router <UPSTREAM_CLUSTER> egress` as the server span name. |
 
diff --git a/site/content/en/latest/tasks/observability/proxy-trace.md b/site/content/en/latest/tasks/observability/proxy-trace.md
index 054e9fb5e6..5a87e20356 100644
--- a/site/content/en/latest/tasks/observability/proxy-trace.md
+++ b/site/content/en/latest/tasks/observability/proxy-trace.md
@@ -347,5 +347,37 @@ spec:
 EOF
 ```
 
+### Custom Tags
+
+You can add custom tags to the traces by setting the `telemetry.tracing.tags` in the [EnvoyProxy][envoy-proxy-crd] CRD.
+You can use the same format as Envoy's [access log command operators](https://www.envoyproxy.io/docs/envoy/latest/configuration/observability/access_log/usage#command-operators) to define the tag values.
+The following configurations show how to apply proxy with custom tags:
+
+```shell
+apiVersion: gateway.envoyproxy.io/v1alpha1
+kind: EnvoyProxy
+metadata:
+  name: otel
+  namespace: envoy-gateway-system
+spec:
+  telemetry:
+    tracing:
+      # sample 100% of requests
+      samplingRate: 100
+      provider:
+        backendRefs:
+        - name: otel-collector
+          namespace: monitoring
+          port: 4317
+        type: OpenTelemetry
+      tags:
+        # This is an example of using a literal as a tag value
+        provider: "otel"
+        "k8s.pod.name": "%ENVIRONMENT(ENVOY_POD_NAME)%"
+        "k8s.namespace.name": "%ENVIRONMENT(ENVOY_POD_NAMESPACE)%"
+        # This is an example of using a header value as a tag value
+        "header1": "%REQUEST_HEADER(X-Header-1)%"
+        "requestedServerName": "%REQUESTED_SERVER_NAME%"
+```
 
 [envoy-proxy-crd]: ../../api/extension_types#envoyproxy
diff --git a/test/e2e/testdata/btp-tracing.yaml b/test/e2e/testdata/btp-tracing.yaml
index 9cd3385cd9..f61908d834 100644
--- a/test/e2e/testdata/btp-tracing.yaml
+++ b/test/e2e/testdata/btp-tracing.yaml
@@ -32,25 +32,17 @@ spec:
           - name: otel-collector
             namespace: monitoring
             port: 4317
+      # will be overridden by tags
       customTags:
         "provider":
           type: Literal
           literal:
-            value: "otel"
-        "k8s.cluster.name":
-          type: Literal
-          literal:
-            value: "envoy-gateway"
-        "k8s.pod.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAME
-            defaultValue: "-"
-        "k8s.namespace.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAMESPACE
-            defaultValue: "envoy-gateway-system"
+            value: "value-will-be-overrite"
+      tags:
+        "provider": "otel"
+        "k8s.cluster.name": "envoy-gateway"
+        "k8s.pod.name": "%ENVIRONMENT(ENVOY_POD_NAME)%"
+        "k8s.namespace.name": "%ENVIRONMENT(ENVOY_POD_NAMESPACE)%"
   shutdown:
     drainTimeout: 5s
     minDrainDuration: 1s
@@ -103,22 +95,8 @@ spec:
     tracing:
       samplingFraction:
         numerator: 100
-      customTags:
-        "provider":
-          type: Literal
-          literal:
-            value: "otel-override"
-        "k8s.cluster.name":
-          type: Literal
-          literal:
-            value: "envoy-gateway"
-        "k8s.pod.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAME
-            defaultValue: "-"
-        "k8s.namespace.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAMESPACE
-            defaultValue: "envoy-gateway-system"
+      tags:
+        "provider": "otel-override"
+        "k8s.cluster.name": "envoy-gateway"
+        "k8s.pod.name": "%ENVIRONMENT(ENVOY_POD_NAME)%"
+        "k8s.namespace.name": "%ENVIRONMENT(ENVOY_POD_NAMESPACE)%"
diff --git a/test/e2e/testdata/tracing-datadog-custom-service-name.yaml b/test/e2e/testdata/tracing-datadog-custom-service-name.yaml
index 6b5ec03799..bd812a44c2 100644
--- a/test/e2e/testdata/tracing-datadog-custom-service-name.yaml
