diff --git a/docs/Extensions.md b/docs/Extensions.md
index ae1c011..3244f5f 100644
--- a/docs/Extensions.md
+++ b/docs/Extensions.md
@@ -89,3 +89,23 @@ In addition, podman-compose supports the following podman-specific values for `n
 
 The options to the network modes are passed to the `--network` option of the `podman create` command
 as-is.
+
+
+## Custom pods management
+
+Podman-compose can have containers in pods. This can be controlled by extension key x-podman in_pod.
+It allows providing custom value for --in-pod and is especially relevant when --userns has to be set.
+
+For example, the following docker-compose.yml allows using userns_mode by overriding the default
+value of --in-pod (unless it was specifically provided by "--in-pod=True" in command line interface).
+```yml
+version: "3"
+services:
+    cont:
+        image: nopush/podman-compose-test
+        userns_mode: keep-id:uid=1000
+        command: ["dumb-init", "/bin/busybox", "httpd", "-f", "-p", "8080"]
+
+x-podman:
+    in_pod: false
+```
diff --git a/podman_compose.py b/podman_compose.py
index 39ed03c..be3318f 100755
--- a/podman_compose.py
+++ b/podman_compose.py
@@ -1741,6 +1741,18 @@ class PodmanCompose:
         if isinstance(retcode, int):
             sys.exit(retcode)
 
+    def resolve_in_pod(self, compose):
+        if self.global_args.in_pod_bool is None:
+            extension_dict = compose.get("x-podman", None)
+            if extension_dict is not None:
+                in_pod_value = extension_dict.get("in_pod", None)
+                if in_pod_value is not None:
+                    self.global_args.in_pod_bool = in_pod_value
+            else:
+                self.global_args.in_pod_bool = True
+        # otherwise use `in_pod` value provided by command line
+        return self.global_args.in_pod_bool
+
     def _parse_compose_file(self):
         args = self.global_args
         # cmd = args.command
@@ -1968,6 +1980,8 @@ class PodmanCompose:
         given_containers = list(container_by_name.values())
         given_containers.sort(key=lambda c: len(c.get("_deps", None) or []))
         # log("sorted:", [c["name"] for c in given_containers])
+
+        args.in_pod_bool = self.resolve_in_pod(compose)
         pods, containers = transform(args, project_name, given_containers)
         self.pods = pods
         self.containers = containers
@@ -2005,12 +2019,22 @@ class PodmanCompose:
             for cmd_parser in cmd._parse_args:  # pylint: disable=protected-access
                 cmd_parser(subparser)
         self.global_args = parser.parse_args()
-        if self.global_args.in_pod.lower() not in ('', 'true', '1', 'false', '0'):
+        if self.global_args.in_pod is not None and self.global_args.in_pod.lower() not in (
+            '',
+            'true',
+            '1',
+            'false',
+            '0',
+        ):
             raise ValueError(
                 f'Invalid --in-pod value: \'{self.global_args.in_pod}\'. '
                 'It must be set to either of: empty value, true, 1, false, 0'
             )
-        self.global_args.in_pod_bool = self.global_args.in_pod.lower() in ('', 'true', '1')
+
+        if self.global_args.in_pod == '' or self.global_args.in_pod is None:
+            self.global_args.in_pod_bool = None
+        else:
+            self.global_args.in_pod_bool = self.global_args.in_pod.lower() in ('true', '1')
 
         if self.global_args.version:
             self.global_args.command = "version"
@@ -2029,7 +2053,7 @@ class PodmanCompose:
             help="pod creation",
             metavar="in_pod",
             type=str,
-            default="true",
+            default=None,
         )
         parser.add_argument(
             "--pod-args",
diff --git a/tests/in_pod/custom_x-podman_false/docker-compose.yml b/tests/in_pod/custom_x-podman_false/docker-compose.yml
new file mode 100644
index 0000000..c967bef
--- /dev/null
+++ b/tests/in_pod/custom_x-podman_false/docker-compose.yml
@@ -0,0 +1,9 @@
+version: "3"
+services:
+    cont:
+        image: nopush/podman-compose-test
+        userns_mode: keep-id:uid=1000
+        command: ["dumb-init", "/bin/busybox", "httpd", "-f", "-p", "8080"]
+
+x-podman:
+    in_pod: false
diff --git a/tests/in_pod/custom_x-podman_not_exists/docker-compose.yml b/tests/in_pod/custom_x-podman_not_exists/docker-compose.yml
new file mode 100644
index 0000000..8514c79
--- /dev/null
+++ b/tests/in_pod/custom_x-podman_not_exists/docker-compose.yml
@@ -0,0 +1,6 @@
+version: "3"
+services:
+    cont:
+        image: nopush/podman-compose-test
+        userns_mode: keep-id:uid=1000
+        command: ["dumb-init", "/bin/busybox", "httpd", "-f", "-p", "8080"]
diff --git a/tests/in_pod/custom_x-podman_true/docker-compose.yml b/tests/in_pod/custom_x-podman_true/docker-compose.yml
new file mode 100644
index 0000000..698f7b4
--- /dev/null
+++ b/tests/in_pod/custom_x-podman_true/docker-compose.yml
@@ -0,0 +1,9 @@
+version: "3"
+services:
+    cont:
+        image: nopush/podman-compose-test
+        userns_mode: keep-id:uid=1000
+        command: ["dumb-init", "/bin/busybox", "httpd", "-f", "-p", "8080"]
