diff --git a/src/Service.ts b/src/Service.ts
index 9a6bd1b..ab3d50f 100644
--- a/src/Service.ts
+++ b/src/Service.ts
@@ -670,8 +670,21 @@ export class Service<
             .getWorkflow(input.workflowId)
             .pipe(Effect.map((w) => w.context));
         },
-        updateWorkflowContext(context: unknown) {
-          return state.updateWorkflowContext(input.workflowId, context);
+        updateWorkflowContext(contextOrUpdater: unknown) {
+          return Effect.gen(function* ($) {
+            if (typeof contextOrUpdater === 'function') {
+              const workflow = yield* $(state.getWorkflow(input.workflowId));
+              return yield* $(
+                state.updateWorkflowContext(
+                  input.workflowId,
+                  contextOrUpdater(workflow.context)
+                )
+              );
+            }
+            return yield* $(
+              state.updateWorkflowContext(input.workflowId, contextOrUpdater)
+            );
+          });
         },
       },
       queue: {
diff --git a/src/__tests__/__snapshots__/update-workflow-context.test.ts.snap b/src/__tests__/__snapshots__/update-workflow-context.test.ts.snap
new file mode 100644
index 0000000..b524da3
--- /dev/null
+++ b/src/__tests__/__snapshots__/update-workflow-context.test.ts.snap
@@ -0,0 +1,223 @@
+// Vitest Snapshot v1, https://vitest.dev/guide/snapshot.html
+
+exports[`handles context update when updater function is passed 1`] = `
+{
+  "conditions": [
+    {
+      "marking": 0,
+      "name": "start",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+    {
+      "marking": 0,
+      "name": "end",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+  ],
+  "tasks": [
+    {
+      "generation": 1,
+      "name": "t1",
+      "state": "started",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+  ],
+  "workItems": [],
+  "workflows": [
+    {
+      "context": {
+        "count": 2,
+      },
+      "id": "workflow-1",
+      "name": "activities",
+      "parent": null,
+      "state": "started",
+    },
+  ],
+}
+`;
+
+exports[`handles context update when value is passed 1`] = `
+{
+  "conditions": [
+    {
+      "marking": 0,
+      "name": "start",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+    {
+      "marking": 0,
+      "name": "end",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+  ],
+  "tasks": [
+    {
+      "generation": 1,
+      "name": "t1",
+      "state": "started",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+  ],
+  "workItems": [],
+  "workflows": [
+    {
+      "context": {
+        "count": 2,
+      },
+      "id": "workflow-1",
+      "name": "activities",
+      "parent": null,
+      "state": "started",
+    },
+  ],
+}
+`;
+
+exports[`handles parent context update when updater function is passed 1`] = `
+{
+  "conditions": [
+    {
+      "marking": 0,
+      "name": "start",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+    {
+      "marking": 0,
+      "name": "end",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+    {
+      "marking": 1,
+      "name": "start",
+      "workflowId": "workflow-2",
+      "workflowName": "sub",
+    },
+    {
+      "marking": 0,
+      "name": "end",
+      "workflowId": "workflow-2",
+      "workflowName": "sub",
+    },
+  ],
+  "tasks": [
+    {
+      "generation": 1,
+      "name": "t1",
+      "state": "started",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+    {
+      "generation": 0,
+      "name": "subT1",
+      "state": "enabled",
+      "workflowId": "workflow-2",
+      "workflowName": "sub",
+    },
+  ],
+  "workItems": [],
+  "workflows": [
+    {
+      "context": {
+        "count": 1,
+      },
+      "id": "workflow-1",
+      "name": "activities",
+      "parent": null,
+      "state": "started",
+    },
+    {
+      "context": undefined,
+      "id": "workflow-2",
+      "name": "sub",
+      "parent": {
+        "taskGeneration": 1,
+        "taskName": "t1",
