diff --git a/tools/docker-compose/ansible/roles/sources/templates/local_settings.py.j2 b/tools/docker-compose/ansible/roles/sources/templates/local_settings.py.j2
index fa93ccecc5..42a5d56366 100644
--- a/tools/docker-compose/ansible/roles/sources/templates/local_settings.py.j2
+++ b/tools/docker-compose/ansible/roles/sources/templates/local_settings.py.j2
@@ -51,11 +51,18 @@ LOGGING['handlers']['otel'] |= {
     'class': 'awx.main.utils.handlers.OTLPHandler',
     'endpoint': 'http://otel:4317',
 }
-# Add otel log handler to all log handlers
+# Add otel log handler to all log handlers where propagate is False
 for name in LOGGING['loggers'].keys():
-    handler = LOGGING['loggers'][name].get('handlers', [])
-    if 'otel' not in handler:
-        LOGGING['loggers'][name].get('handlers', []).append('otel')
+    if not LOGGING['loggers'][name].get('propagate', True):
+        handler = LOGGING['loggers'][name].get('handlers', [])
+        if 'otel' not in handler:
+            LOGGING['loggers'][name].get('handlers', []).append('otel')
+
+# Everything without explicit propagate=False ends up logging to 'awx' so add it
+handler = LOGGING['loggers']['awx'].get('handlers', [])
+if 'otel' not in handler:
+    LOGGING['loggers']['awx'].get('handlers', []).append('otel')
+
 {% endif %}
 
 BROADCAST_WEBSOCKET_PORT = 8013