Environment variables in Compose in Docker - Step-by-Step Execution

Process Flow - Environment variables in Compose

Start Compose file

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Read environment variables section

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Load variables from .env file or shell

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Substitute variables in service definitions

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Create containers with substituted values

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Containers run with environment variables set

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End

Docker Compose reads environment variables from .env or shell, substitutes them in the compose file, then creates containers with those variables set.

Execution Sample

Docker

version: '3.8'
services:
  app:
    image: alpine
    environment:
      - GREETING=${GREETING}
    command: sh -c "echo $GREETING"

This Compose file runs an Alpine container that prints the GREETING environment variable.

Process Table

Step	Action	Environment Variable Source	Variable Value	Container Command Output
1	Start docker-compose up	Shell or .env file	GREETING=Hello, World!
2	Compose reads GREETING variable	Shell or .env file	Hello, World!
3	Substitute ${GREETING} in environment section	Compose file	GREETING=Hello, World!
4	Create container with GREETING env var	Container environment	GREETING=Hello, World!
5	Run container command: sh -c "echo $GREETING"	Inside container	GREETING=Hello, World!	Hello, World!
6	Container exits after printing	N/A	N/A	Hello, World!

💡 Container finishes running command and exits.

Status Tracker

Variable	Start	After Step 2	After Step 3	After Step 4	Final
GREETING	undefined	Hello, World!	Hello, World!	Hello, World!	Hello, World!

Key Moments - 2 Insights

Why does the container print 'Hello, World!' instead of '${GREETING}'?

Because Compose replaces ${GREETING} with the actual value from the shell or .env file before creating the container, as shown in steps 2 and 3 of the execution table.

What happens if GREETING is not set in the shell or .env file?

The variable GREETING will be empty or undefined, so the container command will print an empty line or nothing, as Compose cannot substitute a missing variable (see step 2).

Visual Quiz - 3 Questions

Look at the execution table, what is the value of GREETING after step 3?

A Hello, World!

B ${GREETING}

C undefined

D Goodbye

💡 Hint

Check the 'Variable Value' column at step 3 in the execution table.

At which step does the container actually run the command that prints GREETING?

A Step 4

B Step 5

C Step 2

D Step 6

💡 Hint

Look for the step where 'Container Command Output' shows 'Hello, World!'

If GREETING was not set in the shell or .env file, what would the container output be?

A Hello, World!

B An error message

C An empty line

D ${GREETING}

💡 Hint

Refer to the key moment about missing variables and step 2 in the execution table.

Concept Snapshot

Docker Compose reads environment variables from the shell or .env file.
It substitutes variables like ${VAR} in the compose file before creating containers.
Containers receive these variables in their environment.
Commands inside containers can use these variables.
If a variable is missing, substitution results in empty value.
Use .env file or shell export to set variables before 'docker-compose up'.

Full Transcript

Docker Compose uses environment variables to customize container settings. When you run 'docker-compose up', Compose looks for variables in your shell or a .env file. It replaces placeholders like ${GREETING} in the compose file with actual values. Then it creates containers with these variables set inside. When the container runs, commands can access these variables. If a variable is missing, it becomes empty. This lets you easily change container behavior without editing the compose file.