diff --git a/docs/conf/index.md b/docs/conf/index.md
index 7c5be174e5..0b2240e2de 100644
--- a/docs/conf/index.md
+++ b/docs/conf/index.md
@@ -25,6 +25,7 @@ Loading order of these files is as follows:
 1. `app-config.yaml`
 2. `app-config.<BACKSTAGE_ENVIRONMENT>.yaml`
 3. `app-config.local.yaml`
+4. `app-config.<BACKSTAGE_ENVIRONMENT>.local.yaml`
 
 Other sets of files can by loaded by passing `--config <path>` flags.
 Read more about the configuration loading order in the
diff --git a/packages/config-loader/src/sources/ConfigSources.test.ts b/packages/config-loader/src/sources/ConfigSources.test.ts
index 9b2932e439..da56f5ccf9 100644
--- a/packages/config-loader/src/sources/ConfigSources.test.ts
+++ b/packages/config-loader/src/sources/ConfigSources.test.ts
@@ -99,6 +99,7 @@ describe('ConfigSources', () => {
       { name: 'FileConfigSource', path: `${root}app-config.yaml` },
       { name: 'FileConfigSource', path: `${root}app-config.test.yaml` },
       { name: 'FileConfigSource', path: `${root}app-config.local.yaml` },
+      { name: 'FileConfigSource', path: `${root}app-config.test.local.yaml` },
     ]);
 
     fsSpy.mockRestore();
diff --git a/packages/config-loader/src/sources/ConfigSources.ts b/packages/config-loader/src/sources/ConfigSources.ts
index 0d958bb81d..1dacdc4752 100644
--- a/packages/config-loader/src/sources/ConfigSources.ts
+++ b/packages/config-loader/src/sources/ConfigSources.ts
@@ -186,6 +186,10 @@ export class ConfigSources {
         rootDir,
         `app-config.${process.env.BACKSTAGE_ENVIRONMENT}.yaml`,
       );
+      const envLocalPath = resolvePath(
+        rootDir,
+        `app-config.${process.env.BACKSTAGE_ENVIRONMENT}.local.yaml`,
+      );
       const alwaysIncludeDefaultConfigSource =
         !options.allowMissingDefaultConfig;
 
@@ -218,6 +222,19 @@ export class ConfigSources {
           }),
         );
       }
+
+      if (
+        process.env.BACKSTAGE_ENVIRONMENT &&
+        fs.pathExistsSync(envLocalPath)
+      ) {
+        argSources.push(
+          FileConfigSource.create({
+            watch: options.watch,
+            path: envLocalPath,
+            substitutionFunc: options.substitutionFunc,
+          }),
+        );
+      }
     }
 
     return this.merge(argSources);