+++ b/test/e2e/testdata/tracing-datadog-custom-service-name.yaml
@@ -37,25 +37,11 @@ spec:
             namespace: monitoring
             port: 8126
         serviceName: my-custom-service
-      customTags:
-        "provider":
-          type: Literal
-          literal:
-            value: "datadog"
-        "k8s.cluster.name":
-          type: Literal
-          literal:
-            value: "envoy-gateway"
-        "k8s.pod.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAME
-            defaultValue: "-"
-        "k8s.namespace.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAMESPACE
-            defaultValue: "envoy-gateway-system"
+      tags:
+        "provider": "datadog"
+        "k8s.cluster.name": "envoy-gateway"
+        "k8s.pod.name": "%ENVIRONMENT(ENVOY_POD_NAME)%"
+        "k8s.namespace.name": "%ENVIRONMENT(ENVOY_POD_NAMESPACE)%"
   shutdown:
     drainTimeout: 5s
     minDrainDuration: 1s
diff --git a/test/e2e/testdata/tracing-datadog.yaml b/test/e2e/testdata/tracing-datadog.yaml
index d39f5e1fa5..f6a71a5381 100644
--- a/test/e2e/testdata/tracing-datadog.yaml
+++ b/test/e2e/testdata/tracing-datadog.yaml
@@ -36,25 +36,11 @@ spec:
           - name: otel-collector
             namespace: monitoring
             port: 8126
-      customTags:
-        "provider":
-          type: Literal
-          literal:
-            value: "datadog"
-        "k8s.cluster.name":
-          type: Literal
-          literal:
-            value: "envoy-gateway"
-        "k8s.pod.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAME
-            defaultValue: "-"
-        "k8s.namespace.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAMESPACE
-            defaultValue: "envoy-gateway-system"
+      tags:
+        "provider": "datadog"
+        "k8s.cluster.name": "envoy-gateway"
+        "k8s.pod.name": "%ENVIRONMENT(ENVOY_POD_NAME)%"
+        "k8s.namespace.name": "%ENVIRONMENT(ENVOY_POD_NAMESPACE)%"
   shutdown:
     drainTimeout: 5s
     minDrainDuration: 1s
diff --git a/test/e2e/testdata/tracing-otel-custom-service-name.yaml b/test/e2e/testdata/tracing-otel-custom-service-name.yaml
index 310cf3abe9..7504431199 100644
--- a/test/e2e/testdata/tracing-otel-custom-service-name.yaml
+++ b/test/e2e/testdata/tracing-otel-custom-service-name.yaml
@@ -33,25 +33,11 @@ spec:
             namespace: monitoring
             port: 4317
         serviceName: my-custom-service
-      customTags:
-        "provider":
-          type: Literal
-          literal:
-            value: "otel"
-        "k8s.cluster.name":
-          type: Literal
-          literal:
-            value: "envoy-gateway"
-        "k8s.pod.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAME
-            defaultValue: "-"
-        "k8s.namespace.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAMESPACE
-            defaultValue: "envoy-gateway-system"
+      tags:
+        "provider": "otel"
+        "k8s.cluster.name": "envoy-gateway"
+        "k8s.pod.name": "%ENVIRONMENT(ENVOY_POD_NAME)%"
+        "k8s.namespace.name": "%ENVIRONMENT(ENVOY_POD_NAMESPACE)%"
   shutdown:
     drainTimeout: 5s
     minDrainDuration: 1s
diff --git a/test/e2e/testdata/tracing-zipkin-span-name.yaml b/test/e2e/testdata/tracing-zipkin-span-name.yaml
index 13d2c01960..8bf64e94e8 100644
--- a/test/e2e/testdata/tracing-zipkin-span-name.yaml
+++ b/test/e2e/testdata/tracing-zipkin-span-name.yaml
@@ -46,25 +46,11 @@ spec:
             port: 9411
         zipkin:
           enable128BitTraceId: true
-      customTags:
-        "provider":
-          type: Literal
-          literal:
-            value: "zipkin"
-        "k8s.cluster.name":
-          type: Literal
-          literal:
-            value: "envoy-gateway"
-        "k8s.pod.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAME
