diff --git a/.gitignore b/.gitignore
index 4d2ac93af737ea..7c378be1c2bccb 100644
--- a/.gitignore
+++ b/.gitignore
@@ -7,3 +7,4 @@ TODOs.md
 temp
 explorations
 .idea
+*.local
\ No newline at end of file
diff --git a/playground/.env b/playground/.env
index 0dc3d5b88c9e79..aea26e65bca980 100644
--- a/playground/.env
+++ b/playground/.env
@@ -1 +1,2 @@
 CUSTOM_ENV_VARIABLE=9527
+EFFECTIVE_MODE_FILE_NAME=.env
\ No newline at end of file
diff --git a/playground/.env.development b/playground/.env.development
new file mode 100644
index 00000000000000..36eb9202fadce6
--- /dev/null
+++ b/playground/.env.development
@@ -0,0 +1 @@
+EFFECTIVE_MODE_FILE_NAME=.env.development
\ No newline at end of file
diff --git a/playground/.env.production b/playground/.env.production
new file mode 100644
index 00000000000000..19afb2f7133443
--- /dev/null
+++ b/playground/.env.production
@@ -0,0 +1 @@
+EFFECTIVE_MODE_FILE_NAME=.env.production
\ No newline at end of file
diff --git a/playground/TestEnv.vue b/playground/TestEnv.vue
index 8b8461a9670fba..561bd30e63413b 100644
--- a/playground/TestEnv.vue
+++ b/playground/TestEnv.vue
@@ -3,9 +3,12 @@
   <p class="node-env">
     <code>process.env.NODE_ENV: {{ NODE_ENV }}</code>
   </p>
-  <p class="customize-env-variable">
+  <p class="custom-env-variable">
     <code>process.env.CUSTOM_ENV_VARIABLE: {{ CUSTOM_ENV_VARIABLE }}</code>
   </p>
+  <p class="effective-mode-file-name">
+    <code>process.env.EFFECTIVE_MODE_FILE_NAME: {{ EFFECTIVE_MODE_FILE_NAME }}</code>
+  </p>
 </template>
 
 <script>
@@ -13,7 +16,8 @@ export default {
   data() {
     return {
       NODE_ENV: process.env.NODE_ENV,
-      CUSTOM_ENV_VARIABLE: process.env.CUSTOM_ENV_VARIABLE
+      CUSTOM_ENV_VARIABLE: process.env.CUSTOM_ENV_VARIABLE,
+      EFFECTIVE_MODE_FILE_NAME: process.env.EFFECTIVE_MODE_FILE_NAME
     }
   }
 }
diff --git a/src/node/build/index.ts b/src/node/build/index.ts
index 1416f9ef705af7..60423984cd4e43 100644
--- a/src/node/build/index.ts
+++ b/src/node/build/index.ts
@@ -143,7 +143,7 @@ export async function createBaseRollupPlugins(
  * Bundles the app for production.
  * Returns a Promise containing the build result.
  */
-export async function build(options: BuildConfig = {}): Promise<BuildResult> {
+export async function build(options: BuildConfig): Promise<BuildResult> {
   if (options.ssr) {
     return ssrBuild({
       ...options,
@@ -151,10 +151,6 @@ export async function build(options: BuildConfig = {}): Promise<BuildResult> {
     })
   }
 
-  const isTest = process.env.NODE_ENV === 'test'
-  process.env.NODE_ENV = 'production'
-  const start = Date.now()
-
   const {
     root = process.cwd(),
     base = '/',
@@ -173,9 +169,14 @@ export async function build(options: BuildConfig = {}): Promise<BuildResult> {
     silent = false,
     sourcemap = false,
     shouldPreload = null,
-    env = {}
+    env = {},
+    mode
   } = options
 
+  const isTest = process.env.NODE_ENV === 'test'
+  process.env.NODE_ENV = mode
+  const start = Date.now()
+
   let spinner: Ora | undefined
   const msg = 'Building for production...'
   if (!silent) {
@@ -204,7 +205,7 @@ export async function build(options: BuildConfig = {}): Promise<BuildResult> {
 
   const basePlugins = await createBaseRollupPlugins(root, resolver, options)
 
-  env.NODE_ENV = 'production'
+  env.NODE_ENV = mode!
   const envReplacements = Object.keys(env).reduce((replacements, key) => {
     replacements[`process.env.${key}`] = JSON.stringify(env[key])
     return replacements
@@ -380,9 +381,7 @@ export async function build(options: BuildConfig = {}): Promise<BuildResult> {
  * - Imports to dependencies are compiled into require() calls
  * - Templates are compiled with SSR specific optimizations.
  */
-export async function ssrBuild(
-  options: BuildConfig = {}
-): Promise<BuildResult> {
+export async function ssrBuild(options: BuildConfig): Promise<BuildResult> {
   const {
     rollupInputOptions,
     rollupOutputOptions,
diff --git a/src/node/cli.ts b/src/node/cli.ts
index 41dbfa6e851a7c..d790b08e3b298d 100644
--- a/src/node/cli.ts
+++ b/src/node/cli.ts
@@ -14,6 +14,9 @@ import path from 'path'
 import chalk from 'chalk'
 import { UserConfig, resolveConfig } from './config'
 
+const command = argv._[0]
+const defaultMode = command === 'build' ? 'production' : 'development'
+
 function logHelp() {
   console.log(`
 Usage: vite [command] [args] [--options]
@@ -37,6 +40,7 @@ Options:
   --sourcemap                [boolean] output source maps for build (default: false)
   --minify                   [boolean | 'terser' | 'esbuild'] enable/disable minification, or specify
                                        minifier to use. (default: 'terser')
+  --mode, -m                 [string]  specify env mode (default: 'development' for dev, 'production' for build)
   --ssr                      [boolean] build for server-side rendering
   --jsx                      ['vue' | 'preact' | 'react']  choose jsx preset (default: 'vue')
   --jsx-factory              [string]  (default: React.createElement)
@@ -46,15 +50,18 @@ Options:
 
 console.log(chalk.cyan(`vite v${require('../package.json').version}`))
 ;(async () => {
-  if (argv.help || argv.h) {
+  const { help, h, mode, m, version, v } = argv
+
+  if (help || h) {
     logHelp()
     return
-  } else if (argv.version || argv.v) {
+  } else if (version || v) {
     // noop, already logged
     return
   }
 
-  const options = await resolveOptions()
+  const envMode = mode || m || defaultMode
+  const options = await resolveOptions(envMode)
   if (!options.command || options.command === 'serve') {
     runServe(options)
   } else if (options.command === 'build') {
@@ -67,7 +74,9 @@ console.log(chalk.cyan(`vite v${require('../package.json').version}`))
   }
 })()
 
-async function resolveOptions() {
+async function resolveOptions(mode: string) {
+  // specify env mode
+  argv.mode = mode
   // shorthand for serviceWorker option
   if (argv['sw']) {
     argv.serviceWorker = argv['sw']
@@ -94,11 +103,15 @@ async function resolveOptions() {
   }
   // normalize root
   // assumes all commands are in the form of `vite [command] [root]`
-  if (argv._[1] && !argv.root) {
-    argv.root = path.isAbsolute(argv._[1]) ? argv._[1] : path.resolve(argv._[1])
+  if (!argv.root && argv._[1]) {
+    argv.root = argv._[1]
+  }
+
+  if (argv.root) {
+    argv.root = path.isAbsolute(argv.root) ? argv.root : path.resolve(argv.root)
   }
 
-  const userConfig = await resolveConfig(argv.config || argv.c)
+  const userConfig = await resolveConfig(mode, argv.config || argv.c)
   if (userConfig) {
     return {
       ...userConfig,
diff --git a/src/node/config.ts b/src/node/config.ts
index 84422675255351..819402f50236b1 100644
--- a/src/node/config.ts
+++ b/src/node/config.ts
@@ -1,7 +1,7 @@
 import path from 'path'
 import fs from 'fs-extra'
 import chalk from 'chalk'
-import { DotenvParseOutput } from 'dotenv'
+import dotenv, { DotenvParseOutput } from 'dotenv'
 import { Options as RollupPluginVueOptions } from 'rollup-plugin-vue'
 import { CompilerOptions } from '@vue/compiler-sfc'
 import Rollup, {
@@ -84,9 +84,13 @@ export interface SharedConfig {
         fragment?: string
       }
   /**
-   * Environment variables .
+   * Environment variables
    */
   env?: DotenvParseOutput
+  /**
+   * Environment mode
+   */
+  mode?: string
 }
 
 export interface ServerConfig extends SharedConfig {
@@ -252,10 +256,18 @@ export interface Plugin
     | 'rollupOutputOptions'
   > {}
 
-export type ResolvedConfig = UserConfig & { __path?: string }
+export type ResolvedConfig = UserConfig & {
+  /**
+   * Path of config file.
+   */
+  __path?: string
+}
+
+const debug = require('debug')('vite:config')
 
 export async function resolveConfig(
-  configPath: string | undefined
+  mode: string,
+  configPath?: string
 ): Promise<ResolvedConfig | undefined> {
   const start = Date.now()
   const cwd = process.cwd()
@@ -333,19 +345,11 @@ export async function resolveConfig(
     }
 
     // load environment variables
-    const envConfigPath = path.resolve(cwd, '.env')
-    if (fs.existsSync(envConfigPath) && fs.statSync(envConfigPath).isFile()) {
-      const env = require('dotenv').config()
-      if (env.error) {
-        throw env.error
-      }
-
-      config.env = env.parsed
-    }
+    const env = loadEnv(mode, cwd)
+    debug(`env: %O`, env)
+    config.env = env
 
-    require('debug')('vite:config')(
-      `config resolved in ${Date.now() - start}ms`
-    )
+    debug(`config resolved in ${Date.now() - start}ms`)
 
     config.__path = resolvedPath
     return config
@@ -409,3 +413,30 @@ function resolvePlugin(config: UserConfig, plugin: Plugin): UserConfig {
     }
   }
 }
+
+function loadEnv(mode: string, cwd: string): Record<string, string> {
+  debug(`env mode: ${mode}`)
+  const { resolve } = path
+  const envFiles = [
+    /** default file */ resolve(cwd, '.env'),
+    /** local file */ resolve(cwd, `.env.local`),
+    /** mode file */ resolve(cwd, `.env.${mode}`),
+    /** mode local file */ resolve(cwd, `.env.${mode}.local`)
+  ]
+
+  const env: Record<string, string> = {}
+  for (const file of envFiles) {
+    if (fs.existsSync(file) && fs.statSync(file).isFile()) {
+      const result = dotenv.config({
+        debug: !!process.env.DEBUG,
+        path: file
+      })
+      if (result.error) {
+        throw result.error
+      }
+      Object.assign(env, result.parsed)
+    }
+  }
+
+  return env
+}
diff --git a/src/node/server/index.ts b/src/node/server/index.ts
index b8c5630ae9e293..c21eacfa2137c9 100644
--- a/src/node/server/index.ts
+++ b/src/node/server/index.ts
@@ -33,7 +33,7 @@ export interface ServerPluginContext {
   config: ServerConfig & { __path?: string }
 }
 
-export function createServer(config: ServerConfig = {}): Server {
+export function createServer(config: ServerConfig): Server {
   const {
     root = process.cwd(),
     configureServer = [],
diff --git a/src/node/server/serverPluginHtml.ts b/src/node/server/serverPluginHtml.ts
index 5d58dee5c356e6..daffa5f18c6367 100644
--- a/src/node/server/serverPluginHtml.ts
+++ b/src/node/server/serverPluginHtml.ts
@@ -25,7 +25,8 @@ export const htmlRewritePlugin: ServerPlugin = ({
 }) => {
   // inject __DEV__ and process.env.NODE_ENV flags
   // since some ESM builds expect these to be replaced by the bundler
-  const { env = {} } = config
+  const { env = {}, mode } = config
+
   const devInjectionCode =
     `\n<script type="module">\n` +
     `import "${hmrClientPublicPath}"\n` +
@@ -33,7 +34,7 @@ export const htmlRewritePlugin: ServerPlugin = ({
     `window.__BASE__ = '/'\n` +
     `window.process = { env: ${JSON.stringify({
       ...env,
-      NODE_ENV: 'development'
+      NODE_ENV: mode
     })}}\n` +
     `</script>\n`
 
diff --git a/test/test.js b/test/test.js
index b7505ccd934a2f..5dfc47453695fd 100644
--- a/test/test.js
+++ b/test/test.js
@@ -96,7 +96,7 @@ describe('vite', () => {
       expect(await getText('.node-env')).toMatch(
         `process.env.NODE_ENV: ${isBuild ? 'production' : 'development'}`
       )
-      expect(await getText('.customize-env-variable')).toMatch(
+      expect(await getText('.custom-env-variable')).toMatch(
         'process.env.CUSTOM_ENV_VARIABLE: 9527'
       )
     })