diff --git a/packages/sketch/src/commands/colors/index.js b/packages/sketch/src/commands/colors/index.js
index 8b8807840172..25314275a4ef 100644
--- a/packages/sketch/src/commands/colors/index.js
+++ b/packages/sketch/src/commands/colors/index.js
@@ -5,5 +5,5 @@
  * LICENSE file in the root directory of this source tree.
  */
 
-export { sync } from './sync';
+export { sync, syncColorVars } from './sync';
 export { generate } from './generate';
diff --git a/packages/sketch/src/commands/colors/sync.js b/packages/sketch/src/commands/colors/sync.js
index 7703e8c59b35..0c88c6f46721 100644
--- a/packages/sketch/src/commands/colors/sync.js
+++ b/packages/sketch/src/commands/colors/sync.js
@@ -7,10 +7,16 @@
 
 import { Document } from 'sketch/dom';
 import { command } from '../command';
-import { syncColorStyles } from '../../sharedStyles/colors';
+import { syncColorStyles, syncColorVariables } from '../../sharedStyles/colors';
 
 export function sync() {
   command('commands/colors/sync', () => {
     syncColorStyles({ document: Document.getSelectedDocument() });
   });
 }
+
+export function syncColorVars() {
+  command('commands/colors/syncvars', () => {
+    syncColorVariables({ document: Document.getSelectedDocument() });
+  });
+}
diff --git a/packages/sketch/src/commands/index.js b/packages/sketch/src/commands/index.js
index 9183632ad5e5..ddf03a22a1fd 100644
--- a/packages/sketch/src/commands/index.js
+++ b/packages/sketch/src/commands/index.js
@@ -12,7 +12,11 @@ import 'regenerator-runtime/runtime';
 // triggered by having separate entrypoints. Most notably we would encounter
 // parse errors because the bundlers were being generated incorrectly during
 // incremental rebuilds.
-export { sync as syncColors, generate as generateColors } from './colors';
+export {
+  sync as syncColors,
+  syncColorVars,
+  generate as generateColors,
+} from './colors';
 export { generate as generateIcons } from './icons';
 export { syncSmallIcons, syncLargeIcons } from './icons';
 export { sync as syncThemes, generate as generateThemes } from './themes';
diff --git a/packages/sketch/src/manifest.json b/packages/sketch/src/manifest.json
index 8de9594bbfe3..c4b722fdaef3 100644
--- a/packages/sketch/src/manifest.json
+++ b/packages/sketch/src/manifest.json
@@ -10,6 +10,12 @@
       "script": "commands/index.js",
       "handler": "syncColors"
     },
+    {
+      "name": "Sync color variables",
+      "identifier": "carbon.elements.colors.syncvars",
+      "script": "commands/index.js",
+      "handler": "syncColorVars"
+    },
     {
       "name": "Generate color page",
       "identifier": "carbon.elements.colors.generate",
@@ -77,6 +83,7 @@
         "title": "Colors",
         "items": [
           "carbon.elements.colors.sync",
+          "carbon.elements.colors.syncvars",
           "carbon.elements.colors.generate"
         ]
       },
@@ -97,7 +104,10 @@
       },
       {
         "title": "Type",
-        "items": ["carbon.elements.type.sync", "carbon.elements.type.generate"]
+        "items": [
+          "carbon.elements.type.sync",
+          "carbon.elements.type.generate"
+        ]
       },
       {
         "title": "Test",
diff --git a/packages/sketch/src/sharedStyles/colors.js b/packages/sketch/src/sharedStyles/colors.js
index 5ea0afae2771..3e0d2535d101 100644
--- a/packages/sketch/src/sharedStyles/colors.js
+++ b/packages/sketch/src/sharedStyles/colors.js
@@ -8,23 +8,38 @@
 import { colors } from '@carbon/colors';
 import { formatTokenName } from '@carbon/themes';
 import { syncColorStyle } from '../tools/sharedStyles';
+import { syncColorVariable } from '../tools/colorVariables';
 
 // We separate out certain colors that are not a part of the primary swatches
 // that we need to render
 const { black, white, orange, yellow, ...swatches } = colors;
 
 /**
- * Our shared style name will need to have the `color` namespace alongside a
- * name for the swatch, the style type, and an optional grade.
- * @param {object} params - formatSharedColorStyleName parameters
- * @param {string} params.name
- * @param {string?} params.grade
+ * Format name for shared layer styles or color variables
+ * Shared styles names will need to have the `color` namespace
+ * Both shared styles and color variables need a name for the swatch and an
+ * optional grade.
+ * @param {object} params
+ * @param {string} params.name - kebab cased color name
+ * @param {string?} params.grade - color grade
+ * @param {string?} params.formatFor - color name output format
  * @returns {string}
  */
-function formatSharedColorStyleName({ name, grade }) {
-  return ['color', name.split('-').join(' '), grade]
-    .filter(Boolean)
-    .join(' / ');
+function formatColorName({ name, grade, formatFor }) {
+  const formattedName = name.split('-').join(' ');
+  switch (formatFor) {
+    case 'sharedLayerStyle':
+      return ['color', formattedName, grade].filter(Boolean).join(' / ');
+    case 'colorVariable':
+      return [
+        grade ? `${formattedName}/${formattedName}` : formattedName,
+        grade,
+      ]
+        .filter(Boolean)
+        .join(' ');
+    default:
+      return '';
+  }
 }
 
