diff --git a/scripts/test_env.py b/scripts/test_env.py
index 65b2266c3ca..f6463040a1f 100755
--- a/scripts/test_env.py
+++ b/scripts/test_env.py
@@ -134,6 +134,35 @@ def run(self, is_genesis: bool = False):
         subprocess.Popen([self.name, genesis_arg], executable=f"{self.out_dir}/peers/iroha",
                     stdout=log_file, stderr=subprocess.STDOUT)
 
+def initialize_test_smart_contracts(root_dir: pathlib.Path, out_dir: pathlib.Path):
+    """
+    Function to make directory called smartcontracts, build every integeration smartcontract,
+    the it moves the result WASM file to the smartcontracts directory. 
+    """
+    smartcontracts_dir = out_dir / "smartcontracts"
+    os.makedirs(smartcontracts_dir, exist_ok=True)
+    source_dir = pathlib.Path("./client/tests/integration/smartcontracts")
+
+    #Iterate through every smartcontract in the inte
+    for folder in [f for f in source_dir.iterdir() if f.is_dir()]:
+        folder_name = folder.name
+        if folder_name == ".cargo":
+            continue
+        # Path of the output .wasm file
+        wasm_file_name = f"{folder_name}.wasm"
+        wasm_file_path = root_dir / wasm_file_name
+
+        # Build the smart contracts in the root director
+        subprocess.run([
+            "cargo", "run", "--bin", "iroha_wasm_builder_cli", "--", "build",
+            str(folder), "--optimize", "--outfile", str(wasm_file_path)
+        ])
+
+        # Move the .wasm file to the smarts contracts folder
+        if wasm_file_path.exists():
+            shutil.move(str(wasm_file_path), str(smartcontracts_dir / wasm_file_name))
+
+
 def pos_int(arg):
     if int(arg) > 0:
         return int(arg)
@@ -181,6 +210,7 @@ def main(args: argparse.Namespace):
 def setup(args: argparse.Namespace):
     logging.info(f"Starting iroha network with {args.n_peers} peers...")
     os.makedirs(args.out_dir, exist_ok=True)
+    initialize_test_smart_contracts(args.root_dir, args.out_dir)
     copy_or_prompt_build_bin("iroha_client_cli", args.root_dir, args.out_dir)
     with open(os.path.join(args.out_dir, "metadata.json"), "w") as f:
         f.write('{"comment":{"String": "Hello Meta!"}}')