+        "workflowId": "workflow-1",
+        "workflowName": "activities",
+      },
+      "state": "started",
+    },
+  ],
+}
+`;
+
+exports[`handles parent context update when value is passed 1`] = `
+{
+  "conditions": [
+    {
+      "marking": 0,
+      "name": "start",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+    {
+      "marking": 0,
+      "name": "end",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+    {
+      "marking": 1,
+      "name": "start",
+      "workflowId": "workflow-2",
+      "workflowName": "sub",
+    },
+    {
+      "marking": 0,
+      "name": "end",
+      "workflowId": "workflow-2",
+      "workflowName": "sub",
+    },
+  ],
+  "tasks": [
+    {
+      "generation": 1,
+      "name": "t1",
+      "state": "started",
+      "workflowId": "workflow-1",
+      "workflowName": "activities",
+    },
+    {
+      "generation": 0,
+      "name": "subT1",
+      "state": "enabled",
+      "workflowId": "workflow-2",
+      "workflowName": "sub",
+    },
+  ],
+  "workItems": [],
+  "workflows": [
+    {
+      "context": {
+        "count": 1,
+      },
+      "id": "workflow-1",
+      "name": "activities",
+      "parent": null,
+      "state": "started",
+    },
+    {
+      "context": undefined,
+      "id": "workflow-2",
+      "name": "sub",
+      "parent": {
+        "taskGeneration": 1,
+        "taskName": "t1",
+        "workflowId": "workflow-1",
+        "workflowName": "activities",
+      },
+      "state": "started",
+    },
+  ],
+}
+`;
diff --git a/src/__tests__/update-workflow-context.test.ts b/src/__tests__/update-workflow-context.test.ts
new file mode 100644
index 0000000..7aa7eef
--- /dev/null
+++ b/src/__tests__/update-workflow-context.test.ts
@@ -0,0 +1,198 @@
+import { Effect } from 'effect';
+import { it } from 'vitest';
+
+import { Builder, IdGenerator, Service } from '../index.js';
+import { makeIdGenerator } from './shared.js';
+
+const workflowDefinition1 = Builder.workflow<{ count: number }>()
+  .withName('activities')
+  .startCondition('start')
+  .task('t1', (t) =>
+    t().onEnable(({ enableTask, getWorkflowContext, updateWorkflowContext }) =>
+      Effect.gen(function* ($) {
+        const { enqueueStartTask } = yield* $(enableTask());
+        yield* $(enqueueStartTask());
+        const workflowContext = yield* $(getWorkflowContext());
+        const { count } = workflowContext;
+        yield* $(updateWorkflowContext({ count: count + 1 }));
+      })
+    )
+  )
+  .endCondition('end')
+  .connectCondition('start', (to) => to.task('t1'))
+  .connectTask('t1', (to) => to.condition('end'))
+  .onStart(({ getWorkflowContext, updateWorkflowContext }) =>
+    Effect.gen(function* ($) {
+      const workflowContext = yield* $(getWorkflowContext());
+      const { count } = workflowContext;
+      yield* $(updateWorkflowContext({ count: count + 1 }));
+    })
+  );
+
+it('handles context update when value is passed', ({ expect }) => {
+  const program = Effect.gen(function* ($) {
+    const idGenerator = makeIdGenerator();
+
+    const service = yield* $(
+      workflowDefinition1.build(),
+      Effect.flatMap((workflow) => Service.initialize(workflow, { count: 0 })),
+      Effect.provideService(IdGenerator, idGenerator)
+    );
+
+    yield* $(service.start());
+    const state = yield* $(service.getState());
+    expect(state).toMatchSnapshot();
+    expect(state);
+  });
+
+  Effect.runSync(program);
+});
+
+const workflowDefinition2 = Builder.workflow<{ count: number }>()
+  .withName('activities')
+  .startCondition('start')
+  .task('t1', (t) =>
+    t().onEnable(({ enableTask, updateWorkflowContext }) =>
+      Effect.gen(function* ($) {
+        const { enqueueStartTask } = yield* $(enableTask());
+        yield* $(enqueueStartTask());
+        yield* $(updateWorkflowContext(({ count }) => ({ count: count + 1 })));
+      })
+    )
+  )
+  .endCondition('end')
+  .connectCondition('start', (to) => to.task('t1'))
+  .connectTask('t1', (to) => to.condition('end'))