+
+x-podman:
+    in_pod: true
diff --git a/tests/test_podman_compose_in_pod.py b/tests/test_podman_compose_in_pod.py
new file mode 100644
index 0000000..ed66a17
--- /dev/null
+++ b/tests/test_podman_compose_in_pod.py
@@ -0,0 +1,442 @@
+# SPDX-License-Identifier: GPL-2.0
+
+import os
+import unittest
+from pathlib import Path
+
+from .test_utils import RunSubprocessMixin
+
+
+def base_path():
+    """Returns the base path for the project"""
+    return Path(__file__).parent.parent
+
+
+def test_path():
+    """Returns the path to the tests directory"""
+    return os.path.join(base_path(), "tests")
+
+
+def podman_compose_path():
+    """Returns the path to the podman compose script"""
+    return os.path.join(base_path(), "podman_compose.py")
+
+
+# If a compose file has userns_mode set, setting in_pod to True, results in error.
+# Default in_pod setting is True, unless compose file provides otherwise.
+# Compose file provides custom in_pod option, which can be overridden by command line in_pod option.
+# Test all combinations of command line argument in_pod and compose file argument in_pod.
+class TestPodmanComposeInPod(unittest.TestCase, RunSubprocessMixin):
+    # compose file provides x-podman in_pod=false
+    def test_x_podman_in_pod_false_command_line_in_pod_not_exists(self):
+        """
+        Test that podman-compose will not create a pod, when x-podman in_pod=false and command line
+        does not provide this option
+        """
+        main_path = Path(__file__).parent.parent
+
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_false", "docker-compose.yml")
+            ),
+            "up",
+            "-d",
+        ]
+
+        down_cmd = [
+            "python3",
+            podman_compose_path(),
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_false", "docker-compose.yml")
+            ),
+            "down",
+        ]
+
+        try:
+            self.run_subprocess_assert_returncode(command_up)
+
+        finally:
+            self.run_subprocess_assert_returncode(down_cmd)
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_false"]
+            # throws an error, can not actually find this pod because it was not created
+            self.run_subprocess_assert_returncode(command_rm_pod, expected_returncode=1)
+
+    def test_x_podman_in_pod_false_command_line_in_pod_true(self):
+        """
+        Test that podman-compose does not allow pod creating even with command line in_pod=True
+        when --userns and --pod are set together: throws an error
+        """
+        main_path = Path(__file__).parent.parent
+
+        # FIXME: creates a pod anyway, although it should not
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "--in-pod=True",
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_false", "docker-compose.yml")
+            ),
+            "up",
+            "-d",
+        ]
+
+        try:
+            out, err = self.run_subprocess_assert_returncode(command_up)
+            self.assertEqual(b"Error: --userns and --pod cannot be set together" in err, True)
+
+        finally:
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_false"]
+            # should throw an error of not being able to find this pod (because it should not have
+            # been created) and have expected_returncode=1 (see FIXME above)
+            self.run_subprocess_assert_returncode(command_rm_pod)
+
+    def test_x_podman_in_pod_false_command_line_in_pod_false(self):
+        """
+        Test that podman-compose will not create a pod as command line sets in_pod=False
+        """
+        main_path = Path(__file__).parent.parent
+
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "--in-pod=False",
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_false", "docker-compose.yml")
+            ),
+            "up",
+            "-d",
+        ]
+
+        down_cmd = [
+            "python3",
+            podman_compose_path(),
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_false", "docker-compose.yml")
+            ),
+            "down",
+        ]
+
+        try:
+            self.run_subprocess_assert_returncode(command_up)
+
+        finally:
+            self.run_subprocess_assert_returncode(down_cmd)
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_false"]
+            # can not actually find this pod because it was not created
+            self.run_subprocess_assert_returncode(command_rm_pod, 1)
+
+    def test_x_podman_in_pod_false_command_line_in_pod_empty_string(self):
+        """
+        Test that podman-compose will not create a pod, when x-podman in_pod=false and command line
+        command line in_pod=""
+        """
+        main_path = Path(__file__).parent.parent
+
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "--in-pod=",
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_false", "docker-compose.yml")
+            ),
+            "up",
+            "-d",
+        ]
+
+        down_cmd = [
+            "python3",
+            podman_compose_path(),
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_false", "docker-compose.yml")
+            ),
+            "down",
+        ]
+
+        try:
+            self.run_subprocess_assert_returncode(command_up)
+
+        finally:
+            self.run_subprocess_assert_returncode(down_cmd)
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_false"]
+            # can not actually find this pod because it was not created
+            self.run_subprocess_assert_returncode(command_rm_pod, 1)
+
+    # compose file provides x-podman in_pod=true
+    def test_x_podman_in_pod_true_command_line_in_pod_not_exists(self):
+        """
+        Test that podman-compose does not allow pod creating when --userns and --pod are set
+        together even when x-podman in_pod=true: throws an error
+        """
+        main_path = Path(__file__).parent.parent
+
+        # FIXME: creates a pod anyway, although it should not
+        # Container is not created, so command 'down' is not needed
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_true", "docker-compose.yml")
+            ),
+            "up",
+            "-d",
+        ]
+
+        try:
+            out, err = self.run_subprocess_assert_returncode(command_up)
+            self.assertEqual(b"Error: --userns and --pod cannot be set together" in err, True)
+
+        finally:
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_true"]
+            # should throw an error of not being able to find this pod (it should not have been
+            # created) and have expected_returncode=1 (see FIXME above)
+            self.run_subprocess_assert_returncode(command_rm_pod)
+
+    def test_x_podman_in_pod_true_command_line_in_pod_true(self):
+        """
+        Test that podman-compose does not allow pod creating when --userns and --pod are set
+        together even when x-podman in_pod=true and and command line in_pod=True: throws an error
+        """
+        main_path = Path(__file__).parent.parent
+
+        # FIXME: creates a pod anyway, although it should not
+        # Container is not created, so command 'down' is not needed
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "--in-pod=True",
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_true", "docker-compose.yml")
+            ),
+            "up",
+            "-d",
+        ]
+
+        try:
+            out, err = self.run_subprocess_assert_returncode(command_up)
+            self.assertEqual(b"Error: --userns and --pod cannot be set together" in err, True)
+
+        finally:
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_true"]
+            # should throw an error of not being able to find this pod (because it should not have
+            # been created) and have expected_returncode=1 (see FIXME above)
+            self.run_subprocess_assert_returncode(command_rm_pod)
+
+    def test_x_podman_in_pod_true_command_line_in_pod_false(self):
+        """
+        Test that podman-compose will not create a pod as command line sets in_pod=False
+        """
+        main_path = Path(__file__).parent.parent
+
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "--in-pod=False",
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_true", "docker-compose.yml")
+            ),
+            "up",
+            "-d",
+        ]
+
+        down_cmd = [
+            "python3",
+            podman_compose_path(),
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_true", "docker-compose.yml")
+            ),
+            "down",
+        ]
+
+        try:
+            self.run_subprocess_assert_returncode(command_up)
+
+        finally:
+            self.run_subprocess_assert_returncode(down_cmd)
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_false"]
+            # can not actually find this pod because it was not created
+            self.run_subprocess_assert_returncode(command_rm_pod, 1)
+
+    def test_x_podman_in_pod_true_command_line_in_pod_empty_string(self):
+        """
+        Test that podman-compose does not allow pod creating when --userns and --pod are set
+        together even when x-podman in_pod=true and command line in_pod="": throws an error
+        """
+        main_path = Path(__file__).parent.parent
+
+        # FIXME: creates a pod anyway, although it should not
+        # Container is not created, so command 'down' is not needed
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "--in-pod=",
+            "-f",
+            str(
+                main_path.joinpath("tests", "in_pod", "custom_x-podman_true", "docker-compose.yml")
+            ),
+            "up",
+            "-d",
+        ]
+
+        try:
+            out, err = self.run_subprocess_assert_returncode(command_up)
+            self.assertEqual(b"Error: --userns and --pod cannot be set together" in err, True)
+
+        finally:
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_true"]
+            # should throw an error of not being able to find this pod (because it should not have
+            # been created) and have expected_returncode=1 (see FIXME above)
+            self.run_subprocess_assert_returncode(command_rm_pod)
+
+    # compose file does not provide x-podman in_pod
+    def test_x_podman_in_pod_not_exists_command_line_in_pod_not_exists(self):
+        """
+        Test that podman-compose does not allow pod creating when --userns and --pod are set
+        together: throws an error
+        """
+        main_path = Path(__file__).parent.parent
+
+        # FIXME: creates a pod anyway, although it should not
+        # Container is not created, so command 'down' is not needed
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "-f",
+            str(
+                main_path.joinpath(
+                    "tests", "in_pod", "custom_x-podman_not_exists", "docker-compose.yml"
+                )
+            ),
+            "up",
+            "-d",
+        ]
+
+        try:
+            out, err = self.run_subprocess_assert_returncode(command_up)
+            self.assertEqual(b"Error: --userns and --pod cannot be set together" in err, True)
+
+        finally:
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_not_exists"]
+            # should throw an error of not being able to find this pod (it should not have been
+            # created) and have expected_returncode=1 (see FIXME above)
+            self.run_subprocess_assert_returncode(command_rm_pod)
+
+    def test_x_podman_in_pod_not_exists_command_line_in_pod_true(self):
+        """
+        Test that podman-compose does not allow pod creating when --userns and --pod are set
+        together even when x-podman in_pod=true: throws an error
+        """
+        main_path = Path(__file__).parent.parent
+
+        # FIXME: creates a pod anyway, although it should not
+        # Container was not created, so command 'down' is not needed
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "--in-pod=True",
+            "-f",
+            str(
+                main_path.joinpath(
+                    "tests", "in_pod", "custom_x-podman_not_exists", "docker-compose.yml"
+                )
+            ),
+            "up",
+            "-d",
+        ]
+
+        try:
+            out, err = self.run_subprocess_assert_returncode(command_up)
+            self.assertEqual(b"Error: --userns and --pod cannot be set together" in err, True)
+
+        finally:
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_not_exists"]
+            # should throw an error of not being able to find this pod (because it should not have
+            # been created) and have expected_returncode=1 (see FIXME above)
+            self.run_subprocess_assert_returncode(command_rm_pod)
+
+    def test_x_podman_in_pod_not_exists_command_line_in_pod_false(self):
+        """
+        Test that podman-compose will not create a pod as command line sets in_pod=False
+        """
+        main_path = Path(__file__).parent.parent
+
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "--in-pod=False",
+            "-f",
+            str(
+                main_path.joinpath(
+                    "tests", "in_pod", "custom_x-podman_not_exists", "docker-compose.yml"
+                )
+            ),
+            "up",
+            "-d",
+        ]
+
+        down_cmd = [
+            "python3",
+            podman_compose_path(),
+            "-f",
+            str(
+                main_path.joinpath(
+                    "tests", "in_pod", "custom_x-podman_not_exists", "docker-compose.yml"
+                )
+            ),
+            "down",
+        ]
+
+        try:
+            self.run_subprocess_assert_returncode(command_up)
+
+        finally:
+            self.run_subprocess_assert_returncode(down_cmd)
+
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_not_exists"]
+            # can not actually find this pod because it was not created
+            self.run_subprocess_assert_returncode(command_rm_pod, 1)
+
+    def test_x_podman_in_pod_not_exists_command_line_in_pod_empty_string(self):
+        """
+        Test that podman-compose does not allow pod creating when --userns and --pod are set
+        together: throws an error
+        """
+        main_path = Path(__file__).parent.parent
+
+        # FIXME: creates a pod anyway, although it should not
+        # Container was not created, so command 'down' is not needed
+        command_up = [
+            "python3",
+            str(main_path.joinpath("podman_compose.py")),
+            "--in-pod=",
+            "-f",
+            str(
+                main_path.joinpath(
+                    "tests", "in_pod", "custom_x-podman_not_exists", "docker-compose.yml"
+                )
+            ),
+            "up",
+            "-d",
+        ]
+
+        try:
+            out, err = self.run_subprocess_assert_returncode(command_up)
+            self.assertEqual(b"Error: --userns and --pod cannot be set together" in err, True)
+
+        finally:
+            command_rm_pod = ["podman", "pod", "rm", "pod_custom_x-podman_not_exists"]
+            # should throw an error of not being able to find this pod (because it should not have
+            # been created) and have expected_returncode=1 (see FIXME above)
+            self.run_subprocess_assert_returncode(command_rm_pod)