diff --git a/overlay/etc/cont-init.d/90-configure_steam.sh b/overlay/etc/cont-init.d/90-configure_steam.sh
index 6a562ed..5bef278 100644
--- a/overlay/etc/cont-init.d/90-configure_steam.sh
+++ b/overlay/etc/cont-init.d/90-configure_steam.sh
@@ -1,7 +1,8 @@
 
 print_header "Configure Steam"
 
-steam_autostart_desktop="$(cat <<EOF
+steam_autostart_desktop="$(
+    cat <<EOF
 [Desktop Entry]
 Encoding=UTF-8
 Type=Application
@@ -17,16 +18,45 @@ Hidden=false
 EOF
 )"
 
+default_steam_library_config="$(
+    cat <<EOF
+"libraryfolders"
+{
+        "0"
+        {
+                "path"          "/mnt/games"
+                "label"         "Games"
+                "contentid"     "5581753361318374545"
+                "totalsize"     "0"
+                "update_clean_bytes_tally" "0"
+                "time_last_update_verified" "0"
+                "apps"
+                {
+                }
+        }
+}
+EOF
+)"
+
 if [ "${ENABLE_STEAM:-}" = "true" ]; then
-    if [ "${MODE}" == "s" ] | [ "${MODE}" == "secondary" ]; then
+    if [ "${MODE}" == "s" ] || [ "${MODE}" == "secondary" ]; then
         print_step_header "Enable Steam supervisor.d service"
         sed -i 's|^autostart.*=.*$|autostart=true|' /etc/supervisor.d/steam.ini
     else
         print_step_header "Enable Steam auto-start script"
         mkdir -p "${USER_HOME:?}/.config/autostart"
-        echo "${steam_autostart_desktop:?}" > "${USER_HOME:?}/.config/autostart/Steam.desktop"
+        echo "${steam_autostart_desktop:?}" >"${USER_HOME:?}/.config/autostart/Steam.desktop"
         sed -i 's|^autostart.*=.*$|autostart=false|' /etc/supervisor.d/steam.ini
     fi
+
+    # Ensure Steam library folder is set to /mnt/games if not already
+    LIBRARY_VDF="${USER_HOME:?}/.steam/steam/steamapps/libraryfolders.vdf"
+    if [ ! -f "${LIBRARY_VDF}" ] || ! grep -q '"0"' "${LIBRARY_VDF}"; then
+        print_step_header "Initializing Steam library folder"
+        mkdir -p "$(dirname "${LIBRARY_VDF}")"
+        echo "${default_steam_library_config}" >"${LIBRARY_VDF}"
+        chown "${USER:?}:${USER:?}" "${LIBRARY_VDF}"
+    fi
 else
     print_step_header "Disable Steam service"
     sed -i 's|^autostart.*=.*$|autostart=false|' /etc/supervisor.d/steam.ini