+  .onStart(({ updateWorkflowContext }) =>
+    Effect.gen(function* ($) {
+      yield* $(updateWorkflowContext(({ count }) => ({ count: count + 1 })));
+    })
+  );
+
+it('handles context update when updater function is passed', ({ expect }) => {
+  const program = Effect.gen(function* ($) {
+    const idGenerator = makeIdGenerator();
+
+    const service = yield* $(
+      workflowDefinition2.build(),
+      Effect.flatMap((workflow) => Service.initialize(workflow, { count: 0 })),
+      Effect.provideService(IdGenerator, idGenerator)
+    );
+
+    yield* $(service.start());
+
+    const state = yield* $(service.getState());
+    expect(state).toMatchSnapshot();
+    expect(state);
+  });
+
+  Effect.runSync(program);
+});
+
+const subWorkflowDefinition1 = Builder.workflow()
+  .withName('sub')
+  .withParentContext<{ count: number }>()
+  .startCondition('start')
+  .task('subT1')
+  .endCondition('end')
+  .connectCondition('start', (to) => to.task('subT1'))
+  .connectTask('subT1', (to) => to.condition('end'))
+  .onStart(({ updateParentWorkflowContext }) =>
+    updateParentWorkflowContext(({ count }) => ({ count: count + 1 }))
+  );
+
+const parentWorkflowDefinition1 = Builder.workflow<{ count: number }>()
+  .withName('activities')
+  .startCondition('start')
+  .compositeTask('t1', (ct) =>
+    ct()
+      .withSubWorkflow(subWorkflowDefinition1)
+      .onStart(({ startTask }) =>
+        Effect.gen(function* ($) {
+          const { initializeWorkflow, enqueueStartWorkflow } = yield* $(
+            startTask()
+          );
+          const workflow = yield* $(initializeWorkflow());
+          yield* $(enqueueStartWorkflow(workflow.id));
+        })
+      )
+  )
+  .endCondition('end')
+  .connectCondition('start', (to) => to.task('t1'))
+  .connectTask('t1', (to) => to.condition('end'));
+
+it('handles parent context update when updater function is passed', ({
+  expect,
+}) => {
+  const program = Effect.gen(function* ($) {
+    const idGenerator = makeIdGenerator();
+
+    const service = yield* $(
+      parentWorkflowDefinition1.build(),
+      Effect.flatMap((workflow) => Service.initialize(workflow, { count: 0 })),
+      Effect.provideService(IdGenerator, idGenerator)
+    );
+
+    yield* $(service.start());
+    yield* $(service.startTask('t1'));
+
+    const state = yield* $(service.getState());
+    expect(state).toMatchSnapshot();
+    expect(state);
+  });
+
+  Effect.runSync(program);
+});
+
+const subWorkflowDefinition2 = Builder.workflow()
+  .withName('sub')
+  .withParentContext<{ count: number }>()
+  .startCondition('start')
+  .task('subT1')
+  .endCondition('end')
+  .connectCondition('start', (to) => to.task('subT1'))
+  .connectTask('subT1', (to) => to.condition('end'))
+  .onStart(({ updateParentWorkflowContext }) =>
+    updateParentWorkflowContext({ count: 1 })
+  );
+
+const parentWorkflowDefinition2 = Builder.workflow<{ count: number }>()
+  .withName('activities')
+  .startCondition('start')
+  .compositeTask('t1', (ct) =>
+    ct()
+      .withSubWorkflow(subWorkflowDefinition2)
+      .onStart(({ startTask }) =>
+        Effect.gen(function* ($) {
+          const { initializeWorkflow, enqueueStartWorkflow } = yield* $(
+            startTask()
+          );
+          const workflow = yield* $(initializeWorkflow());
+          yield* $(enqueueStartWorkflow(workflow.id));
+        })
+      )
+  )
+  .endCondition('end')
+  .connectCondition('start', (to) => to.task('t1'))
+  .connectTask('t1', (to) => to.condition('end'));
+
+it('handles parent context update when value is passed', ({ expect }) => {
+  const program = Effect.gen(function* ($) {
+    const idGenerator = makeIdGenerator();
+
+    const service = yield* $(
+      parentWorkflowDefinition2.build(),
+      Effect.flatMap((workflow) => Service.initialize(workflow, { count: 0 })),
+      Effect.provideService(IdGenerator, idGenerator)
+    );
+
+    yield* $(service.start());
+    yield* $(service.startTask('t1'));
