diff --git a/README.md b/README.md
index 5ae854d2..3d3c26dd 100644
--- a/README.md
+++ b/README.md
@@ -89,6 +89,7 @@ version = "0.11.3"
 2. For example, `echo "0.10.5" >> .tfswitchrc` for version 0.10.5 of terraform
 3. Run the command `tfswitch` in the same directory as your `.tfswitchrc`
 
+*instead of a `.tfswitchrc` file, a `.terraform-version` file may be used for compatibility with [`tfenv`](https://github.com/tfutils/tfenv#terraform-version-file) and other tools which use it*
 
 **Automatically switch with bash**
 
@@ -139,7 +140,7 @@ cd(){
 
 ## Additional Info
 
-See how to *upgrade*, *uninstall*, *troubleshoot* here:[More info](https://warrensbox.github.io/terraform-switcher/additional)
+See how to *upgrade*, *uninstall*, *troubleshoot* here: [More info](https://warrensbox.github.io/terraform-switcher/additional)
 
 
 ## Issues
diff --git a/main.go b/main.go
index 7d4a6060..7d64f4d7 100644
--- a/main.go
+++ b/main.go
@@ -33,6 +33,7 @@ import (
 const (
 	hashiURL     = "https://releases.hashicorp.com/terraform/"
 	defaultBin   = "/usr/local/bin/terraform" //default bin installation dir
+	tfvFilename  = ".terraform-version"
 	rcFilename   = ".tfswitchrc"
 	tomlFilename = ".tfswitch.toml"
 )
@@ -56,6 +57,7 @@ func main() {
 		os.Exit(1)
 	}
 
+	tfvfile := dir + fmt.Sprintf("/%s", tfvFilename)     //settings for .terraform-version file in current directory (tfenv compatible)
 	rcfile := dir + fmt.Sprintf("/%s", rcFilename)       //settings for .tfswitchrc file in current directory (backward compatible purpose)
 	configfile := dir + fmt.Sprintf("/%s", tomlFilename) //settings for .tfswitch.toml file in current directory (option to specify bin directory)
 
@@ -88,7 +90,7 @@ func main() {
 
 			bin := viper.Get("bin")                  // read custom binary location
 			if binPath == defaultBin && bin != nil { // if the bin path is the same as the default binary path and if the custom binary is provided in the toml file (use it)
-				binPath = bin.(string)
+				binPath = os.ExpandEnv(bin.(string))
 			}
 			version := viper.Get("version") //attempt to get the version if it's provided in the toml
 
@@ -131,6 +133,23 @@ func main() {
 			}
 			tfversion := strings.TrimSuffix(string(fileContents), "\n")
 
+			if lib.ValidVersionFormat(tfversion) { //check if version is correct
+				lib.Install(string(tfversion), *custBinPath)
+			} else {
+				fmt.Println("Invalid terraform version format. Format should be #.#.# or #.#.#-@# where # is numbers and @ is word characters. For example, 0.11.7 and 0.11.9-beta1 are valid versions")
+				os.Exit(1)
+			}
+		} else if _, err := os.Stat(tfvfile); err == nil && len(args) == 0 { //if there is a .terraform-version file, and no command line arguments
+			fmt.Printf("Reading required terraform version %s ", tfvFilename)
+
+			fileContents, err := ioutil.ReadFile(tfvfile)
+			if err != nil {
+				fmt.Printf("Failed to read %s file. Follow the README.md instructions for setup. https://github.com/warrensbox/terraform-switcher/blob/master/README.md\n", tfvFilename)
+				fmt.Printf("Error: %s\n", err)
+				os.Exit(1)
+			}
+			tfversion := strings.TrimSuffix(string(fileContents), "\n")
+
 			if lib.ValidVersionFormat(tfversion) { //check if version is correct
 				lib.Install(string(tfversion), *custBinPath)
 			} else {