diff --git a/datadog_lambda/tracing.py b/datadog_lambda/tracing.py
index 19ef8c04..67836e46 100644
--- a/datadog_lambda/tracing.py
+++ b/datadog_lambda/tracing.py
@@ -2,7 +2,7 @@
 # under the Apache License Version 2.0.
 # This product includes software developed at Datadog (https://www.datadoghq.com/).
 # Copyright 2019 Datadog, Inc.
-
+import hashlib
 import logging
 import os
 import json
@@ -328,6 +328,39 @@ def extract_context_from_kinesis_event(event, lambda_context):
         return extract_context_from_lambda_context(lambda_context)
 
 
+def _deterministic_md5_hash(s: str) -> str:
+    """MD5 here is to generate trace_id, not for any encryption."""
+    hex_number = hashlib.md5(s.encode("ascii")).hexdigest()
+    binary = bin(int(hex_number, 16))
+    binary_str = str(binary)
+    binary_str_remove_0b = binary_str[2:].rjust(128, "0")
+    most_significant_64_bits_without_leading_1 = "0" + binary_str_remove_0b[1:-64]
+    result = str(int(most_significant_64_bits_without_leading_1, 2))
+    if result == "0" * 64:
+        return "1"
+    return result
+
+
+def extract_context_from_step_functions(event, lambda_context):
+    """
+    Only extract datadog trace context when Step Functions Context Object is injected
+    into lambda's event dict.
+    """
+    try:
+        execution_id = event.get("Execution").get("Id")
+        state_name = event.get("State").get("Name")
+        state_entered_time = event.get("State").get("EnteredTime")
+        trace_id = _deterministic_md5_hash(execution_id)
+        parent_id = _deterministic_md5_hash(
+            execution_id + "#" + state_name + "#" + state_entered_time
+        )
+        sampling_priority = SamplingPriority.AUTO_KEEP
+        return trace_id, parent_id, sampling_priority
+    except Exception as e:
+        logger.debug("The Step Functions trace extractor returned with error %s", e)
+        return extract_context_from_lambda_context(lambda_context)
+
+
 def extract_context_custom_extractor(extractor, event, lambda_context):
     """
     Extract Datadog trace context using a custom trace extractor function
@@ -440,6 +473,12 @@ def extract_dd_trace_context(
             parent_id,
             sampling_priority,
         ) = extract_context_from_kinesis_event(event, lambda_context)
+    elif event_source.equals(EventTypes.STEPFUNCTIONS):
+        (
+            trace_id,
+            parent_id,
+            sampling_priority,
+        ) = extract_context_from_step_functions(event, lambda_context)
     else:
         trace_id, parent_id, sampling_priority = extract_context_from_lambda_context(
             lambda_context
diff --git a/datadog_lambda/trigger.py b/datadog_lambda/trigger.py
index 0576e3f9..bbb44b30 100644
--- a/datadog_lambda/trigger.py
+++ b/datadog_lambda/trigger.py
@@ -34,12 +34,13 @@ class EventTypes(_stringTypedEnum):
     CLOUDWATCH_EVENTS = "cloudwatch-events"
     CLOUDFRONT = "cloudfront"
     DYNAMODB = "dynamodb"
+    EVENTBRIDGE = "eventbridge"
     KINESIS = "kinesis"
     LAMBDA_FUNCTION_URL = "lambda-function-url"
     S3 = "s3"
     SNS = "sns"
     SQS = "sqs"
-    EVENTBRIDGE = "eventbridge"
+    STEPFUNCTIONS = "states"
 
 
 class EventSubtypes(_stringTypedEnum):
@@ -145,6 +146,9 @@ def parse_event_source(event: dict) -> _EventSource:
     if event.get("source") == "aws.events" or has_event_categories:
         event_source = _EventSource(EventTypes.CLOUDWATCH_EVENTS)
 
+    if "Execution" in event and "StateMachine" in event and "State" in event:
+        event_source = _EventSource(EventTypes.STEPFUNCTIONS)
+
     event_record = get_first_record(event)
     if event_record:
         aws_event_source = event_record.get(
diff --git a/tests/test_tracing.py b/tests/test_tracing.py
index 25865d5e..e19c66aa 100644
--- a/tests/test_tracing.py
+++ b/tests/test_tracing.py
@@ -5,7 +5,7 @@
 from unittest.mock import MagicMock, Mock, patch, call
 
 import ddtrace
-from ddtrace.constants import ERROR_MSG, ERROR_TYPE
+
 from ddtrace import tracer
 from ddtrace.context import Context
 
@@ -15,6 +15,7 @@
     XraySubsegment,
 )
 from datadog_lambda.tracing import (
+    _deterministic_md5_hash,
     create_inferred_span,
     extract_dd_trace_context,
     create_dd_dummy_metadata_subsegment,
@@ -1334,9 +1335,7 @@ def test_create_inferred_span_from_api_gateway_event_no_apiid(self):
             event = json.load(event)
         ctx = get_mock_context()
         ctx.aws_request_id = "123"
-        print(event)
         span = create_inferred_span(event, ctx)
-        print(span)
         self.assertEqual(span.get_tag("operation_name"), "aws.apigateway.rest")
         self.assertEqual(
             span.service,
@@ -1389,3 +1388,24 @@ def test_no_error_with_nonetype_headers(self):
             lambda_ctx,
         )
         self.assertEqual(ctx, None)
+
+
+class TestStepFunctionsTraceContext(unittest.TestCase):
+    def test_deterministic_m5_hash(self):
+        result = _deterministic_md5_hash("some_testing_random_string")
+        self.assertEqual("2251275791555400689", result)
+
+    def test_deterministic_m5_hash__result_the_same_as_backend(self):
+        result = _deterministic_md5_hash(
+            "arn:aws:states:sa-east-1:601427271234:express:DatadogStateMachine:acaf1a67-336a-e854-1599-2a627eb2dd8a"
+            ":c8baf081-31f1-464d-971f-70cb17d01111#step-one#2022-12-08T21:08:19.224Z"
+        )
+        self.assertEqual("8034507082463708833", result)
+
+    def test_deterministic_m5_hash__always_leading_with_zero(self):
+        for i in range(100):
+            result = _deterministic_md5_hash(str(i))
+            result_in_binary = bin(int(result))
+            # Leading zeros will be omitted, so only test for full 64 bits present
+            if len(result_in_binary) == 66:  # "0b" + 64 bits.
+                self.assertTrue(result_in_binary.startswith("0b0"))