diff --git a/.env.example b/.env.example
new file mode 100644
index 00000000..1bf6a06b
--- /dev/null
+++ b/.env.example
@@ -0,0 +1,5 @@
+# Local environment configuration.
+# Copy this file to .env and adjust as needed.
+# In production, set environment variables via server or container configuration instead.
+APP_ENV=dev
+APP_DEBUG=true
diff --git a/.gitignore b/.gitignore
index 806d488f..d3abd8ec 100644
--- a/.gitignore
+++ b/.gitignore
@@ -24,3 +24,6 @@ Thumbs.db
 
 # Codeception C3
 c3.php
+
+# Local environment configuration
+.env
diff --git a/CHANGELOG.md b/CHANGELOG.md
index 7c92f5aa..7d98b40a 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -9,6 +9,7 @@
 - Chg #449: Remove `yiisoft/data-response` dependency (@vjik)
 - Chg #443: Do not write logs to file since that's not needed for both Docker and `./yii serve` (@samdark)
 - Enh #456: Add "service update paused" case for swarm deployment log parsing (@samdark)
+- Enh #417: Add `.env` for development without Docker (@samdark)
 
 ## 1.2.0 February 20, 2026
 
diff --git a/README.md b/README.md
index ab4d55ab..913d9290 100644
--- a/README.md
+++ b/README.md
@@ -47,15 +47,25 @@ cd myproject
 > [!NOTE]
 > Ensure that Composer is executed with the same PHP version that will be used to run the application.
 
+Copy the example environment file and adjust as needed:
+
+```shell
+cp .env.example .env
+```
+
 To run the app:
 
 ```shell
-APP_ENV=dev ./yii serve
+./yii serve
 ```
 
 Now you should be able to access the application through the URL printed to console.
 Usually it is `http://localhost:8080`.
 
+> [!TIP]
+> The `.env` file is for local development only and is excluded from version control.
+> In production, configure environment variables via your server or container instead.
+
 ### Installation with Docker
 
 > [!WARNING]
@@ -110,6 +120,7 @@ src/                    Application source code.
     Web/                Web-specific code (actions, handlers, layout).
         Shared/         Shared web components.
             Layout/     Layout components and templates.
+    bootstrap.php       Application bootstrap (autoloading, environment setup).
     Environment.php     Environment configuration class.
 tests/                  A set of Codeception tests for the application.
     Console/            Console command tests.
diff --git a/composer-dependency-analyser.php b/composer-dependency-analyser.php
index 25a4db2c..852c0fd6 100644
--- a/composer-dependency-analyser.php
+++ b/composer-dependency-analyser.php
@@ -10,6 +10,8 @@
     ->disableComposerAutoloadPathScan()
     ->setFileExtensions(['php'])
     ->addPathToScan($root . '/src', isDev: false)
+    ->addPathToExclude($root . '/src/bootstrap.php')
+    ->addPathToScan($root . '/src/bootstrap.php', isDev: true)
     ->addPathToScan($root . '/config', isDev: false)
     ->addPathToScan($root . '/public/index.php', isDev: false)
     ->addPathToScan($root . '/yii', isDev: false)
diff --git a/composer.json b/composer.json
index 09c50b8a..cc8879d4 100644
--- a/composer.json
+++ b/composer.json
@@ -66,6 +66,7 @@
         "yiisoft/yii-view-renderer": "^7.4.1"
     },
     "require-dev": {
+        "vlucas/phpdotenv": "^5.6",
         "codeception/c3": "^2.9",
         "codeception/codeception": "^5.3.5",
         "codeception/module-asserts": "^3.3.0",
diff --git a/public/index.php b/public/index.php
index e557ad8f..9a54b70e 100644
--- a/public/index.php
+++ b/public/index.php
@@ -12,7 +12,7 @@
 
 $root = dirname(__DIR__);
 
