diff --git a/instrumentation/active_job/lib/opentelemetry/instrumentation/active_job/handlers.rb b/instrumentation/active_job/lib/opentelemetry/instrumentation/active_job/handlers.rb
index 70bebf0617..251f11a94b 100644
--- a/instrumentation/active_job/lib/opentelemetry/instrumentation/active_job/handlers.rb
+++ b/instrumentation/active_job/lib/opentelemetry/instrumentation/active_job/handlers.rb
@@ -8,6 +8,7 @@
 require_relative 'handlers/default'
 require_relative 'handlers/enqueue'
 require_relative 'handlers/perform'
+require_relative 'handlers/step'
 
 module OpenTelemetry
   module Instrumentation
@@ -27,6 +28,7 @@ module Handlers
         # - perform
         # - retry_stopped
         # - discard
+        # - step (Continuations, Rails 8.1+)
         #
         # Ingress and Egress spans (perform, enqueue, enqueue_at) use Messaging semantic conventions for naming the span,
         # while internal spans keep their ActiveSupport event name.
@@ -48,6 +50,7 @@ def subscribe
           default_handler = Handlers::Default.new(parent_span_provider, mapper, config)
           enqueue_handler = Handlers::Enqueue.new(parent_span_provider, mapper, config)
           perform_handler = Handlers::Perform.new(parent_span_provider, mapper, config)
+          step_handler = Handlers::Step.new(parent_span_provider, mapper, config)
 
           handlers_by_pattern = {
             'enqueue' => enqueue_handler,
@@ -55,7 +58,8 @@ def subscribe
             'enqueue_retry' => default_handler,
             'perform' => perform_handler,
             'retry_stopped' => default_handler,
-            'discard' => default_handler
+            'discard' => default_handler,
+            'step' => step_handler
           }
 
