diff --git a/deploy/aws-hypervisor/instance.env.template b/deploy/aws-hypervisor/instance.env.template
index 6fa028a..45ac143 100644
--- a/deploy/aws-hypervisor/instance.env.template
+++ b/deploy/aws-hypervisor/instance.env.template
@@ -6,8 +6,18 @@ export RHEL_HOST_ARCHITECTURE=x86_64
 export REGION=us-west-2
 export EC2_INSTANCE_TYPE="c5n.metal"
 export AWS_DEFAULT_REGION=us-west-2
+# Availability Zone override (optional) - if set, the instance will be placed in this AZ
+# Useful when a specific AZ has better capacity or pricing (e.g. for spot instances)
+# Example: export AVAILABILITY_ZONE=us-west-2b
+# export AVAILABILITY_ZONE=
 
-# EC2 Capacity Reservation Settings
+# Spot Instance Settings
+# Set to 'true' to use spot instances for significant cost savings (up to 90% off on-demand)
+# Spot instances may be stopped by AWS when capacity is needed, but will NOT be terminated
+# (uses persistent spot with stop interruption behavior)
+# export USE_SPOT_INSTANCE=false
+
+# EC2 Capacity Reservation Settings (ignored when USE_SPOT_INSTANCE=true)
 # Enable capacity reservation check before instance creation (recommended)
 # Set to 'false' to disable the pre-flight capacity check
 export ENABLE_CAPACITY_RESERVATION=true
diff --git a/deploy/aws-hypervisor/scripts/common.sh b/deploy/aws-hypervisor/scripts/common.sh
index 8096f89..0f36274 100755
--- a/deploy/aws-hypervisor/scripts/common.sh
+++ b/deploy/aws-hypervisor/scripts/common.sh
@@ -10,7 +10,12 @@ export RHEL_HOST_ARCHITECTURE="${RHEL_HOST_ARCHITECTURE:-x86_64}"
 export EC2_INSTANCE_TYPE="${EC2_INSTANCE_TYPE:-c5n.metal}"
 export RHEL_VERSION="${RHEL_VERSION:-9.6}"
 
-# Capacity reservation defaults
+# Spot instance defaults
+export USE_SPOT_INSTANCE="${USE_SPOT_INSTANCE:-false}"
+# Availability zone override (optional)
+export AVAILABILITY_ZONE="${AVAILABILITY_ZONE:-}"
+
+# Capacity reservation defaults (ignored when USE_SPOT_INSTANCE=true)
 export ENABLE_CAPACITY_RESERVATION="${ENABLE_CAPACITY_RESERVATION:-true}"
 export CAPACITY_RESERVATION_DURATION_MINUTES="${CAPACITY_RESERVATION_DURATION_MINUTES:-60}"
 
diff --git a/deploy/aws-hypervisor/scripts/create.sh b/deploy/aws-hypervisor/scripts/create.sh
index 75e85b7..f2ce657 100755
--- a/deploy/aws-hypervisor/scripts/create.sh
+++ b/deploy/aws-hypervisor/scripts/create.sh
@@ -55,10 +55,19 @@ echo "ec2-user" > "${SCRIPT_DIR}/../${SHARED_DIR}/ssh_user"
 
 echo -e "AMI ID: $RHEL_HOST_AMI"
 echo -e "Machine Type: $EC2_INSTANCE_TYPE"
+echo -e "Spot Instance: ${USE_SPOT_INSTANCE:-false}"
+
+# Spot and capacity reservations are mutually exclusive
+USE_SPOT="${USE_SPOT_INSTANCE:-false}"
+if [[ "${USE_SPOT}" == "true" ]]; then
+    msg_info "Spot instance requested - skipping capacity reservation (mutually exclusive)"
+    ENABLE_CAPACITY_RESERVATION="false"
+fi
 
