diff --git a/Dockerfile b/Dockerfile
index 2c57fdf516..c94883e0ac 100644
--- a/Dockerfile
+++ b/Dockerfile
@@ -1,6 +1,11 @@
 # Build the runtime image
 FROM mcr.microsoft.com/dotnet/runtime-deps:10.0-alpine AS runtime
 
+# Install libsecret so MSAL token-cache persistence works on Alpine Linux.
+# Without it, InteractiveBrowserCredential throws MsalCachePersistenceException
+# in headless environments (Docker, WSL without a running keyring daemon).
+RUN apk add --no-cache libsecret
+
 # Add build argument for publish directory
 ARG PUBLISH_DIR
 
@@ -30,8 +35,10 @@ RUN if [ ! -f $EXECUTABLE_NAME ]; then \
     echo "ERROR: $EXECUTABLE_NAME executable does not exist" && exit 1; \
     fi
 
-# Copy the server binary to a known location and make it executable
+# Copy the server binary to a known location and make it executable.
+# Also chmod the original executable name so users can invoke it directly
+# inside the container (e.g. via --entrypoint or exec).
 COPY ${PUBLISH_DIR}/${EXECUTABLE_NAME} server-binary
-RUN chmod +x server-binary && test -x server-binary
+RUN chmod +x server-binary ${EXECUTABLE_NAME} && test -x server-binary && test -x ${EXECUTABLE_NAME}
 
 ENTRYPOINT ["./server-binary", "server", "start"]
diff --git a/core/Microsoft.Mcp.Core/src/Services/Azure/Authentication/CustomChainedCredential.cs b/core/Microsoft.Mcp.Core/src/Services/Azure/Authentication/CustomChainedCredential.cs
index 2ef1c89ba2..b14565408f 100644
--- a/core/Microsoft.Mcp.Core/src/Services/Azure/Authentication/CustomChainedCredential.cs
+++ b/core/Microsoft.Mcp.Core/src/Services/Azure/Authentication/CustomChainedCredential.cs
@@ -175,7 +175,11 @@ private static TokenCredential CreateCredential(string? tenantId, ILogger<Custom
 
         if (shouldAddBrowserFallback)
         {
-            creds.Add(CreateBrowserCredential(tenantId, authRecord));
+            // Wrap in SafeTokenCredential so that MsalCachePersistenceException
+            // (libsecret missing / no keyring daemon in Docker/headless environments)
+            // is converted to CredentialUnavailableException, allowing the chain to
+            // continue rather than propagating an unhandled exception.
+            creds.Add(new SafeTokenCredential(CreateBrowserCredential(tenantId, authRecord), "InteractiveBrowserCredential"));
         }
 
         return new ChainedTokenCredential([.. creds]);
diff --git a/docs/Authentication.md b/docs/Authentication.md
index 94a7f0e6fe..850d671d88 100644
--- a/docs/Authentication.md
+++ b/docs/Authentication.md
@@ -84,6 +84,36 @@ az account show
 
 The default credential chain includes `InteractiveBrowserCredential` as a fallback for development convenience.
 
+### Docker Containers
+
+When running Azure MCP Server in a Docker container (e.g., `docker run -i --rm --env-file .env mcr.microsoft.com/azure-sdk/azure-mcp:latest`), use a non-interactive credential to avoid requiring a browser or terminal.
+
+**Recommended: Service Principal via EnvironmentCredential**
+
+Set `AZURE_TOKEN_CREDENTIALS=prod` together with your service principal credentials in your `.env` file:
+
+```env
+AZURE_TOKEN_CREDENTIALS=prod
+AZURE_TENANT_ID=<your-tenant-id>
+AZURE_CLIENT_ID=<your-app-client-id>
+AZURE_CLIENT_SECRET=<your-app-client-secret>
+```
+
+`AZURE_TOKEN_CREDENTIALS=prod` restricts the credential chain to `EnvironmentCredential`, `WorkloadIdentityCredential`, and `ManagedIdentityCredential`. This skips `InteractiveBrowserCredential` entirely, preventing errors caused by a missing GUI or keyring daemon inside the container.
+
+> [!IMPORTANT]
+> Omitting `AZURE_TOKEN_CREDENTIALS=prod` in a Docker container causes the server to fall back to `InteractiveBrowserCredential`, which tries to initialize the MSAL token cache via `libsecret`. If no keyring daemon is running in the container, authentication fails with `Persistence check failed` / `libsecret-1.so.0` not found errors even though your service principal credentials are correct.
+
+**Alternative: Managed Identity (for Azure-hosted containers)**
+
+When running on Azure Container Instances, AKS, or App Service with a managed identity, set:
+
+```env
+AZURE_TOKEN_CREDENTIALS=prod
+# For user-assigned managed identity only:
+AZURE_CLIENT_ID=<your-managed-identity-client-id>
+```
+
 ### CI/CD Pipelines
 
 For automated builds and deployments, set the following environment variables:
@@ -93,6 +123,7 @@ For automated builds and deployments, set the following environment variables:
 export AZURE_CLIENT_ID="<pipeline-sp-client-id>"
 export AZURE_CLIENT_SECRET="<pipeline-sp-secret>"
 export AZURE_TENANT_ID="<your-tenant-id>"
+export AZURE_TOKEN_CREDENTIALS=prod
 ```
 
 ## Authentication Scenarios in Enterprise Environments