           @subscriptions = handlers_by_pattern.map do |key, handler|
diff --git a/instrumentation/active_job/lib/opentelemetry/instrumentation/active_job/handlers/step.rb b/instrumentation/active_job/lib/opentelemetry/instrumentation/active_job/handlers/step.rb
new file mode 100644
index 0000000000..d1d3ead0c2
--- /dev/null
+++ b/instrumentation/active_job/lib/opentelemetry/instrumentation/active_job/handlers/step.rb
@@ -0,0 +1,63 @@
+# frozen_string_literal: true
+
+# Copyright The OpenTelemetry Authors
+#
+# SPDX-License-Identifier: Apache-2.0
+
+module OpenTelemetry
+  module Instrumentation
+    module ActiveJob
+      module Handlers
+        # Handles step.active_job to generate child spans for continuable job steps
+        class Step < Default
+          # Overrides the `Default#start_span` method to create a child span
+          # for a continuable job step
+          #
+          # @param name [String] of the Event
+          # @param id [String] of the event
+          # @param payload [Hash] containing job run information
+          # @return [Hash] with the span and generated context tokens
+          def start_span(name, _id, payload)
+            job = payload.fetch(:job)
+            step = payload.fetch(:step)
+            step_name = step.name.to_s
+
+            attributes = @mapper.call(payload).merge(
+              'rails.active_job.step.name' => step_name,
+              'rails.active_job.step.state' => step.resumed? ? 'resumed' : 'started'
+            )
+
+            span_name = span_name(job, step_name)
+            span = tracer.start_span(span_name, attributes: attributes)
+            token = OpenTelemetry::Context.attach(OpenTelemetry::Trace.context_with_span(span))
+
+            { span: span, ctx_token: token }
+          end
+
+          # Overrides the `Default#finish` method to record step-specific
+          # attributes before closing the span
+          #
+          # @param _name [String] of the Event (unused)
+          # @param _id [String] of the event (unused)
+          # @param payload [Hash] containing job run information
+          def finish(_name, _id, payload)
+            otel = payload.delete(:__otel)
+            span = otel&.fetch(:span)
+            token = otel&.fetch(:ctx_token)
+
+            step = payload.fetch(:step)
+            span&.set_attribute('rails.active_job.step.result', 'interrupted') if payload[:interrupted]
+            span&.set_attribute('rails.active_job.step.cursor', step.cursor.to_s) if step.cursor
+
+            # Continuation::Interrupt is control flow, not a real error — skip recording it
+            on_exception(payload[:error] || payload[:exception_object], span) unless payload[:interrupted]
+          rescue StandardError => e
+            OpenTelemetry.handle_error(exception: e)
+          ensure
+            finish_span(span, token)
+          end
+        end
+      end
+    end
+  end
+end
diff --git a/instrumentation/active_job/test/opentelemetry/instrumentation/active_job/handlers/step_test.rb b/instrumentation/active_job/test/opentelemetry/instrumentation/active_job/handlers/step_test.rb
new file mode 100644
index 0000000000..c03ae3f488
--- /dev/null
+++ b/instrumentation/active_job/test/opentelemetry/instrumentation/active_job/handlers/step_test.rb
@@ -0,0 +1,140 @@
+# frozen_string_literal: true
+
+# Copyright The OpenTelemetry Authors
+#
+# SPDX-License-Identifier: Apache-2.0
+
+require 'test_helper'
+
+require_relative '../../../../../lib/opentelemetry/instrumentation/active_job'
+
+require 'active_job/continuation/test_helper' if defined?(ActiveJob::Continuable)
+
+describe OpenTelemetry::Instrumentation::ActiveJob::Handlers::Step do
+  let(:instrumentation) { OpenTelemetry::Instrumentation::ActiveJob::Instrumentation.instance }
+  let(:config) { { propagation_style: :link, span_naming: :queue } }
+  let(:exporter) { EXPORTER }
+  let(:spans) { exporter.finished_spans }
+  let(:process_span) { spans.find { |s| s.name == 'default process' } }
+  let(:step_spans) { spans.select { |s| s.name.end_with?('first_step', 'second_step', 'process_items') } }
+
+  before do
+    skip 'Requires ActiveJob::Continuable (Rails 8.1+)' unless defined?(ActiveJob::Continuable)
+
+    OpenTelemetry::Instrumentation::ActiveJob::Handlers.unsubscribe
+    instrumentation.instance_variable_set(:@config, config)
+    instrumentation.instance_variable_set(:@installed, false)
+
+    instrumentation.install(config)
+
+    exporter.reset
+  end
+
+  describe 'basic step tracing' do
+    it 'creates a span for each step' do
+      ContinuableJob.perform_now
+
+      _(step_spans.length).must_equal 2
+    end
+
+    it 'names spans using the step name' do
+      ContinuableJob.perform_now
+
