diff --git a/src/docker-outside-of-docker/README.md b/src/docker-outside-of-docker/README.md
index 1794d42e8..e4fe0c446 100644
--- a/src/docker-outside-of-docker/README.md
+++ b/src/docker-outside-of-docker/README.md
@@ -20,7 +20,7 @@ Re-use the host docker socket, adding the Docker CLI to a container. Feature inv
 | version | Select or enter a Docker/Moby CLI version. (Availability can vary by OS version.) | string | latest |
 | moby | Install OSS Moby build instead of Docker CE | boolean | true |
 | mobyBuildxVersion | Install a specific version of moby-buildx when using Moby | string | latest |
-| dockerDashComposeVersion | Compose version to use for docker-compose (v1 or v2 or none) | string | v2 |
+| dockerDashComposeVersion | Compose version to use for docker-compose (v1 or v2 or none or latest) | string | latest |
 | installDockerBuildx | Install Docker Buildx | boolean | true |
 | installDockerComposeSwitch | Install Compose Switch (provided docker compose is available) which is a replacement to the Compose V1 docker-compose (python) executable. It translates the command line into Compose V2 docker compose then runs the latter. | boolean | true |
 
diff --git a/src/docker-outside-of-docker/devcontainer-feature.json b/src/docker-outside-of-docker/devcontainer-feature.json
index 7314fa83d..eb53d6b2e 100644
--- a/src/docker-outside-of-docker/devcontainer-feature.json
+++ b/src/docker-outside-of-docker/devcontainer-feature.json
@@ -1,6 +1,6 @@
 {
     "id": "docker-outside-of-docker",
-    "version": "1.6.5",
+    "version": "1.6.6",
     "name": "Docker (docker-outside-of-docker)",
     "documentationURL": "https://github.com/devcontainers/features/tree/main/src/docker-outside-of-docker",
     "description": "Re-use the host docker socket, adding the Docker CLI to a container. Feature invokes a script to enable using a forwarded Docker socket within a container to run Docker commands.",
@@ -29,10 +29,11 @@
             "type": "string",
             "enum": [
                 "none",
+                "latest",
                 "v1",
                 "v2"
             ],
-            "default": "v2",
+            "default": "latest",
             "description": "Compose version to use for docker-compose (v1 or v2 or none)"
         },
         "installDockerBuildx": {
diff --git a/test/docker-outside-of-docker/docker_dash_compose_latest_moby.sh b/test/docker-outside-of-docker/docker_dash_compose_latest_moby.sh
new file mode 100644
index 000000000..d032da9e4
--- /dev/null
+++ b/test/docker-outside-of-docker/docker_dash_compose_latest_moby.sh
@@ -0,0 +1,14 @@
+#!/bin/bash
+
+set -e
+
+# Optional: Import test library
+source dev-container-features-test-lib
+
+# Definition specific tests
+check "docker compose" bash -c "docker compose version | grep -E '5.[0-9]+.[0-9]+'"
+check "docker-compose" bash -c "docker-compose --version | grep -E '5.[0-9]+.[0-9]+'"
+check "installs compose-switch as docker-compose" bash -c "[[ -f /usr/local/bin/docker-compose ]]"
+
+# Report result
+reportResults
diff --git a/test/docker-outside-of-docker/docker_dash_compose_latest_no_moby.sh b/test/docker-outside-of-docker/docker_dash_compose_latest_no_moby.sh
new file mode 100644
index 000000000..d032da9e4
--- /dev/null
+++ b/test/docker-outside-of-docker/docker_dash_compose_latest_no_moby.sh
@@ -0,0 +1,14 @@
+#!/bin/bash
+
+set -e
+
+# Optional: Import test library
+source dev-container-features-test-lib
+
+# Definition specific tests
+check "docker compose" bash -c "docker compose version | grep -E '5.[0-9]+.[0-9]+'"
+check "docker-compose" bash -c "docker-compose --version | grep -E '5.[0-9]+.[0-9]+'"
+check "installs compose-switch as docker-compose" bash -c "[[ -f /usr/local/bin/docker-compose ]]"
+
+# Report result
+reportResults
diff --git a/test/docker-outside-of-docker/scenarios.json b/test/docker-outside-of-docker/scenarios.json
index 2163e7076..3a49d594e 100644
--- a/test/docker-outside-of-docker/scenarios.json
+++ b/test/docker-outside-of-docker/scenarios.json
@@ -180,5 +180,25 @@
                 "moby": false
             }
         }
+    },
+     "docker_dash_compose_latest_moby": {
+        "image": "mcr.microsoft.com/devcontainers/base:ubuntu-24.04",
+        "features": {
+            "docker-outside-of-docker": {
+                "moby": true,
+                "dockerDashComposeVersion": "latest"
+            }
+        },
+        "containerUser": "vscode"
+    },
+    "docker_dash_compose_latest_no_moby": {
+        "image": "mcr.microsoft.com/devcontainers/base:ubuntu-24.04",
+        "features": {
+            "docker-outside-of-docker": {
+                "moby": false,
+                "dockerDashComposeVersion": "latest"
+            }
+        },
+        "containerUser": "vscode"
     }
 }