How Can I Use Environment Variables in Docker Compose?

When working with Docker Compose, environment variables are a powerful way to keep your configuration clean, reusable, and secure. They allow you to separate your app settings and secrets from code, making your Docker workflows more flexible and production-ready.

In this post, we’ll explore different ways to use environment variables in docker-compose.yml, and how to manage them effectively.

Table of Contents

🔧 Why Use Environment Variables?

🔒 Avoid hardcoding secrets
🔁 Reuse settings across environments (dev, staging, prod)
📦 Parameterize images and services
📄 Simplify deployment scripts

✅ Method 1: Define Variables in a `.env` File

The easiest and most common way is to use a .env file in the same directory as your docker-compose.yml.

Example `.env` file:

DB_USER=admin
DB_PASSWORD=secret123
PORT=3306

`docker-compose.yml`:

version: '3.8'
services:
  db:
    image: mysql:5.7
    environment:
      MYSQL_ROOT_PASSWORD: ${DB_PASSWORD}
      MYSQL_USER: ${DB_USER}
    ports:
      - "${PORT}:3306"

💡 You don’t need to manually import the .env file—Docker Compose loads it automatically.

✅ Method 2: Use the `environment` Section

You can define environment variables directly in the Compose file:

services:
  web:
    image: node:18
    environment:
      - NODE_ENV=production
      - API_KEY=${MY_API_KEY}

This supports both hardcoded values and references to environment variables on your host machine or .env file.

✅ Method 3: Use `env_file` to Load Many Variables

If you have many variables, you can use the env_file key to load them from a file:

services:
  app:
    image: my-app
    env_file:
      - ./config.env

`config.env`:

DEBUG=false
JWT_SECRET=abc123
API_URL=https://api.example.com

📝 env_file doesn’t support variable expansion (e.g., using ${VAR1} inside VAR2). Use .env for that.

✅ Method 4: Pass Environment Variables at Runtime

You can also inject environment variables dynamically using the CLI:

export DB_USER=devuser
export DB_PASSWORD=devpass
docker-compose up

Docker Compose will read these from your shell session.

🔐 Best Practices

Tip	Description
✅ Use `.env` for environment-specific config
🔐 Never commit `.env` files with secrets to version control
💡 Use `env_file` for large sets of variables
🚫 Avoid hardcoding sensitive data in `docker-compose.yml`
🔄 Use default values like `${PORT:-3000}` for fallbacks

🛠️ Example with Defaults

environment:
  - PORT=${PORT:-8080}
  - LOG_LEVEL=${LOG_LEVEL:-info}

This means:

Use the value from the environment if defined
Otherwise fallback to the default (8080, info)

🧪 Debug Tip: Print Environment Variables Inside a Container

To check what variables are available inside a running container:

docker-compose exec web env

📝 Summary

Task	Method
Load variables from a file	`.env` or `env_file`
Inject variables into services	`environment` section
Set variables at runtime	`export VAR=value` before `docker-compose up`
Set default values	Use `${VAR:-default}` syntax

✅ Conclusion

Using environment variables in Docker Compose keeps your setup clean, flexible, and secure. Whether you’re deploying to production or testing locally, environment variables help you adapt your configuration without rewriting code.

Master these techniques, and you’ll have a robust and scalable Docker environment for any project.

🔧 Why Use Environment Variables?

✅ Method 1: Define Variables in a .env File

Example .env file:

docker-compose.yml:

✅ Method 2: Use the environment Section

✅ Method 3: Use env_file to Load Many Variables

config.env: