diff --git a/DEVELOPMENT.md b/DEVELOPMENT.md
new file mode 100644
index 00000000..b7714e66
--- /dev/null
+++ b/DEVELOPMENT.md
@@ -0,0 +1,108 @@
+# Development Setup
+
+## Setting up development environment
+
+### Toolchain
+
+You'll have to install before you can start writing code.
+
+1. Install Rust:
+   Install Cargo(Rust toolchain) using [rustup](https://rustup.rs/) with:
+
+```
+$ curl --proto '=https' --tlsv1.2 -sSf https://sh.rustup.rs | sh
+```
+
+2. Install Node:
+   Please refer to [official instructions](https://nodejs.org/en/download/)
+
+3. Install yarn:
+   `npm install -g yarn`
+   For more details, refer to [official
+   instructions](https://yarnpkg.com/getting-started/install)
+
+4. GNU Make:
+   If you are on Linux, it's probably already installed on your machine.
+
+You can check it's existence by running:
+
+```bash
+$ make --version
+```
+
+If it's not available, you download it with your package manager or
+refer to [official instructions](https://www.gnu.org/software/make/)
+
+### External Dependencies:
+
+### Postgres databse:
+
+The backend requires a Postgres database. We have
+compiletime SQL checks so without a database available, you won't be
+able to build the project.
+
+I use Postgres in Docker.
+
+1. To install Docker, please refer to [official
+   instructions](https://docs.docker.com/engine/install/].
+
+2. Create create database user:
+
+```bash
+$ docker create --name mcaptcha-postgres \
+	-e POSTGRES_PASSWORD=password \
+	-p 5432:5432    postgres
+```
+
+3. Start database container:
+
+```bash
+$ docker start mcaptcha-postgres
+```
+
+4. Set configurations:
+
+```bash
+$ cd guard # your copy of https://github.com/mCaptcha/guard
+$ echo 'export DATABASE_URL="postgres://postgres:password@localhost:5432/postgres"' > .env
+```
+
+**NOTE: Don't use this database for other projects**
+
+5. Run migrations:
+   This step is only required when migrations are updated. The server
+   binary has inbuilt migrations manager but that can only be used after
+   the server is compiled. Since we are trying to compile the server here,
+   we can't use that.
+
+However, this project ships with a utility to run migrations!
+
+```bash
+$ cd guard # your copy of https://github.com/mCaptcha/guard
+$ cargo run --bin tests-migrate
+```
+
+That's it, you are all set!
+
+## Build commands:
+
+### Compile:
+
+```bash
+$ cd guard # your copy of https://github.com/mCaptcha/guard
+$ make
+```
+
+### Additional commands:
+
+```bash
+➜  guard git:(master) ✗ make help
+  docs      	- build documentation
+  run       	- run developer instance
+  test 		- run unit and integration tests
+  migrate   	- run database migrations
+  dev-env 	- download dependencies
+  clean     	- drop builds and environments
+  coverage 	- build test coverage in HTML format
+  xml-coverage 	- build test coverage in XML for upload to codecov
+```
diff --git a/README.md b/README.md
index 4355c59f..e22170f2 100644
--- a/README.md
+++ b/README.md
@@ -18,7 +18,11 @@
 Guard is the back-end component of [mCaptcha](https://mcaptcha.org)
 system.
 
-**STATUS: UNUSABLE BUT ACTIVE DEVELOPMENT** 
+**STATUS: UNUSABLE BUT ACTIVE DEVELOPMENT**
+
+### Development:
+
+See [DEVELOPMENT.md](./DEVELOPMENT.md)
 
 ### How to build
 
@@ -48,7 +52,6 @@ Configuration is applied/merged in the following order:
 1. `config/default.toml`
 2. environment variables.
 
-
 #### Setup
 
 ##### Environment variables: