diff --git a/src/trace/context.spec.ts b/src/trace/context.spec.ts
index e415a9331..fece383b5 100644
--- a/src/trace/context.spec.ts
+++ b/src/trace/context.spec.ts
@@ -393,7 +393,7 @@ describe("readTraceFromSQSEvent", () => {
 });
 
 describe("readTraceFromLambdaContext", () => {
-  it("can read from lambda context source", () => {
+  it("can read from lambda context source, legacy style", () => {
     const result = readTraceFromLambdaContext({
       clientContext: {
         custom: {
@@ -413,6 +413,24 @@ describe("readTraceFromLambdaContext", () => {
       source: Source.Event,
     });
   });
+  it("can read from lambda context source, new style", () => {
+    const result = readTraceFromLambdaContext({
+      clientContext: {
+        custom: {
+          "x-datadog-trace-id": "666",
+          "x-datadog-parent-id": "777",
+          "x-datadog-sampled": "1",
+          "x-datadog-sampling-priority": "1",
+        },
+      },
+    });
+    expect(result).toEqual({
+      parentID: "777",
+      sampleMode: SampleMode.AUTO_KEEP,
+      traceID: "666",
+      source: Source.Event,
+    });
+  });
   it("can handle no `custom` key", () => {
     const result = readTraceFromLambdaContext({
       clientContext: {
@@ -421,6 +439,14 @@ describe("readTraceFromLambdaContext", () => {
     });
     expect(result).toBeUndefined();
   });
+  it("can handle a string `custom` key", () => {
+    const result = readTraceFromLambdaContext({
+      clientContext: {
+        custom: "bar",
+      },
+    });
+    expect(result).toBeUndefined();
+  });
   it("can handle no context", () => {
     const result = readTraceFromLambdaContext(undefined);
     expect(result).toBeUndefined();
diff --git a/src/trace/context.ts b/src/trace/context.ts
index 918fa1810..c38df2138 100644
--- a/src/trace/context.ts
+++ b/src/trace/context.ts
@@ -223,9 +223,28 @@ export function readTraceFromLambdaContext(context: any): TraceContext | undefin
     return;
   }
 
-  const traceData = context.clientContext?.custom?._datadog;
+  const custom = context.clientContext?.custom;
 
-  if (!traceData || typeof traceData !== "object") {
+  if (!custom || typeof custom !== "object") {
+    return;
+  }
+  let traceData = null;
+
+  if (
+    custom.hasOwnProperty("_datadog") &&
+    typeof custom._datadog === "object" &&
+    custom._datadog.hasOwnProperty(traceIDHeader) &&
+    custom._datadog.hasOwnProperty(parentIDHeader) &&
+    custom._datadog.hasOwnProperty(samplingPriorityHeader)
+  ) {
+    traceData = custom._datadog;
+  } else if (
+    custom.hasOwnProperty(traceIDHeader) &&
+    custom.hasOwnProperty(parentIDHeader) &&
+    custom.hasOwnProperty(samplingPriorityHeader)
+  ) {
+    traceData = custom;
+  } else {
     return;
   }