diff --git a/db/docs/batched_background_migrations/update_workspaces_config_version3.yml b/db/docs/batched_background_migrations/update_workspaces_config_version3.yml
new file mode 100644
index 0000000000000000000000000000000000000000..253feea046911a4574dd9747f04bed6601b84e80
--- /dev/null
+++ b/db/docs/batched_background_migrations/update_workspaces_config_version3.yml
@@ -0,0 +1,9 @@
+---
+migration_job_name: UpdateWorkspacesConfigVersion3
+description: Update config_version to 3 and force_include_all_resources to true for existing workspaces
+feature_category: remote_development
+introduced_by_url: https://gitlab.com/gitlab-org/gitlab/-/merge_requests/140972
+milestone: '16.8'
+queued_migration_version: 20240104085448
+finalize_after: "2024-02-15"
+finalized_by: # version of the migration that finalized this BBM
diff --git a/db/post_migrate/20240104085448_queue_update_workspaces_config_version3.rb b/db/post_migrate/20240104085448_queue_update_workspaces_config_version3.rb
new file mode 100644
index 0000000000000000000000000000000000000000..574b6cdb4c2672edff31c61dd4f05e22d3d48287
--- /dev/null
+++ b/db/post_migrate/20240104085448_queue_update_workspaces_config_version3.rb
@@ -0,0 +1,28 @@
+# frozen_string_literal: true
+
+class QueueUpdateWorkspacesConfigVersion3 < Gitlab::Database::Migration[2.2]
+  milestone '16.8'
+
+  MIGRATION = "UpdateWorkspacesConfigVersion3"
+  DELAY_INTERVAL = 2.minutes
+  BATCH_SIZE = 1000
+  SUB_BATCH_SIZE = 100
+
+  restrict_gitlab_migration gitlab_schema: :gitlab_main
+  disable_ddl_transaction!
+
+  def up
+    queue_batched_background_migration(
+      MIGRATION,
+      :workspaces,
+      :config_version,
+      job_interval: DELAY_INTERVAL,
+      batch_size: BATCH_SIZE,
+      sub_batch_size: SUB_BATCH_SIZE
+    )
+  end
+
+  def down
+    delete_batched_background_migration(MIGRATION, :workspaces, :config_version, [])
+  end
+end
diff --git a/db/schema_migrations/20240104085448 b/db/schema_migrations/20240104085448
new file mode 100644
index 0000000000000000000000000000000000000000..a73b6a090a37b373c3ed8e294aa06efb117b33ea
--- /dev/null
+++ b/db/schema_migrations/20240104085448
@@ -0,0 +1 @@
+57e5c890ac0ebb837a5894b09717322c2053694cc4a91270508a652f091e457c
\ No newline at end of file
diff --git a/ee/lib/ee/gitlab/background_migration/update_workspaces_config_version3.rb b/ee/lib/ee/gitlab/background_migration/update_workspaces_config_version3.rb
new file mode 100644
index 0000000000000000000000000000000000000000..6fb0c8e325f7e7fcaf7d0db6fbd8a655ce8500e1
--- /dev/null
+++ b/ee/lib/ee/gitlab/background_migration/update_workspaces_config_version3.rb
@@ -0,0 +1,34 @@
+# frozen_string_literal: true
+
+module EE
+  module Gitlab
+    module BackgroundMigration
+      # This class is responsible for updating workspaces config_version and force_include_all_resources.
+      module UpdateWorkspacesConfigVersion3
+        extend ActiveSupport::Concern
+        extend ::Gitlab::Utils::Override
+
+        VERSION_2 = 2
+        VERSION_3 = 3
+        STATE_TERMINATED = 'Terminated'
+
+        prepended do
+          operation_name :update
+          scope_to ->(relation) {
+            relation.where(config_version: VERSION_2)
+                    .where.not(actual_state: STATE_TERMINATED)
+          }
+          feature_category :remote_development
+        end
+
+        override :perform
+        def perform
+          each_sub_batch do |sub_batch|
+            sub_batch.update_all(config_version: VERSION_3,
+              force_include_all_resources: true)
+          end
+        end
+      end
+    end
+  end
+end
diff --git a/ee/spec/lib/gitlab/background_migration/update_workspaces_config_version3_spec.rb b/ee/spec/lib/gitlab/background_migration/update_workspaces_config_version3_spec.rb
new file mode 100644
index 0000000000000000000000000000000000000000..8becb845cdeadb2a3da42baa77ca21133f796384
--- /dev/null
+++ b/ee/spec/lib/gitlab/background_migration/update_workspaces_config_version3_spec.rb
@@ -0,0 +1,100 @@
+# frozen_string_literal: true
+
+require 'spec_helper'
+
+RSpec.describe Gitlab::BackgroundMigration::UpdateWorkspacesConfigVersion3, feature_category: :remote_development do
+  describe "#perform" do
+    let(:v2) { 2 }
+    let(:v3) { 3 }
+    let(:personal_access_tokens_table) { table(:personal_access_tokens) }
+    let(:pat) do
+      personal_access_tokens_table.create!(name: 'workspace1', user_id: user.id, scopes: "---\n- api\n",
+        expires_at: 4.days.from_now)
+    end
+
+    let(:workspace_attrs) do
+      {
+        user_id: user.id,
+        project_id: project.id,
+        cluster_agent_id: cluster_agent.id,
+        personal_access_token_id: pat.id,
+        desired_state_updated_at: 2.seconds.ago,
+        max_hours_before_termination: 19,
+        namespace: 'ns',
+        desired_state: 'Running',
+        editor: 'e',
+        devfile_ref: 'dfr',
