diff --git a/src/lib/parseCssConfig.js b/src/lib/parseCssConfig.js
new file mode 100644
index 000000000..99a9acfd8
--- /dev/null
+++ b/src/lib/parseCssConfig.js
@@ -0,0 +1,102 @@
+// @ts-check
+
+/**
+ * Find and convert the `:theme` rule to a configuration object
+ * This is merged with the user's JS config
+ * It should take precedence over the JS config
+ *
+ * @param {import('postcss').Root} root
+ */
+export function parseCssConfig(root) {
+  let config = { extend: { colors: {} } }
+
+  let theme = root.nodes.find(node => node.type === 'rule' && node.selector === ':theme')
+  if (!theme) return config
+
+  theme.walkDecls((decl) => {
+    if (decl.prop.startsWith('--')) {
+      parseVariable(config, decl.prop.slice(2), decl.value)
+    } else {
+      // Only CSS variables are allowed in the theme rule
+      // TODO: Maybe turn this into an error?
+      decl.remove()
+    }
+  })
+
+  theme.remove()
+
+  return config
+}
+
+let prefixPluginMap = {
+  'colors': 'colors',
+  'spacing': 'spacing',
+  'font-family': 'fontFamily',
+  'font-size': 'fontSize',
+  'shadow': 'boxShadow',
+}
+
+/**
+ * Parse a key into one or more actions that modify the config and/or CSS
+ *
+ * @param {*} config
+ * @param {string} name
+ * @param {string} value
+ */
+function parseVariable(config, name, value) {
+  // Parse the variable name into a config plugin and keypath
+  let [plugin, keypath] = parseVariableName(name, value)
+
+  console.log({ name, plugin, keypath, value })
+
+  // We couldn't find a plugin for this variable, so we can't do anything with it
+  if (plugin === null) return
+
+  if (keypath === null && value === 'unset') {
+    // when using `--some-plugin: unset` we want to reset whatever the default value is
+    config[plugin] = {}
+
+    // This also means there is no reason to keep the variable in the CSS
+    decl.remove()
+
+    return
+  }
+
+  // When using `--some-plugin: initial` it should reset to the default value for that key
+  // This effectively means removing it
+  if (keypath === null && value === 'initial') {
+    delete config[plugin]
+    delete config.extend[plugin]
+
+    // This also means there is no reason to keep the variable in the CSS
+    decl.remove()
+
+    return
+  }
+
+  // All other cases are config keys in a plugin
+  config.extend[plugin] ??= {}
+  config.extend[plugin][keypath] = value
+}
+
+/**
+ * Parse a key into one or more actions that modify the config and/or CSS
+ *
+ * @param {string} name
+ * @param {string} value
+ * @returns {[plugin: string|null, keypath: string|null]}
+ */
+function parseVariableName(name, value) {
+  for (const [prefix, plugin] of Object.entries(prefixPluginMap)) {
+    if (!name.startsWith(prefix)) continue
+
+    // The keypath is the part of the variable name after the prefix
+    let keypath = name.slice(prefix.length)
+    if (keypath.startsWith('-')) keypath = keypath.slice(1)
+    if (keypath === '') keypath = null
+
+    return [plugin, keypath]
+  }
+
+  return [null, null]
+}
diff --git a/src/plugin.js b/src/plugin.js
index d617b55cf..396f9b54c 100644
--- a/src/plugin.js
+++ b/src/plugin.js
@@ -6,6 +6,7 @@ import processTailwindFeatures from './processTailwindFeatures'
 import { env } from './lib/sharedState'
 import { findAtConfigPath } from './lib/findAtConfigPath'
 import { handleImportAtRules } from './lib/handleImportAtRules'
+import { parseCssConfig } from './lib/parseCssConfig'
 
 module.exports = function tailwindcss(configOrPath) {
   return {
@@ -23,24 +24,8 @@ module.exports = function tailwindcss(configOrPath) {
         // path for the file being processed
         configOrPath = findAtConfigPath(root, result) ?? configOrPath
 
-        // Begin CSS-first theme configuration proof-of-concept
-        let themeValues = { extend: { colors: {} } }
-
-        root.each((node) => {
-          if (node.type === 'rule' && node.selector === ':theme') {
-            // Walk :theme pseudo and extract values
-            node.walkDecls((decl) => {
-              if (decl.prop.startsWith('--colors-')) {
-                themeValues.extend.colors[decl.prop.slice(9)] = decl.value
-              }
-            })
-
-            node.remove()
-          }
-        })
-
-        // context.tailwindConfig.theme
-        // End CSS-first theme configuration proof-of-concept
+        // Parse any CSS-based config values from `:theme` rules
+        let themeValues = parseCssConfig(root)
 
         let context = setupTrackingContext(configOrPath, themeValues)