-            defaultValue: "-"
-        "k8s.namespace.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAMESPACE
-            defaultValue: "envoy-gateway-system"
+      tags:
+        "provider": "zipkin"
+        "k8s.cluster.name": "envoy-gateway"
+        "k8s.pod.name": "%ENVIRONMENT(ENVOY_POD_NAME)%"
+        "k8s.namespace.name": "%ENVIRONMENT(ENVOY_POD_NAMESPACE)%"
 ---
 apiVersion: gateway.networking.k8s.io/v1
 kind: HTTPRoute
diff --git a/test/e2e/testdata/tracing-zipkin.yaml b/test/e2e/testdata/tracing-zipkin.yaml
index 2e25caaa4c..87d2a5e1d8 100644
--- a/test/e2e/testdata/tracing-zipkin.yaml
+++ b/test/e2e/testdata/tracing-zipkin.yaml
@@ -41,25 +41,11 @@ spec:
             port: 9411
         zipkin:
           enable128BitTraceId: true
-      customTags:
-        "provider":
-          type: Literal
-          literal:
-            value: "zipkin"
-        "k8s.cluster.name":
-          type: Literal
-          literal:
-            value: "envoy-gateway"
-        "k8s.pod.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAME
-            defaultValue: "-"
-        "k8s.namespace.name":
-          type: Environment
-          environment:
-            name: ENVOY_POD_NAMESPACE
-            defaultValue: "envoy-gateway-system"
+      tags:
+        "provider": "zipkin"
+        "k8s.cluster.name": "envoy-gateway"
+        "k8s.pod.name": "%ENVIRONMENT(ENVOY_POD_NAME)%"
+        "k8s.namespace.name": "%ENVIRONMENT(ENVOY_POD_NAMESPACE)%"
   shutdown:
     drainTimeout: 5s
     minDrainDuration: 1s
diff --git a/test/helm/gateway-crds-helm/all.out.yaml b/test/helm/gateway-crds-helm/all.out.yaml
index 4b9d30859d..379fe0d9ba 100644
--- a/test/helm/gateway-crds-helm/all.out.yaml
+++ b/test/helm/gateway-crds-helm/all.out.yaml
@@ -23715,6 +23715,8 @@ spec:
                         description: |-
                           CustomTags defines the custom tags to add to each span.
                           If provider is kubernetes, pod name and namespace are added by default.
+
+                          Deprecated: Use Tags instead.
                         type: object
                       samplingFraction:
                         description: |-
@@ -43802,6 +43804,8 @@ spec:
                         description: |-
                           CustomTags defines the custom tags to add to each span.
                           If provider is kubernetes, pod name and namespace are added by default.
+
+                          Deprecated: Use Tags instead.
                         type: object
                       provider:
                         description: Provider defines the tracing provider.
diff --git a/test/helm/gateway-crds-helm/envoy-gateway-crds.out.yaml b/test/helm/gateway-crds-helm/envoy-gateway-crds.out.yaml
index 564c9e73e4..5bb19922ef 100644
--- a/test/helm/gateway-crds-helm/envoy-gateway-crds.out.yaml
+++ b/test/helm/gateway-crds-helm/envoy-gateway-crds.out.yaml
@@ -2895,6 +2895,8 @@ spec:
                         description: |-
                           CustomTags defines the custom tags to add to each span.
                           If provider is kubernetes, pod name and namespace are added by default.
+
+                          Deprecated: Use Tags instead.
                         type: object
                       samplingFraction:
                         description: |-
@@ -22982,6 +22984,8 @@ spec:
                         description: |-
                           CustomTags defines the custom tags to add to each span.
                           If provider is kubernetes, pod name and namespace are added by default.
+
+                          Deprecated: Use Tags instead.
                         type: object
                       provider:
                         description: Provider defines the tracing provider.