+        devfile_path: 'dev/path',
+        url: 'https://www.example.org',
+        force_include_all_resources: false
+      }
+    end
+
+    let(:namespace) { table(:namespaces).create!(name: 'namespace', path: 'namespace') }
+    let(:project) do
+      table(:projects).create!(name: 'project', path: 'project', project_namespace_id: namespace.id,
+        namespace_id: namespace.id)
+    end
+
+    let(:cluster_agent) { table(:cluster_agents).create!(name: 'cluster_agent', project_id: project.id) }
+    let(:user) { table(:users).create!(email: 'author@example.com', username: 'author', projects_limit: 10) }
+    let(:workspaces_table) { table(:workspaces) }
+    let!(:workspace_with_config_2_actual_state_terminated) do
+      workspaces_table.create!({
+        name: 'workspace1',
+        config_version: v2,
+        actual_state: 'Terminated'
+      }.merge!(workspace_attrs))
+    end
+
+    let!(:workspace_with_config_2_actual_state_running) do
+      workspaces_table.create!({
+        name: 'workspace2',
+        config_version: v2,
+        actual_state: 'Running'
+      }.merge!(workspace_attrs))
+    end
+
+    let!(:workspace_with_config_3_actual_state_running) do
+      workspaces_table.create!({
+        name: 'workspace3',
+        config_version: v3,
+        actual_state: 'Running'
+      }.merge!(workspace_attrs))
+    end
+
+    let(:migration) do
+      described_class.new(
+        start_id: workspace_with_config_2_actual_state_terminated.id,
+        end_id: workspace_with_config_3_actual_state_running.id,
+        batch_table: :workspaces,
+        batch_column: :id,
+        sub_batch_size: 2,
+        pause_ms: 0,
+        connection: ApplicationRecord.connection
+      )
+    end
+
+    it "updates config_version and force_include_all_resources for existing non-terminated workspaces" do
+      migration.perform
+
+      workspace_with_config_2_actual_state_running.reload
+
+      expect(workspace_with_config_2_actual_state_running.config_version).to eq(v3)
+      expect(workspace_with_config_2_actual_state_running.force_include_all_resources).to eq(true)
+    end
+
+    it "does not update workspaces with different config_version or actual_state" do
+      migration.perform
+
+      workspace_with_config_2_actual_state_terminated.reload
+      workspace_with_config_3_actual_state_running.reload
+
+      expect(workspace_with_config_2_actual_state_terminated.config_version).to eq(v2)
+      expect(workspace_with_config_2_actual_state_terminated.force_include_all_resources).to eq(false)
+
+      expect(workspace_with_config_3_actual_state_running.config_version).to eq(v3)
+      expect(workspace_with_config_3_actual_state_running.force_include_all_resources).to eq(false)
+    end
+  end
+end
diff --git a/ee/spec/migrations/20240104085448_queue_update_workspaces_config_version3_spec.rb b/ee/spec/migrations/20240104085448_queue_update_workspaces_config_version3_spec.rb
new file mode 100644
index 0000000000000000000000000000000000000000..b2f8fc1fa878c25e6838af405a8763d829c7657d
--- /dev/null
+++ b/ee/spec/migrations/20240104085448_queue_update_workspaces_config_version3_spec.rb
@@ -0,0 +1,26 @@
+# frozen_string_literal: true
+
+require 'spec_helper'
+require_migration!
+
+RSpec.describe QueueUpdateWorkspacesConfigVersion3, feature_category: :remote_development do
+  let!(:batched_migration) { described_class::MIGRATION }
+
+  it 'schedules a new batched migration' do
+    reversible_migration do |migration|
+      migration.before -> {
+        expect(batched_migration).not_to have_scheduled_batched_migration
+      }
+
+      migration.after -> {
+        expect(batched_migration).to have_scheduled_batched_migration(
+          table_name: :workspaces,
+          column_name: :config_version,
+          interval: described_class::DELAY_INTERVAL,
+          batch_size: described_class::BATCH_SIZE,
+          sub_batch_size: described_class::SUB_BATCH_SIZE
+        )
+      }
+    end
+  end
+end
diff --git a/lib/gitlab/background_migration/update_workspaces_config_version3.rb b/lib/gitlab/background_migration/update_workspaces_config_version3.rb
new file mode 100644
index 0000000000000000000000000000000000000000..8626f7f608de6ed178f8970912291bc716b41bd1
--- /dev/null
+++ b/lib/gitlab/background_migration/update_workspaces_config_version3.rb
@@ -0,0 +1,13 @@
+# frozen_string_literal: true
+
+module Gitlab
+  module BackgroundMigration
+    # No op on ce
+    class UpdateWorkspacesConfigVersion3 < BatchedMigrationJob
+      feature_category :remote_development
+      def perform; end
+    end
+  end
+end
+
+Gitlab::BackgroundMigration::UpdateWorkspacesConfigVersion3.prepend_mod_with('Gitlab::BackgroundMigration::UpdateWorkspacesConfigVersion3') # rubocop:disable Layout/LineLength -- Injecting extension modules must be done on the last line of this file, outside of any class or module definitions