 # Create capacity reservation to validate and guarantee instance availability
 CAPACITY_RESERVATION_ID=""
-AVAILABILITY_ZONE=""
+# Preserve user-provided AVAILABILITY_ZONE from instance.env
+AVAILABILITY_ZONE="${AVAILABILITY_ZONE:-}"
 
 if [[ "${ENABLE_CAPACITY_RESERVATION}" == "true" ]]; then
     if reservation_result=$(create_capacity_reservation "${EC2_INSTANCE_TYPE}" "${REGION}"); then
@@ -100,7 +109,8 @@ aws --region "$REGION" cloudformation create-stack --stack-name "${STACK_NAME}"
         "ParameterKey=EC2Type,ParameterValue=${ec2Type}" \
         "ParameterKey=PublicKeyString,ParameterValue=$(cat "${SSH_PUBLIC_KEY}")" \
         "ParameterKey=CapacityReservationId,ParameterValue=${CAPACITY_RESERVATION_ID}" \
-        "ParameterKey=AvailabilityZone,ParameterValue=${AVAILABILITY_ZONE}"
+        "ParameterKey=AvailabilityZone,ParameterValue=${AVAILABILITY_ZONE}" \
+        "ParameterKey=UseSpot,ParameterValue=$( [[ "${USE_SPOT}" == "true" ]] && echo "Yes" || echo "No" )"
 
 echo "Created stack"
 
diff --git a/deploy/aws-hypervisor/scripts/destroy.sh b/deploy/aws-hypervisor/scripts/destroy.sh
index fba37c4..89189f0 100755
--- a/deploy/aws-hypervisor/scripts/destroy.sh
+++ b/deploy/aws-hypervisor/scripts/destroy.sh
@@ -50,6 +50,23 @@ if [[ -f "${reservation_file}" ]]; then
     rm -f "${instance_data_dir}/availability-zone"
 fi
 
+# Cancel persistent spot request if the instance is a spot instance
+instance_id_file="${instance_data_dir}/aws-instance-id"
+if [[ -f "${instance_id_file}" ]]; then
+    instance_id=$(cat "${instance_id_file}")
+    spot_request_id=$(aws --region "${REGION}" ec2 describe-instances \
+        --instance-ids "${instance_id}" \
+        --query 'Reservations[0].Instances[0].SpotInstanceRequestId' \
+        --output text --no-cli-pager 2>/dev/null || echo "")
+
+    if [[ -n "${spot_request_id}" && "${spot_request_id}" != "None" && "${spot_request_id}" != "null" ]]; then
+        msg_info "Canceling persistent spot request ${spot_request_id}..."
+        aws --region "${REGION}" ec2 cancel-spot-instance-requests \
+            --spot-instance-request-ids "${spot_request_id}" \
+            --no-cli-pager >/dev/null 2>&1 || msg_warning "Failed to cancel spot request (may already be canceled)"
+    fi
+fi
+
 # Delete the CloudFormation stack
 echo "Deleting CloudFormation stack '${STACK_NAME}'..."
 aws --region "$REGION" cloudformation delete-stack --stack-name "${STACK_NAME}"
diff --git a/deploy/aws-hypervisor/scripts/start.sh b/deploy/aws-hypervisor/scripts/start.sh
index 3f35931..ce53816 100755
--- a/deploy/aws-hypervisor/scripts/start.sh
+++ b/deploy/aws-hypervisor/scripts/start.sh
@@ -39,17 +39,24 @@ fi
 INSTANCE_ID=$(cat "${SCRIPT_DIR}/../${SHARED_DIR}/aws-instance-id")
 echo "Starting instance ${INSTANCE_ID}..."
 
-# Check current instance state
+# Check current instance state and lifecycle
 # shellcheck disable=SC2153 # REGION is sourced from instance.env via common.sh, not a misspelling of local 'region'
 INSTANCE_STATE=$(aws --region "${REGION}" ec2 describe-instances --instance-ids "${INSTANCE_ID}" --query 'Reservations[0].Instances[0].State.Name' --output text --no-cli-pager)
+INSTANCE_LIFECYCLE=$(aws --region "${REGION}" ec2 describe-instances --instance-ids "${INSTANCE_ID}" --query 'Reservations[0].Instances[0].InstanceLifecycle' --output text --no-cli-pager || echo "unknown")
 echo "Current instance state: ${INSTANCE_STATE}"
+if [[ "${INSTANCE_LIFECYCLE}" == "spot" ]]; then
+    msg_info "Instance is a spot instance"
+fi
 