-require_once $root . '/src/autoload.php';
+require_once $root . '/src/bootstrap.php';
 
 if (Environment::appC3()) {
     $c3 = $root . '/c3.php';
diff --git a/src/Environment.php b/src/Environment.php
index 62359b7f..8482e972 100644
--- a/src/Environment.php
+++ b/src/Environment.php
@@ -78,19 +78,18 @@ public static function appDebug(): bool
 
     private static function setEnvironment(): void
     {
-        $environment = self::getRawValue('APP_ENV');
+        $environment = self::getRawValue('APP_ENV') ?: self::PROD;
 
         if (!in_array($environment, self::ENVIRONMENTS, true)) {
-            if ($environment === null) {
-                $message = 'APP_ENV environment variable is empty.';
-            } else {
-                $message = sprintf('APP_ENV="%s" environment is invalid.', $environment);
-            }
-
-            $message .= sprintf(' Valid values are "%s".', implode('", "', self::ENVIRONMENTS));
-
-            throw new RuntimeException($message);
+            throw new RuntimeException(
+                sprintf(
+                    'APP_ENV="%s" is invalid. Valid values are "%s".',
+                    $environment,
+                    implode('", "', self::ENVIRONMENTS),
+                ),
+            );
         }
+
         self::$values['APP_ENV'] = $environment;
     }
 
diff --git a/src/autoload.php b/src/autoload.php
deleted file mode 100644
index 3ed4f694..00000000
--- a/src/autoload.php
+++ /dev/null
@@ -1,9 +0,0 @@
-<?php
-
-declare(strict_types=1);
-
-use App\Environment;
-
-require_once dirname(__DIR__) . '/vendor/autoload.php';
-
-Environment::prepare();
diff --git a/src/bootstrap.php b/src/bootstrap.php
new file mode 100644
index 00000000..e12b4360
--- /dev/null
+++ b/src/bootstrap.php
@@ -0,0 +1,16 @@
+<?php
+
+declare(strict_types=1);
+
+use App\Environment;
+
+require_once dirname(__DIR__) . '/vendor/autoload.php';
+
+// Load .env for non-Docker/non-container environments.
+// Existing process environment variables take precedence (Docker, CI, server config).
+// phpdotenv is a dev dependency — not available in production (composer install --no-dev).
+if (empty($_ENV['APP_ENV']) && class_exists(\Dotenv\Dotenv::class)) {
+    \Dotenv\Dotenv::createImmutable(dirname(__DIR__))->safeLoad();
+}
+
+Environment::prepare();
diff --git a/tests/Unit/EnvironmentTest.php b/tests/Unit/EnvironmentTest.php
index 4950bc81..3e1ae71a 100644
--- a/tests/Unit/EnvironmentTest.php
+++ b/tests/Unit/EnvironmentTest.php
@@ -6,18 +6,169 @@
 
 use App\Environment;
 use Codeception\Test\Unit;
+use RuntimeException;
 
+use function PHPUnit\Framework\assertFalse;
+use function PHPUnit\Framework\assertNull;
 use function PHPUnit\Framework\assertSame;
+use function PHPUnit\Framework\assertTrue;
 
 final class EnvironmentTest extends Unit
 {
+    /** @var array<string, string|false> */
+    private array $originalEnv = [];
+
     protected function _before(): void
     {
+        foreach (['APP_ENV', 'APP_DEBUG', 'APP_C3', 'APP_HOST_PATH'] as $key) {
+            $this->originalEnv[$key] = getenv($key);
+        }
+    }
+
+    protected function _after(): void
+    {
+        foreach ($this->originalEnv as $key => $value) {
+            if ($value === false) {
+                putenv($key);
+                unset($_ENV[$key]);
+            } else {
+                putenv("$key=$value");
+                $_ENV[$key] = $value;
+            }
+        }
         Environment::prepare();
     }
 
