diff --git a/.gitignore b/.gitignore
index bf19fc6..5a08ef8 100644
--- a/.gitignore
+++ b/.gitignore
@@ -1,2 +1,3 @@
 nitro-nodes-setup/out/
 nitro-nodes-setup/nitro-vars.yml
+l2-setup/out
diff --git a/README.md b/README.md
index 3e13766..41871c5 100644
--- a/README.md
+++ b/README.md
@@ -28,7 +28,7 @@
 
     - Set the `LANG` variable to en_US.UTF-8:
 
-      ```Copy code
+      ```
       LANG="en_US.UTF-8"
       ```
 
@@ -38,4 +38,5 @@
 
 ## Playbooks
 
-- [nitro-nodes-setup](./nitro-nodes-setup/README.md)
+- [l2-setup](./l2-setup/README.md)
+- [nitro-node-setup](./nitro-nodes-setup/README.md)
diff --git a/l2-setup/README.md b/l2-setup/README.md
new file mode 100644
index 0000000..ae31893
--- /dev/null
+++ b/l2-setup/README.md
@@ -0,0 +1,77 @@
+# l2-setup
+
+## Setup Ansible
+
+To get started, follow the [installation](../README.md#installation) guide to setup ansible on your machine
+
+## Setup and Run Optimism
+
+The following commands have to be executed in [`l2-setup`](./) directory
+
+- Edit [`l2-vars.yml`](./l2-vars.yml) with the required values
+
+  ```bash
+  # L1 chain ID
+  l1_chain_id: ""
+
+  # L1 RPC endpoint
+  l1_rpc: ""
+
+  # L1 RPC endpoint host or IP address
+  l1_host: ""
+
+  # L1 RPC endpoint port number
+  l1_port: ""
+
+  # L1 Beacon endpoint
+  l1_beacon: ""
+
+  # Address of the funded account on L1
+  # Used for optimism contracts deployment
+  l1_address: ""
+
+  # Private key of the funded account on L1
+  l1_priv_key: ""
+  ```
+
+- To setup and run L2, execute the `run-optimism.yml` Ansible playbook by running the following command.
+
+  NOTE: By default, deployments are created in the `l2-setup/out` directory. To change this location, update the `l2_directory` variable in the [setup-vars.yml](./setup-vars.yml) file.
+
+  ```bash
+  LANG=en_US.utf8 ansible-playbook -i localhost, --connection=local run-optimism.yml --extra-vars='{ "target_host": "localhost"}' -kK --user $USER
+  ```
+
+  - For skipping container build, set `"skip_container_build" : true` in the `--extra-vars` parameter:
+
+    ```bash
+    LANG=en_US.utf8 ansible-playbook -i localhost, --connection=local run-optimism.yml --extra-vars='{"target_host" : "localhost", "skip_container_build": true}' -kK --user $USER
+    ```
+
+- To run using existing contracts deployment
+
+  - Update `artifact_path` in [`setup-vars.yml`](./setup-vars.yml) file with path to data directory of the existing deployment
+
+  - Run the ansible playbook with `"existing_contracts_deployment": true` in the `--extra-vars` parameter:
+
+    ```bash
+    LANG=en_US.utf8 ansible-playbook -i localhost, --connection=local run-optimism.yml --extra-vars='{"target_host" : "localhost", "existing_contracts_deployment":  true}' -kK --user $USER
+    ```
+
+## Check Deployment Status
+
+- Run the following command in the directory where the optimism-deployment is created
+
+  - Follow optimism contracts deployment logs:
+
+    ```bash
+    laconic-so deployment --dir optimism-deployment logs -f fixturenet-optimism-contracts
+    ```
+
+  - Check L2 logs:
+
+    ```bash
+    laconic-so deployment --dir optimism-deployment logs -f op-geth
+
+    # Ensure new blocks are getting created
+    ```
diff --git a/l2-setup/l2-vars.yml b/l2-setup/l2-vars.yml
new file mode 100644
index 0000000..13796c9
--- /dev/null
+++ b/l2-setup/l2-vars.yml
@@ -0,0 +1,9 @@
+l1_chain_id: ""
+l1_rpc: ""
+l1_host: ""
+l1_port: ""
+l1_beacon: ""
+l1_address: ""
+l1_priv_key: ""
+proposer_amount: "0.2ether"
+batcher_amount: "0.1ether"
diff --git a/l2-setup/run-optimism.yml b/l2-setup/run-optimism.yml
new file mode 100644
index 0000000..0555a8b
--- /dev/null
+++ b/l2-setup/run-optimism.yml
@@ -0,0 +1,89 @@
+- name: Setup L2 on host
+  hosts: "{{ target_host }}"
+
+  vars_files:
+    - setup-vars.yml
+    - l2-vars.yml
+
+  environment:
+    PATH: "{{ ansible_env.PATH }}:/home/{{ansible_user}}/bin"
+
+  tasks:
+    - name: Create directory for L2
+      file:
+        path: "{{ l2_directory }}"
+        state: directory
+
+    - name: Change owner of l2-directory
+      file:
+        path: "{{ l2_directory }}"
+        owner: "{{ansible_user}}"
+        group: "{{ansible_user}}"
+        state: directory
+        recurse: yes
+      become: yes
