diff --git a/CHANGELOG.md b/CHANGELOG.md
index 5f9c05c54..cb0fa082c 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -11,6 +11,14 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 
 - Fix README image paths to use absolute GitHub URLs so images display correctly on PyPI [\#188](https://github.com/mllam/neural-lam/pull/188) @bk-simon
 
+### Documentation
+
+- Improve development environment setup instructions in README: link to Python venv docs, clarify editable install with dev dependencies, and add test verification step [\#262](https://github.com/mllam/neural-lam/pull/262) @ashum9
+
+### Documentation
+
+- Improve development environment setup instructions in README: link to Python venv docs, clarify editable install with dev dependencies, and add test verification step [\#262](https://github.com/mllam/neural-lam/pull/262) @ashum9
+
 - Fix typo in `ar_model.py` that causes `AttributeError` during evaluation [\#204](https://github.com/mllam/neural-lam/pull/204) @ritinikhil
 
 - Changed the hardcoded True to a conditional check "persistent_workers=self.num_workers > 0" [\#235](https://github.com/mllam/neural-lam/pull/235) @santhil-cyber
diff --git a/README.md b/README.md
index 46a077b79..02930a6d0 100644
--- a/README.md
+++ b/README.md
@@ -569,6 +569,24 @@ These files have the same list format as the ones above, but each list has lengt
 Entries 0 in these lists describe edges between the lowest levels 1 and 2.
 
 # Development and Contributing
+
+## Development Environment Setup
+
+For development, we recommend using a virtual environment. See the [official Python venv documentation](https://docs.python.org/3/library/venv.html) for instructions on how to set one up.
+
+To install neural-lam in editable mode with development dependencies:
+
+```bash
+python -m pip install --group dev -e .
+```
+
+To verify that the environment is working correctly, run:
+
+```bash
+pytest
+```
+
+## Code Quality
 Any push or Pull-Request to the main branch will trigger a selection of pre-commit hooks.
 These hooks will run a series of checks on the code, like formatting and linting.
 If any of these checks fail the push or PR will be rejected.