diff --git a/cmd/compose/compose.go b/cmd/compose/compose.go
index 4921450b1..17e5e071c 100644
--- a/cmd/compose/compose.go
+++ b/cmd/compose/compose.go
@@ -261,10 +261,10 @@ func (o *ProjectOptions) toProjectOptions(po ...cli.ProjectOptionsFn) (*cli.Proj
 		append(po,
 			cli.WithWorkingDirectory(o.ProjectDir),
 			cli.WithOsEnv,
-			cli.WithEnvFiles(o.EnvFiles...),
-			cli.WithDotEnv,
 			cli.WithConfigFileEnv,
 			cli.WithDefaultConfigPath,
+			cli.WithEnvFiles(o.EnvFiles...),
+			cli.WithDotEnv,
 			cli.WithDefaultProfiles(o.Profiles...),
 			cli.WithName(o.ProjectName))...)
 }
diff --git a/pkg/e2e/compose_test.go b/pkg/e2e/compose_test.go
index 6384c29c8..b37ec0f48 100644
--- a/pkg/e2e/compose_test.go
+++ b/pkg/e2e/compose_test.go
@@ -313,3 +313,15 @@ func TestRemoveOrphaned(t *testing.T) {
 	res := c.RunDockerComposeCmd(t, "-f", "./fixtures/sentences/compose.yaml", "-p", projectName, "ps", "--format", "{{.Name}}")
 	res.Assert(t, icmd.Expected{Out: fmt.Sprintf("%s-words-1", projectName)})
 }
+
+func TestResolveDotEnv(t *testing.T) {
+	c := NewCLI(t)
+
+	cmd := c.NewDockerComposeCmd(t, "config")
+	cmd.Dir = filepath.Join(".", "fixtures", "dotenv")
+	res := icmd.RunCmd(cmd)
+	res.Assert(t, icmd.Expected{
+		ExitCode: 0,
+		Out:      "image: backend:latest",
+	})
+}
diff --git a/pkg/e2e/fixtures/dotenv/.env b/pkg/e2e/fixtures/dotenv/.env
new file mode 100644
index 000000000..869938aa7
--- /dev/null
+++ b/pkg/e2e/fixtures/dotenv/.env
@@ -0,0 +1 @@
+COMPOSE_FILE="${COMPOSE_FILE:-development/compose.yaml}"
\ No newline at end of file
diff --git a/pkg/e2e/fixtures/dotenv/development/.env b/pkg/e2e/fixtures/dotenv/development/.env
new file mode 100644
index 000000000..936902877
--- /dev/null
+++ b/pkg/e2e/fixtures/dotenv/development/.env
@@ -0,0 +1,2 @@
+IMAGE_NAME="${IMAGE_NAME:-backend}"
+IMAGE_TAG="${IMAGE_TAG:-latest}"
diff --git a/pkg/e2e/fixtures/dotenv/development/compose.yaml b/pkg/e2e/fixtures/dotenv/development/compose.yaml
new file mode 100644
index 000000000..b44805e30
--- /dev/null
+++ b/pkg/e2e/fixtures/dotenv/development/compose.yaml
@@ -0,0 +1,3 @@
+services:
+  backend:
+    image: $IMAGE_NAME:$IMAGE_TAG