diff --git a/CHANGELOG.md b/CHANGELOG.md
index db7edb49..ff01f1ab 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -3,6 +3,7 @@
 ### Fixes
 
 - default headers do not overwrite headers with other casing (Anweber/vscode-httpyac#200)
+- env dir is resolved correctly (Anweber/vscode-httpyac#198)
 
 ## [6.4.5]
 
diff --git a/src/plugins/dotenv/dotenvVariableProvider.ts b/src/plugins/dotenv/dotenvVariableProvider.ts
index 6c81436d..9d34a131 100644
--- a/src/plugins/dotenv/dotenvVariableProvider.ts
+++ b/src/plugins/dotenv/dotenvVariableProvider.ts
@@ -8,19 +8,8 @@ const defaultFiles: Array<string> = ['.env'];
 export async function provideDotenvEnvironments(context: VariableProviderContext): Promise<string[]> {
   const files: Array<string> = [];
 
-  const globalEnv = process.env.HTTPYAC_ENV;
-  if (globalEnv && utils.isString(globalEnv)) {
-    const globalEnvAbsolute = await utils.toAbsoluteFilename(globalEnv, context.httpFile.rootDir);
-    if (globalEnvAbsolute) {
-      files.push(...(await fileProvider.readdir(globalEnvAbsolute)));
-    }
-  }
-  if (context.config?.envDirName) {
-    const absolute = await utils.toAbsoluteFilename(context.config.envDirName, context.httpFile.rootDir);
-    if (absolute) {
-      files.push(...(await fileProvider.readdir(absolute)));
-    }
-  }
+  files.push(...(await readEnvDir(process.env.HTTPYAC_ENV, context)));
+  files.push(...(await readEnvDir(context.config?.envDirName, context)));
 
   const dirOfFile = fileProvider.dirname(context.httpFile.fileName);
   if (dirOfFile) {
@@ -40,6 +29,17 @@ export async function provideDotenvEnvironments(context: VariableProviderContext
     });
 }
 
+async function readEnvDir(dir: string | undefined, context: VariableProviderContext): Promise<Array<string>> {
+  const files = [];
+  if (dir && utils.isString(dir)) {
+    const absoluteDir = await utils.toAbsoluteFilename(dir, context.httpFile.rootDir);
+    if (absoluteDir) {
+      files.push(...(await fileProvider.readdir(absoluteDir)));
+    }
+  }
+  return files;
+}
+
 export async function provideDotenvVariables(
   env: string[] | undefined,
   context: VariableProviderContext
@@ -51,27 +51,38 @@ export async function provideDotenvVariables(
   if (globalEnv && utils.isString(globalEnv)) {
     const globalEnvAbsolute = await utils.toAbsoluteFilename(globalEnv, context.httpFile.rootDir);
     if (globalEnvAbsolute) {
-      variables.push(...(await getVariablesOfFolder(searchFiles, globalEnvAbsolute)));
+      variables.push(...(await getEnvVariables(searchFiles, globalEnvAbsolute)));
     }
   }
 
-  if (context.config?.envDirName) {
-    const absolute = await utils.toAbsoluteFilename(context.config.envDirName, context.httpFile.rootDir);
-    if (absolute) {
-      variables.push(...(await getVariablesOfFolder(searchFiles, absolute)));
-    }
-  }
+  await getEnvFolderVariables(context.config?.envDirName, searchFiles, context.httpFile.rootDir);
   const dirOfFile = fileProvider.dirname(context.httpFile.fileName);
   if (dirOfFile) {
     const vars: Array<Variables> = [];
     await utils.iterateUntilRoot(dirOfFile, context.httpFile.rootDir, async (dir: PathLike) => {
-      vars.unshift(...(await getVariablesOfFolder(searchFiles, dir)));
+      vars.unshift(...(await getEnvFolderVariables(context.config?.envDirName, searchFiles, dir)));
+      vars.unshift(...(await getEnvVariables(searchFiles, dir)));
     });
     variables.push(...vars);
   }
   return Object.assign({}, ...variables);
 }
 
+async function getEnvFolderVariables(
+  envDirName: string | undefined,
+  searchFiles: string[],
+  dir: PathLike | undefined
+): Promise<Array<Variables>> {
+  const variables: Array<Variables> = [];
+  if (envDirName) {
+    const absolute = await utils.toAbsoluteFilename(envDirName, dir);
+    if (absolute) {
+      variables.push(...(await getEnvVariables(searchFiles, absolute)));
+    }
+  }
+  return variables;
+}
+
 function getSearchFiles(env: string[] | undefined) {
   const searchFiles = [...defaultFiles];
   if (env) {
@@ -82,20 +93,20 @@ function getSearchFiles(env: string[] | undefined) {
   return searchFiles;
 }
 
-async function getVariablesOfFolder(searchFiles: string[], workingDir: PathLike) {
-  const files = await fileProvider.readdir(workingDir);
+async function getEnvVariables(searchFiles: string[], dir: PathLike) {
+  const files = await fileProvider.readdir(dir);
   const foundFiles = searchFiles.filter(file => files.indexOf(file) >= 0);
   const vars = [];
 
   for (const fileName of foundFiles) {
-    const envFileName = fileProvider.joinPath(workingDir, fileName);
+    const envFileName = fileProvider.joinPath(dir, fileName);
     log.trace(`.env environment file found: ${envFileName}`);
     try {
       const content = await fileProvider.readFile(envFileName, 'utf-8');
       const variables = parse(content);
       vars.push(variables);
     } catch (err) {
-      log.trace(`${fileProvider.toString(workingDir)}/${fileName} not found`);
+      log.trace(`${fileProvider.toString(dir)}/${fileName} not found`);
     }
   }
   return vars;
diff --git a/src/store/httpFileStore.ts b/src/store/httpFileStore.ts
index fa655ba6..c9d0b639 100644
--- a/src/store/httpFileStore.ts
+++ b/src/store/httpFileStore.ts
@@ -131,7 +131,8 @@ export class HttpFileStore implements models.HttpFileStore {
         options.workingDir,
         'package.json',
         options.config?.envDirName || 'env'
-      ));
+      )) ||
+      options.workingDir;
 
     const httpFile = new HttpFile(absoluteFileName, rootDir);
     httpFile.activeEnvironment = options.activeEnvironment;
diff --git a/src/utils/fsUtils.ts b/src/utils/fsUtils.ts
index a44cfe93..105dd691 100644
--- a/src/utils/fsUtils.ts
+++ b/src/utils/fsUtils.ts
@@ -64,11 +64,7 @@ export async function findRootDirOfFile(
     file = fileProvider.joinPath(workingDir, fsPath);
   }
   const dirName = fileProvider.dirname(file);
-  const dir = await findRootDir(dirName, ...files);
-  if (dir) {
-    return dir;
-  }
-  return dir || workingDir;
+  return await findRootDir(dirName, ...files);
 }
 
 export async function findRootDir(