 case "${INSTANCE_STATE}" in
     "running")
         echo "Instance is already running."
         ;;
     "stopped")
-        ensure_open_capacity_preference "${INSTANCE_ID}" "${REGION}"
+        # Spot instances don't support capacity reservation attributes
+        if [[ "${INSTANCE_LIFECYCLE}" != "spot" ]]; then
+            ensure_open_capacity_preference "${INSTANCE_ID}" "${REGION}"
+        fi
         echo "Starting instance..."
         aws --region "${REGION}" ec2 start-instances --instance-ids "${INSTANCE_ID}" --no-cli-pager > /dev/null
         echo "Waiting for instance to start..."
@@ -60,7 +67,10 @@ case "${INSTANCE_STATE}" in
     "stopping")
         echo "Instance is currently stopping. Waiting for it to stop completely..."
         aws --region "${REGION}" ec2 wait instance-stopped --instance-ids "${INSTANCE_ID}" --no-cli-pager
-        ensure_open_capacity_preference "${INSTANCE_ID}" "${REGION}"
+        # Spot instances don't support capacity reservation attributes
+        if [[ "${INSTANCE_LIFECYCLE}" != "spot" ]]; then
+            ensure_open_capacity_preference "${INSTANCE_ID}" "${REGION}"
+        fi
         echo "Now starting instance..."
         aws --region "${REGION}" ec2 start-instances --instance-ids "${INSTANCE_ID}" --no-cli-pager > /dev/null
         echo "Waiting for instance to start..."
diff --git a/deploy/aws-hypervisor/templates/rhel-instance.yaml b/deploy/aws-hypervisor/templates/rhel-instance.yaml
index 9c71969..21bfe35 100644
--- a/deploy/aws-hypervisor/templates/rhel-instance.yaml
+++ b/deploy/aws-hypervisor/templates/rhel-instance.yaml
@@ -6,6 +6,7 @@ Conditions:
   AddSecondaryVolume: !Not [!Equals [!Ref EC2Type, 'MetalMachine']]
   UseCapacityReservation: !Not [!Equals [!Ref CapacityReservationId, '']]
   UseSpecificAZ: !Not [!Equals [!Ref AvailabilityZone, '']]
+  UseSpotInstance: !Equals [!Ref UseSpot, 'Yes']
 
 Mappings:
   VolumeSize:
@@ -54,6 +55,13 @@ Parameters:
     Type: String
     Description: Specific AZ for instance placement (optional)
     Default: ""
+  UseSpot:
+    Type: String
+    Description: Whether to use spot instances (Yes/No)
+    Default: "No"
+    AllowedValues:
+      - "Yes"
+      - "No"
 
 Metadata:
   AWS::CloudFormation::Interface:
@@ -238,6 +246,18 @@ Resources:
           CapacityReservationTarget:
             CapacityReservationId: !Ref CapacityReservationId
 
+  # Launch Template for Spot Instances (only created when spot is used)
+  RHELSpotLaunchTemplate:
+    Type: AWS::EC2::LaunchTemplate
+    Condition: UseSpotInstance
+    Properties:
+      LaunchTemplateData:
+        InstanceMarketOptions:
+          MarketType: spot
+          SpotOptions:
+            SpotInstanceType: persistent
+            InstanceInterruptionBehavior: stop
+
   # EC2 Instance
   RHELInstance:
     Type: AWS::EC2::Instance
@@ -251,10 +271,14 @@ Resources:
       IamInstanceProfile: !Ref RHELInstanceProfile
       InstanceType: !Ref HostInstanceType
       LaunchTemplate: !If
-        - UseCapacityReservation
-        - LaunchTemplateId: !Ref RHELLaunchTemplate
-          Version: !GetAtt RHELLaunchTemplate.LatestVersionNumber
-        - !Ref AWS::NoValue
+        - UseSpotInstance
+        - LaunchTemplateId: !Ref RHELSpotLaunchTemplate
+          Version: !GetAtt RHELSpotLaunchTemplate.LatestVersionNumber
+        - !If
+          - UseCapacityReservation
+          - LaunchTemplateId: !Ref RHELLaunchTemplate
+            Version: !GetAtt RHELLaunchTemplate.LatestVersionNumber
+          - !Ref AWS::NoValue
       NetworkInterfaces:
         - AssociatePublicIpAddress: "False"
           DeviceIndex: "0"