+
+    const state = yield* $(service.getState());
+    expect(state).toMatchSnapshot();
+    expect(state);
+  });
+
+  Effect.runSync(program);
+});
diff --git a/src/elements/Workflow.ts b/src/elements/Workflow.ts
index 6529b8c..27c8914 100644
--- a/src/elements/Workflow.ts
+++ b/src/elements/Workflow.ts
@@ -387,7 +387,7 @@ export class Workflow<
             return yield* $(stateManager.getWorkflowContext(parent.workflowId));
           });
         },
-        updateParentWorkflowContext(context: unknown) {
+        updateParentWorkflowContext(contextOrUpdater: unknown) {
           return Effect.gen(function* ($) {
             const parent = workflow.parent;
             if (!parent) {
@@ -400,8 +400,22 @@ export class Workflow<
                 )
               );
             }
+            if (typeof contextOrUpdater === 'function') {
+              const context = yield* $(
+                stateManager.getWorkflowContext(parent.workflowId)
+              );
+              return yield* $(
+                stateManager.updateWorkflowContext(
+                  parent.workflowId,
+                  contextOrUpdater(context)
+                )
+              );
+            }
             return yield* $(
-              stateManager.updateWorkflowContext(parent.workflowId, context)
+              stateManager.updateWorkflowContext(
+                parent.workflowId,
+                contextOrUpdater
+              )
             );
           });
         },
@@ -410,8 +424,21 @@ export class Workflow<
             return (yield* $(stateManager.getWorkflowContext(id))) as Context;
           });
         },
-        updateWorkflowContext(context: unknown) {
-          return stateManager.updateWorkflowContext(id, context);
+        updateWorkflowContext(contextOrUpdater: unknown) {
+          return Effect.gen(function* ($) {
+            if (typeof contextOrUpdater === 'function') {
+              const context = yield* $(stateManager.getWorkflowContext(id));
+              return yield* $(
+                stateManager.updateWorkflowContext(
+                  id,
+                  contextOrUpdater(context)
+                )
+              );
+            }
+            return yield* $(
+              stateManager.updateWorkflowContext(id, contextOrUpdater)
+            );
+          });
         },
       };
     });
diff --git a/src/types.ts b/src/types.ts
index 4a09eb1..4dd1999 100644
--- a/src/types.ts
+++ b/src/types.ts
@@ -65,11 +65,13 @@ export interface WorkflowBuilderDefinition {
   };
 }
 
+type UpdateWorkflowContext<C> = (
+  contextOrUpdater: C | ((context: C) => C)
+) => Effect.Effect<never, WorkflowDoesNotExist, void>;
+
 export interface DefaultTaskOrWorkItemActivityPayload<C> {
   getWorkflowContext(): Effect.Effect<never, WorkflowDoesNotExist, C>;
-  updateWorkflowContext(
-    context: C
-  ): Effect.Effect<never, WorkflowDoesNotExist, void>;
+  updateWorkflowContext: UpdateWorkflowContext<C>;
 }
 
 export type TaskOnDisablePayload<C> =
@@ -534,9 +536,7 @@ export interface ExecutionContext {
       WorkflowDoesNotExist,
       unknown
     >;
-    updateWorkflowContext: (
-      context: unknown
-    ) => Effect.Effect<never, WorkflowDoesNotExist, void>;
+    updateWorkflowContext: UpdateWorkflowContext<unknown>;
   };
   queue: {
     offer: (
@@ -624,16 +624,14 @@ export interface DefaultWorkflowActivityPayload<C, PC> {
   updateParentWorkflowContext: PC extends never
     ? never
     : (
-        context: PC
+        context: PC | ((context: PC) => PC)
       ) => Effect.Effect<
         never,
         ParentWorkflowDoesNotExist | WorkflowDoesNotExist,
         void
       >;
   getWorkflowContext(): Effect.Effect<never, WorkflowDoesNotExist, C>;
-  updateWorkflowContext(
-    context: C
-  ): Effect.Effect<never, WorkflowDoesNotExist, void>;
+  updateWorkflowContext: UpdateWorkflowContext<C>;
 }
 
 export type WorkflowOnStartPayload<C, PC> = DefaultWorkflowActivityPayload<