diff --git a/devcontainer/devcontainer.go b/devcontainer/devcontainer.go
index 4db3496a..cb3f1c5e 100644
--- a/devcontainer/devcontainer.go
+++ b/devcontainer/devcontainer.go
@@ -191,41 +191,37 @@ func (s *Spec) compileFeatures(fs billy.Filesystem, scratchDir, remoteUser, dock
 		if err != nil {
 			return "", fmt.Errorf("parse feature ref %s: %w", featureRefRaw, err)
 		}
-		featureImage := featureRefParsed.Repository.Name()
-		featureTag := featureRefParsed.TagStr()
 
 		featureOpts := map[string]any{}
 		switch t := s.Features[featureRefRaw].(type) {
 		case string:
-			featureTag = t
+			// As a shorthand, the value of the `features`` property can be provided as a
+			// single string. This string is mapped to an option called version.
+			// https://containers.dev/implementors/features/#devcontainer-json-properties
+			featureOpts["version"] = t
 		case map[string]any:
 			featureOpts = t
 		}
 
-		featureRef := featureImage
-		if featureTag != "" {
-			featureRef += ":" + featureTag
-		}
-
 		// It's important for caching that this directory is static.
 		// If it changes on each run then the container will not be cached.
 		//
 		// devcontainers/cli has a very complex method of computing the feature
 		// name from the feature reference. We're just going to hash it for simplicity.
-		featureSha := md5.Sum([]byte(featureRef))
-		featureName := filepath.Base(featureImage)
+		featureSha := md5.Sum([]byte(featureRefRaw))
+		featureName := filepath.Base(featureRefParsed.Repository.Name())
 		featureDir := filepath.Join(featuresDir, fmt.Sprintf("%s-%x", featureName, featureSha[:4]))
 		err = fs.MkdirAll(featureDir, 0644)
 		if err != nil {
 			return "", err
 		}
-		spec, err := features.Extract(fs, featureDir, featureRef)
+		spec, err := features.Extract(fs, featureDir, featureRefRaw)
 		if err != nil {
-			return "", fmt.Errorf("extract feature %s: %w", featureRef, err)
+			return "", fmt.Errorf("extract feature %s: %w", featureRefRaw, err)
 		}
 		directive, err := spec.Compile(featureOpts)
 		if err != nil {
-			return "", fmt.Errorf("compile feature %s: %w", featureRef, err)
+			return "", fmt.Errorf("compile feature %s: %w", featureRefRaw, err)
 		}
 		featureDirectives = append(featureDirectives, directive)
 	}
diff --git a/devcontainer/devcontainer_test.go b/devcontainer/devcontainer_test.go
index 3f1b5376..440f9020 100644
--- a/devcontainer/devcontainer_test.go
+++ b/devcontainer/devcontainer_test.go
@@ -41,7 +41,7 @@ func TestParse(t *testing.T) {
 func TestCompileWithFeatures(t *testing.T) {
 	t.Parallel()
 	registry := registrytest.New(t)
-	featureOne := registrytest.WriteContainer(t, registry, "coder/test:tomato", features.TarLayerMediaType, map[string]any{
+	featureOne := registrytest.WriteContainer(t, registry, "coder/one:tomato", features.TarLayerMediaType, map[string]any{
 		"install.sh": "hey",
 		"devcontainer-feature.json": features.Spec{
 			ID:          "rust",
@@ -53,7 +53,7 @@ func TestCompileWithFeatures(t *testing.T) {
 			},
 		},
 	})
-	featureTwo := registrytest.WriteContainer(t, registry, "coder/test:potato", features.TarLayerMediaType, map[string]any{
+	featureTwo := registrytest.WriteContainer(t, registry, "coder/two:potato", features.TarLayerMediaType, map[string]any{
 		"install.sh": "hey",
 		"devcontainer-feature.json": features.Spec{
 			ID:          "go",
@@ -63,10 +63,13 @@ func TestCompileWithFeatures(t *testing.T) {
 			ContainerEnv: map[string]string{
 				"POTATO": "example",
 			},
+			Options: map[string]features.Option{
+				"version": {
+					Type: "string",
+				},
+			},
 		},
 	})
-	// Update the tag to ensure it comes from the feature value!
-	featureTwoFake := strings.Join(append(strings.Split(featureTwo, ":")[:2], "faketag"), ":")
 
 	raw := `{
   "build": {
@@ -77,7 +80,7 @@ func TestCompileWithFeatures(t *testing.T) {
   "image": "codercom/code-server:latest",
   "features": {
 	"` + featureOne + `": {},
-	"` + featureTwoFake + `": "potato"
+	"` + featureTwo + `": "potato"
   }
 }`
 	dc, err := devcontainer.Parse([]byte(raw))
@@ -95,12 +98,12 @@ func TestCompileWithFeatures(t *testing.T) {
 	require.Equal(t, `FROM codercom/code-server:latest
 
 USER root
-# Go potato - Example description!
-ENV POTATO=example
-RUN .envbuilder/features/test-`+featureTwoSha+`/install.sh
 # Rust tomato - Example description!
 ENV TOMATO=example
-RUN .envbuilder/features/test-`+featureOneSha+`/install.sh
+RUN .envbuilder/features/one-`+featureOneSha+`/install.sh
+# Go potato - Example description!
+ENV POTATO=example
+RUN VERSION=potato .envbuilder/features/two-`+featureTwoSha+`/install.sh
 USER 1000`, params.DockerfileContent)
 }