-    public function testAppEnv(): void
+    public function testAppEnvIsReadFromEnvironment(): void
     {
+        $this->setEnv('APP_ENV', 'test');
+
         assertSame('test', Environment::appEnv());
     }
+
+    public function testAppEnvDefaultsToProdWhenNotSet(): void
+    {
+        $this->unsetEnv('APP_ENV');
+
+        assertSame('prod', Environment::appEnv());
+    }
+
+    public function testAppEnvDefaultsToProdWhenEmpty(): void
+    {
+        $this->setEnv('APP_ENV', '');
+
+        assertSame('prod', Environment::appEnv());
+    }
+
+    public function testInvalidAppEnvThrows(): void
+    {
+        $this->unsetEnv('APP_ENV');
+        putenv('APP_ENV=staging');
+
+        try {
+            Environment::prepare();
+            $this->fail('Expected RuntimeException was not thrown.');
+        } catch (RuntimeException $e) {
+            assertSame('APP_ENV="staging" is invalid. Valid values are "dev", "test", "prod".', $e->getMessage());
+        } finally {
+            putenv('APP_ENV');
+        }
+    }
+
+    public function testIsDev(): void
+    {
+        $this->setEnv('APP_ENV', 'dev');
+
+        assertTrue(Environment::isDev());
+        assertFalse(Environment::isTest());
+        assertFalse(Environment::isProd());
+    }
+
+    public function testIsTest(): void
+    {
+        $this->setEnv('APP_ENV', 'test');
+
+        assertTrue(Environment::isTest());
+        assertFalse(Environment::isDev());
+        assertFalse(Environment::isProd());
+    }
+
+    public function testIsProd(): void
+    {
+        $this->setEnv('APP_ENV', 'prod');
+
+        assertTrue(Environment::isProd());
+        assertFalse(Environment::isDev());
+        assertFalse(Environment::isTest());
+    }
+
+    public function testAppDebugDefaultsToFalse(): void
+    {
+        $this->unsetEnv('APP_DEBUG');
+
+        assertFalse(Environment::appDebug());
+    }
+
+    public function testAppDebugTrue(): void
+    {
+        $this->setEnv('APP_DEBUG', 'true');
+
+        assertTrue(Environment::appDebug());
+    }
+
+    public function testAppDebugFalse(): void
+    {
+        $this->setEnv('APP_DEBUG', 'false');
+
+        assertFalse(Environment::appDebug());
+    }
+
+    public function testAppC3DefaultsToFalse(): void
+    {
+        $this->unsetEnv('APP_C3');
+
+        assertFalse(Environment::appC3());
+    }
+
+    public function testAppC3True(): void
+    {
+        $this->setEnv('APP_C3', 'true');
+
+        assertTrue(Environment::appC3());
+    }
+
+    public function testAppHostPathDefaultsToNull(): void
+    {
+        $this->unsetEnv('APP_HOST_PATH');
+
+        assertNull(Environment::appHostPath());
+    }
+
+    public function testAppHostPathIsRead(): void
+    {
+        $this->setEnv('APP_HOST_PATH', '/projects/myapp');
+
+        assertSame('/projects/myapp', Environment::appHostPath());
+    }
+
+    public function testAppHostPathEmptyStringTreatedAsNull(): void
+    {
+        $this->setEnv('APP_HOST_PATH', '');
+
+        assertNull(Environment::appHostPath());
+    }
+
+    private function setEnv(string $key, string $value): void
+    {
+        putenv("$key=$value");
+        $_ENV[$key] = $value;
+        Environment::prepare();
+    }
+
+    private function unsetEnv(string $key): void
+    {
+        putenv($key);
+        unset($_ENV[$key]);
+        Environment::prepare();
+    }
 }
diff --git a/yii b/yii
index 8a928a77..6f1fc029 100755
--- a/yii
+++ b/yii
@@ -6,7 +6,7 @@ declare(strict_types=1);
 use App\Environment;
 use Yiisoft\Yii\Runner\Console\ConsoleApplicationRunner;
 
-require_once __DIR__ . '/src/autoload.php';
+require_once __DIR__ . '/src/bootstrap.php';
 
 // Run console application runner
 $runner = new ConsoleApplicationRunner(