diff --git a/pkg/testworkflows/testworkflowprocessor/action/containerize.go b/pkg/testworkflows/testworkflowprocessor/action/containerize.go
index fd04d8bfe4..b0d631b64d 100644
--- a/pkg/testworkflows/testworkflowprocessor/action/containerize.go
+++ b/pkg/testworkflows/testworkflowprocessor/action/containerize.go
@@ -39,11 +39,15 @@ func CreateContainer(groupId int, defaultContainer stage2.Container, actions []a
 	// Find the highest priority container configuration
 	var bestContainerConfig *actiontypes.Action
 	var bestIsToolkit = false
+	var bestIsDefaultImage = true
 	for i := range containerConfigs {
 		if executable[containerConfigs[i].Container.Ref] {
-			if bestContainerConfig == nil || bestIsToolkit {
+			image := containerConfigs[i].Container.Config.Image
+			isDefaultImage := image == "" || image == constants.DefaultInitImage || image == constants.DefaultToolkitImage
+			if bestContainerConfig == nil || bestIsToolkit || (bestIsDefaultImage && !isDefaultImage) {
 				bestContainerConfig = containerConfigs[i]
 				bestIsToolkit = toolkit[bestContainerConfig.Container.Ref]
+				bestIsDefaultImage = isDefaultImage
 			}
 		}
 	}
diff --git a/pkg/testworkflows/testworkflowprocessor/action/containerize_test.go b/pkg/testworkflows/testworkflowprocessor/action/containerize_test.go
new file mode 100644
index 0000000000..90e37219d5
--- /dev/null
+++ b/pkg/testworkflows/testworkflowprocessor/action/containerize_test.go
@@ -0,0 +1,61 @@
+package action
+
+import (
+	"testing"
+
+	"github.com/stretchr/testify/assert"
+
+	testworkflowsv1 "github.com/kubeshop/testkube-operator/api/testworkflows/v1"
+	"github.com/kubeshop/testkube/internal/common"
+	"github.com/kubeshop/testkube/pkg/testworkflows/testworkflowprocessor/action/actiontypes"
+	"github.com/kubeshop/testkube/pkg/testworkflows/testworkflowprocessor/constants"
+	"github.com/kubeshop/testkube/pkg/testworkflows/testworkflowprocessor/stage"
+)
+
+func TestCreateContainer_MergingDefaultStepBefore(t *testing.T) {
+	input := actiontypes.NewActionList().
+		MutateContainer("ref1", testworkflowsv1.ContainerConfig{
+			Command: common.Ptr([]string{"sleep"}),
+		}).
+		Start("ref1").
+		Execute("ref1", false, true).
+		End("ref1").
+		CurrentStatus("ref1").
+		MutateContainer("ref2", testworkflowsv1.ContainerConfig{
+			Image:   "custom-image:1.2.3",
+			Command: common.Ptr([]string{"my-test"}),
+		}).
+		Start("ref2").
+		Execute("ref2", false, false).
+		End("ref2").
+		End(constants.RootOperationName).
+		End("")
+	result, _, err := CreateContainer(1, stage.NewContainer(), input, false)
+
+	assert.NoError(t, err)
+	assert.Equal(t, result.Image, "custom-image:1.2.3")
+}
+
+func TestCreateContainer_MergingDefaultStepAfter(t *testing.T) {
+	input := actiontypes.NewActionList().
+		MutateContainer("ref1", testworkflowsv1.ContainerConfig{
+			Image:   "custom-image:1.2.3",
+			Command: common.Ptr([]string{"my-test"}),
+		}).
+		Start("ref1").
+		Execute("ref1", false, false).
+		End("ref1").
+		CurrentStatus("ref1").
+		MutateContainer("ref2", testworkflowsv1.ContainerConfig{
+			Command: common.Ptr([]string{"sleep"}),
+		}).
+		Start("ref2").
+		Execute("ref2", false, true).
+		End("ref2").
+		End(constants.RootOperationName).
+		End("")
+	result, _, err := CreateContainer(1, stage.NewContainer(), input, false)
+
+	assert.NoError(t, err)
+	assert.Equal(t, result.Image, "custom-image:1.2.3")
+}
diff --git a/pkg/testworkflows/testworkflowprocessor/presets/processor_test.go b/pkg/testworkflows/testworkflowprocessor/presets/processor_test.go
index b7f842085d..18b503e3e7 100644
--- a/pkg/testworkflows/testworkflowprocessor/presets/processor_test.go
+++ b/pkg/testworkflows/testworkflowprocessor/presets/processor_test.go
@@ -1334,3 +1334,67 @@ func TestProcess_PureShellAtTheEnd(t *testing.T) {
 	assert.NoError(t, err)
 	assert.Equal(t, want, res.LiteActions())
 }
+
+func TestProcess_MergingActions(t *testing.T) {
+	wf := &testworkflowsv1.TestWorkflow{
+		Spec: testworkflowsv1.TestWorkflowSpec{
+			Steps: []testworkflowsv1.Step{
+				{
+					StepOperations: testworkflowsv1.StepOperations{Delay: "1s"},
+				},
+				{
+					StepDefaults: testworkflowsv1.StepDefaults{Container: &testworkflowsv1.ContainerConfig{
+						Image: "custom-image:1.2.3",
+					}},
+					StepOperations: testworkflowsv1.StepOperations{Shell: "test-command"},
+				},
+			},
+		},
+	}
+
+	res, err := proc.Bundle(context.Background(), wf, testworkflowprocessor.BundleOptions{Config: testConfig})
+	sig := res.Signature
+
+	wantActions := lite.NewLiteActionGroups().
+		Append(func(list lite.LiteActionList) lite.LiteActionList {
+			return list.
+				// configure
+				Setup(true, false, true).
+				Declare(constants.RootOperationName, "true").
+				Declare(sig[0].Ref(), "true", constants.RootOperationName).
+				Declare(sig[1].Ref(), sig[0].Ref(), constants.RootOperationName).
+				Result(constants.RootOperationName, and(sig[0].Ref(), sig[1].Ref())).
+				Result("", constants.RootOperationName).
+
+				// initialize
+				Start("").
+				CurrentStatus("true").
+				Start(constants.RootOperationName).
+				CurrentStatus(constants.RootOperationName)
+		}).
+		Append(func(list lite.LiteActionList) lite.LiteActionList {
+			return list.
+				// start first container
+				MutateContainer(lite.LiteContainerConfig{
+					Command: cmd("sleep"),
+					Args:    cmd("1"),
+				}).
+				Start(sig[0].Ref()).
+				Execute(sig[0].Ref(), false, true).
+				End(sig[0].Ref()).
+				CurrentStatus(and(sig[0].Ref(), constants.RootOperationName)).
+				MutateContainer(lite.LiteContainerConfig{
+					Command: cmd("/.tktw/bin/sh"),
+					Args:    cmdShell("test-command"),
+				}).
+				Start(sig[1].Ref()).
+				Execute(sig[1].Ref(), false, false).
+				End(sig[1].Ref()).
+				End(constants.RootOperationName).
+				End("")
+		})
+
+	assert.NoError(t, err)
+	assert.Equal(t, wantActions, res.LiteActions())
+	assert.Equal(t, res.Job.Spec.Template.Spec.Containers[0].Image, "custom-image:1.2.3")
+}