 /**
@@ -39,7 +54,7 @@ export function syncColorStyles({ document }) {
     const result = Object.keys(swatches[swatchName]).map((grade) => {
       return syncColorStyle({
         document,
-        name: formatSharedColorStyleName({ name, grade }),
+        name: formatColorName({ name, grade, formatFor: 'sharedLayerStyle' }),
         value: swatches[swatchName][grade],
       });
     });
@@ -54,10 +69,45 @@ export function syncColorStyles({ document }) {
   ].map(([name, value]) => {
     return syncColorStyle({
       document,
-      name: formatSharedColorStyleName({ name }),
+      name: formatColorName({ name, formatFor: 'sharedLayerStyle' }),
       value,
     });
   });
 
   return sharedStyles.concat(singleColors);
 }
+
+/**
+ * Sync color variables (Swatches) in the given document and return an array
+ * @param {object} params - syncColorVariables parameters
+ * @param {Document} params.document
+ * @returns {Array<Swatch>}
+ */
+export function syncColorVariables({ document }) {
+  const colorVariables = Object.keys(swatches).flatMap((swatchName) => {
+    const name = formatTokenName(swatchName);
+    const result = Object.keys(swatches[swatchName]).map((grade) => {
+      return syncColorVariable({
+        document,
+        name: formatColorName({ name, grade, formatFor: 'colorVariable' }),
+        color: swatches[swatchName][grade],
+      });
+    });
+    return result;
+  });
+
+  const singleColors = [
+    ['black', black['100']],
+    ['white', white['0']],
+    ['orange', orange['40']],
+    ['yellow', yellow['30']],
+  ].map(([name, color]) => {
+    return syncColorVariable({
+      document,
+      name: formatColorName({ name, formatFor: 'colorVariable' }),
+      color,
+    });
+  });
+
+  return colorVariables.concat(singleColors);
+}
diff --git a/packages/sketch/src/tools/colorVariables.js b/packages/sketch/src/tools/colorVariables.js
new file mode 100644
index 000000000000..584ab55e919c
--- /dev/null
+++ b/packages/sketch/src/tools/colorVariables.js
@@ -0,0 +1,67 @@
+/**
+ * Copyright IBM Corp. 2018, 2018
+ *
+ * This source code is licensed under the Apache-2.0 license found in the
+ * LICENSE file in the root directory of this source tree.
+ */
+
+/* global MSColor */
+
+import { Swatch } from 'sketch/dom';
+
+/**
+ * Creates or updates a color variable (Swatch) in the current working document
+ * @param {object} params - syncColorVariable parameters
+ * @param {Document} params.document
+ * @param {string} params.name - color name
+ * @param {string} params.color - color hex
+ * @returns {void}
+ */
+export function syncColorVariable({ document, name, color }) {
+  // check existing color variables
+  const documentColorVariables = document.swatches;
+  const colorVariable = documentColorVariables.find(
+    (swatch) => swatch.name === name
+  );
+
+  // generate new Swatch
+  const generatedSwatch = Swatch.from({
+    name,
+    color,
+  });
+
+  // create and add new color variable if existing Swatch not found
+  if (!colorVariable) {
+    document.swatches.push(generatedSwatch);
+    return;
+  }
+
+  // update existing color variable
+  if (colorVariable.color !== generatedSwatch.color) {
+    // slice up Sketch swatch color hex since they use rgba hex
+    const generatedColor = generatedSwatch.color.slice(0, -2);
+    const generatedAlpha = generatedSwatch.color.slice(-2);
+
+    /**
+     * currently (May 2021) need native API to update color of a swatch
+     * ref: https://sketchplugins.com/d/2205-js-api-guide-whats-up-with-color-variables
+     */
+    colorVariable.sketchObject.updateWithColor(
+      MSColor.colorWithHex_alpha(
+        generatedColor,
+        // convert hex alpha channel to decimal
+        parseInt(generatedAlpha, 16) / 255
+      )
+    );
+
+    /**
+     * because the color does not get updated automatically we have to manually
+     * call an update method. may possibly be fixed in future Sketch API
+     * versions
+     */
+    const swatchContainer = document.sketchObject
+      .documentData()
+      .sharedSwatches();
+    swatchContainer.updateReferencesToSwatch(colorVariable.sketchObject);
+  }
+}