diff --git a/app/scripts/app-init.js b/app/scripts/app-init.js
index 6d2bf2d65..ba66698b7 100644
--- a/app/scripts/app-init.js
+++ b/app/scripts/app-init.js
@@ -48,8 +48,3 @@ function importAllScripts() {
 
 // Placing script import call here ensures that scripts are inported each time service worker is activated.
 importAllScripts();
-
-/**
- * An open issue is changes in this file break during hot reloading. Reason is dynamic injection of "FILE NAMES".
- * Developers need to restart local server if they change this file.
- */
diff --git a/development/build/scripts.js b/development/build/scripts.js
index 044551399..21892519e 100644
--- a/development/build/scripts.js
+++ b/development/build/scripts.js
@@ -365,6 +365,15 @@ function createScriptTasks({
   }
 }
 
+const postProcessServiceWorker = (mv3BrowserPlatforms, fileList) => {
+  mv3BrowserPlatforms.forEach((browser) => {
+    const appInitFile = `./dist/${browser}/app-init.js`;
+    const fileContent = readFileSync('./app/scripts/app-init.js', 'utf8');
+    const fileOutput = fileContent.replace('/** FILE NAMES */', fileList);
+    writeFileSync(appInitFile, fileOutput);
+  });
+};
+
 // Function generates app-init.js for browsers chrome, brave and opera.
 // It dynamically injects list of files generated in the build.
 async function bundleMV3AppInitialiser({
@@ -400,12 +409,17 @@ async function bundleMV3AppInitialiser({
     shouldLintFenceFiles,
   })();
 
-  mv3BrowserPlatforms.forEach((browser) => {
-    const appInitFile = `./dist/${browser}/app-init.js`;
-    const fileContent = readFileSync('./app/scripts/app-init.js', 'utf8');
-    const fileOutput = fileContent.replace('/** FILE NAMES */', fileList);
-    writeFileSync(appInitFile, fileOutput);
+  postProcessServiceWorker(mv3BrowserPlatforms, fileList);
+
+  let prevChromeFileContent;
+  watch('./dist/chrome/app-init.js', () => {
+    const chromeFileContent = readFileSync('./dist/chrome/app-init.js', 'utf8');
+    if (chromeFileContent !== prevChromeFileContent) {
+      prevChromeFileContent = chromeFileContent;
+      postProcessServiceWorker(mv3BrowserPlatforms, fileList);
+    }
   });
+
   console.log(`Bundle end: service worker app-init.js`);
 }