+      first_step_span = spans.find { |s| s.name == 'default first_step' }
+      second_step_span = spans.find { |s| s.name == 'default second_step' }
+
+      _(first_step_span).wont_be_nil
+      _(second_step_span).wont_be_nil
+    end
+
+    it 'creates step spans as children of the process span' do
+      ContinuableJob.perform_now
+
+      step_spans.each do |step_span|
+        _(step_span.parent_span_id).must_equal process_span.span_id
+      end
+    end
+  end
+
+  describe 'step attributes' do
+    it 'includes the step name' do
+      ContinuableJob.perform_now
+
+      first_step_span = spans.find { |s| s.name == 'default first_step' }
+      _(first_step_span.attributes['rails.active_job.step.name']).must_equal 'first_step'
+    end
+
+    it 'includes state as started for first execution' do
+      ContinuableJob.perform_now
+
+      first_step_span = spans.find { |s| s.name == 'default first_step' }
+      _(first_step_span.attributes['rails.active_job.step.state']).must_equal 'started'
+    end
+
+    it 'includes standard messaging attributes' do
+      ContinuableJob.perform_now
+
+      first_step_span = spans.find { |s| s.name == 'default first_step' }
+      _(first_step_span.attributes['code.namespace']).must_equal 'ContinuableJob'
+      _(first_step_span.attributes['messaging.system']).must_equal 'active_job'
+      _(first_step_span.attributes['messaging.destination']).must_equal 'default'
+    end
+
+    it 'does not marks the step as interrupted' do
+      ContinuableJob.perform_now
+
+      first_step_span = spans.find { |s| s.name == 'default first_step' }
+      assert_nil(first_step_span.attributes['rails.active_job.step.result'])
+    end
+  end
+
+  describe 'cursor tracking' do
+    it 'includes the cursor value when present' do
+      ContinuableWithCursorJob.perform_now
+
+      step_span = spans.find { |s| s.name == 'default process_items' }
+      _(step_span.attributes['rails.active_job.step.cursor']).must_equal '3'
+    end
+  end
+
+  describe 'interrupted step' do
+    before do
+      singleton_class.include ActiveJob::Continuation::TestHelper
+      ActiveJob::Base.queue_adapter = :test
+    end
+
+    after do
+      ActiveJob::Base.queue_adapter = :inline
+    end
+
+    it 'does not record an error on the step span' do
+      ContinuableWithCursorJob.perform_later
+      interrupt_job_during_step(ContinuableWithCursorJob, :process_items, cursor: 2) { perform_enqueued_jobs }
+
+      step_span = spans.find { |s| s.name == 'default process_items' }
+      _(step_span.status.code).must_equal OpenTelemetry::Trace::Status::OK
+      _(step_span.events).must_be_nil
+    end
+
+    it 'marks the step as interrupted' do
+      ContinuableWithCursorJob.perform_later
+      interrupt_job_during_step(ContinuableWithCursorJob, :process_items, cursor: 2) { perform_enqueued_jobs }
+
+      step_span = spans.find { |s| s.name == 'default process_items' }
+      _(step_span.attributes['rails.active_job.step.result']).must_equal 'interrupted'
+    end
+  end
+
+  describe 'span_naming option' do
+    describe 'when job_class' do
+      let(:config) { { propagation_style: :link, span_naming: :job_class } }
+
+      it 'names step spans using the job class' do
+        ContinuableJob.perform_now
+
+        first_step_span = spans.find { |s| s.name == 'ContinuableJob first_step' }
+        _(first_step_span).wont_be_nil
+      end
+    end
+  end
+end
diff --git a/instrumentation/active_job/test/test_helper.rb b/instrumentation/active_job/test/test_helper.rb
index 69a5826a9f..b21bde653d 100644
--- a/instrumentation/active_job/test/test_helper.rb
+++ b/instrumentation/active_job/test/test_helper.rb
@@ -10,6 +10,7 @@
 Bundler.require(:default, :development, :test)
 
 require 'active_job'
+require 'active_support/core_ext/object/with'
 require 'opentelemetry-instrumentation-active_job'
 require 'minitest/autorun'
 require 'rspec/mocks/minitest_integration'
@@ -90,6 +91,38 @@ def perform
   end
 end
 
+if defined?(ActiveJob::Continuable)
+  class ContinuableJob < ActiveJob::Base
+    include ActiveJob::Continuable
+
+    self.resume_options = { wait: 0 }
+
+    def perform
+      step :first_step do
+        # no-op
+      end
+
+      step :second_step do
+        # no-op
+      end
+    end
+  end
+
+  class ContinuableWithCursorJob < ActiveJob::Base
+    include ActiveJob::Continuable
+
+    self.resume_options = { wait: 0 }
+
+    def perform
+      step(:process_items, start: 0) do |step|
+        (step.cursor..2).each do |i|
+          step.set! i + 1
+        end
+      end
+    end
+  end
+end
+
 ActiveJob::Base.queue_adapter = :inline
 ActiveJob::Base.logger = Logger.new($stderr, level: ENV.fetch('OTEL_LOG_LEVEL', 'fatal').to_sym)