+
+    - name: Clone fixturenet-optimism-stack
+      command: laconic-so fetch-stack git.vdb.to/cerc-io/fixturenet-optimism-stack --pull
+      ignore_errors: yes
+
+    - name: Clone required repositories for fixturenet-optimism
+      command: laconic-so --stack ~/cerc/fixturenet-optimism-stack/stack/fixturenet-optimism setup-repositories --pull
+
+    - name: Build container images for L2
+      command: laconic-so --stack ~/cerc/fixturenet-optimism-stack/stack/fixturenet-optimism build-containers --force-rebuild
+      when: not skip_container_build
+
+    - name: Generate spec file for L2 deployment
+      template:
+        src: "./templates/specs/l2-spec.yml.j2"
+        dest: "{{ l2_directory }}/optimism-spec.yml"
+
+    - name: Check if the deployment directory exists for L2
+      stat:
+        path: "{{ l2_directory }}/optimism-deployment"
+      register: l2_deployment_dir
+
+    - name: Create a deployment from the spec file for L2
+      command: laconic-so --stack ~/cerc/fixturenet-optimism-stack/stack/fixturenet-optimism deploy create --spec-file optimism-spec.yml --deployment-dir optimism-deployment
+      args:
+        chdir: "{{ l2_directory }}"
+      when: not l2_deployment_dir.stat.exists
+
+    - name: Generate config.env for L2 deployment
+      template:
+        src: "./templates/configs/l2-config.env.j2"
+        dest: "{{ l2_directory }}/optimism-deployment/config.env"
+
+    - name: Copy deployed contract addresses and configuration files
+      block:
+        - name: Copy l1 deployment file
+          copy:
+            src: "{{ artifact_path }}/l1_deployment/{{ l1_chain_id }}-deploy.json"
+            dest: "{{ l2_directory }}/optimism-deployment/data/l1_deployment"
+            remote_src: "{{ target_host != 'localhost' }}"
+
+        - name: Copy l2 configuration file
+          copy:
+            src: "{{ artifact_path }}/l2_config/{{ l1_chain_id }}.json"
+            dest: "{{ l2_directory }}/optimism-deployment/data/l2_config"
+            remote_src: "{{ target_host != 'localhost' }}"
+
+        - name: Copy allocs-l2 file
+          copy:
+            src: "{{ artifact_path }}/l2_config/allocs-l2.json"
+            dest: "{{ l2_directory }}/optimism-deployment/data/l2_config"
+            remote_src: "{{ target_host != 'localhost' }}"
+
+        - name: Copy l2 accounts file
+          copy:
+            src: "{{ artifact_path }}/l2_accounts/accounts.json"
+            dest: "{{ l2_directory }}/optimism-deployment/data/l2_accounts"
+            remote_src: "{{ target_host != 'localhost' }}"
+
+      when: existing_contracts_deployment
+
+    - name: Start L2-deployment
+      command: laconic-so deployment --dir optimism-deployment start
+      args:
+        chdir: "{{ l2_directory }}"
diff --git a/l2-setup/setup-vars.yml b/l2-setup/setup-vars.yml
new file mode 100644
index 0000000..ea03344
--- /dev/null
+++ b/l2-setup/setup-vars.yml
@@ -0,0 +1,4 @@
+skip_container_build: false
+l2_directory: "./out"
+existing_contracts_deployment: false
+artifact_path: ""
diff --git a/l2-setup/templates/configs/l2-config.env.j2 b/l2-setup/templates/configs/l2-config.env.j2
new file mode 100644
index 0000000..11fdfaf
--- /dev/null
+++ b/l2-setup/templates/configs/l2-config.env.j2
@@ -0,0 +1,9 @@
+CERC_L1_CHAIN_ID={{ l1_chain_id }}
+CERC_L1_RPC={{ l1_rpc }}
+CERC_L1_HOST={{ l1_host }}
+CERC_L1_PORT={{ l1_port }}
+CERC_L1_BEACON={{ l1_beacon }}
+CERC_L1_ADDRESS={{ l1_address }}
+CERC_L1_PRIV_KEY={{ l1_priv_key }}
+CERC_PROPOSER_AMOUNT={{ proposer_amount }}
+CERC_BATCHER_AMOUNT={{ batcher_amount }}
diff --git a/l2-setup/templates/specs/l2-spec.yml.j2 b/l2-setup/templates/specs/l2-spec.yml.j2
new file mode 100644
index 0000000..456e557
--- /dev/null
+++ b/l2-setup/templates/specs/l2-spec.yml.j2
@@ -0,0 +1,18 @@
+stack: /home/{{ansible_user}}/cerc/fixturenet-optimism-stack/stack/fixturenet-optimism
+deploy-to: compose
+network:
+  ports:
+    op-geth:
+     - '9545:8545'
+     - '9546:8546'
+    op-node:
+     - '8547'
+    op-batcher:
+     - '8548'
+    op-proposer:
+     - '8560'
+volumes:
+  l1_deployment: ./data/l1_deployment
+  l2_accounts: ./data/l2_accounts
+  l2_config: ./data/l2_config
+  l2_geth_data: ./data/l2_geth_data