diff --git a/acceptance/bundle/variables/empty/output.txt b/acceptance/bundle/variables/empty/output.txt
index 261635920..589a0a502 100644
--- a/acceptance/bundle/variables/empty/output.txt
+++ b/acceptance/bundle/variables/empty/output.txt
@@ -1,4 +1,4 @@
-Error: no value assigned to required variable a. Assignment can be done through the "--var" flag or by setting the BUNDLE_VAR_a environment variable
+Error: no value assigned to required variable a. Assignment can be done through the "--var" or "--var-file" flag or by setting the BUNDLE_VAR_a environment variable
 
 Name: empty${var.a}
 Target: default
diff --git a/acceptance/bundle/variables/env_overrides/output.txt b/acceptance/bundle/variables/env_overrides/output.txt
index f42f82211..faa3505f3 100644
--- a/acceptance/bundle/variables/env_overrides/output.txt
+++ b/acceptance/bundle/variables/env_overrides/output.txt
@@ -9,7 +9,7 @@
 "prod-a env-var-b"
 
 >>> errcode $CLI bundle validate -t env-missing-a-required-variable-assignment
-Error: no value assigned to required variable b. Assignment can be done through the "--var" flag or by setting the BUNDLE_VAR_b environment variable
+Error: no value assigned to required variable b. Assignment can be done through the "--var" or "--var-file" flag or by setting the BUNDLE_VAR_b environment variable
 
 Name: test bundle
 Target: env-missing-a-required-variable-assignment
diff --git a/acceptance/bundle/variables/flag_overrides/output.txt b/acceptance/bundle/variables/flag_overrides/output.txt
deleted file mode 100644
index 549cf9e36..000000000
--- a/acceptance/bundle/variables/flag_overrides/output.txt
+++ /dev/null
@@ -1,8 +0,0 @@
-{
-  "job_cluster_key": "mlops_stacks-cluster",
-  "new_cluster": {
-    "node_type_id": "Standard_DS3_v2",
-    "num_workers": 2
-  }
-}
-"mlops_stacks-cluster"
diff --git a/acceptance/bundle/variables/flag_overrides/script b/acceptance/bundle/variables/flag_overrides/script
deleted file mode 100644
index bfdbdf427..000000000
--- a/acceptance/bundle/variables/flag_overrides/script
+++ /dev/null
@@ -1,5 +0,0 @@
-# variable file
-$CLI bundle validate -o json --var-file=vars.json | jq .resources.jobs.job1.job_clusters[0]
-
-# variable flag
-$CLI bundle validate -o json --var="cluster_key=mlops_stacks-cluster" | jq .resources.jobs.job1.job_clusters[0].job_cluster_key
diff --git a/acceptance/bundle/variables/vanilla/output.txt b/acceptance/bundle/variables/vanilla/output.txt
index 1d88bd060..36cf44b5a 100644
--- a/acceptance/bundle/variables/vanilla/output.txt
+++ b/acceptance/bundle/variables/vanilla/output.txt
@@ -3,7 +3,7 @@
 "abc def"
 
 >>> errcode $CLI bundle validate
-Error: no value assigned to required variable b. Assignment can be done through the "--var" flag or by setting the BUNDLE_VAR_b environment variable
+Error: no value assigned to required variable b. Assignment can be done through the "--var" or "--var-file" flag or by setting the BUNDLE_VAR_b environment variable
 
 Name: ${var.a} ${var.b}
 Target: default
diff --git a/acceptance/bundle/variables/var_file_overrides/databricks.yml b/acceptance/bundle/variables/var_file_overrides/databricks.yml
new file mode 100644
index 000000000..cf743a556
--- /dev/null
+++ b/acceptance/bundle/variables/var_file_overrides/databricks.yml
@@ -0,0 +1,32 @@
+bundle:
+  name: TestResolveVariablesFromFile
+
+variables:
+  cluster:
+    type: "complex"
+  cluster_key:
+  cluster_workers:
+
+resources:
+  jobs:
+    job1:
+      job_clusters:
+        - job_cluster_key: ${var.cluster_key}
+          new_cluster:
+            node_type_id: "${var.cluster.node_type_id}"
+            num_workers: ${var.cluster_workers}
+
+targets:
+  with-defaults:
+    default: true
+    variables:
+      cluster_workers:
+        default: 1
+      cluster:
+        type: "complex"
+        default:
+          node_type_id: "default"
+      cluster_key:
+        default: "default"
+
+  without-defaults:
diff --git a/acceptance/bundle/variables/var_file_overrides/output.txt b/acceptance/bundle/variables/var_file_overrides/output.txt
new file mode 100644
index 000000000..1f6184397
--- /dev/null
+++ b/acceptance/bundle/variables/var_file_overrides/output.txt
@@ -0,0 +1,126 @@
+
+>>> $CLI bundle validate -o json --var-file=var_files/normal.json
+{
+  "job_cluster_key": "mlops_stacks-cluster",
+  "new_cluster": {
+    "node_type_id": "Standard_DS3_v2",
+    "num_workers": 2
+  }
+}
+
+>>> $CLI bundle validate -o json --var=cluster_key=mlops_stacks-cluster
+{
+  "job_cluster_key": "mlops_stacks-cluster",
+  "new_cluster": {
+    "node_type_id": "default",
+    "num_workers": 1
+  }
+}
+
+>>> errcode $CLI bundle validate -o json --var-file=var_files/normal.json --var=cluster_key=mlops_stacks-cluster
+Error: cannot specify both --var and --var-file flags
+
+
+Exit code: 1
+{
+  "job_cluster_key": "${var.cluster_key}",
+  "new_cluster": {
+    "node_type_id": "${var.cluster.node_type_id}",
+    "num_workers": "${var.cluster_workers}"
+  }
+}
+
+>>> errcode $CLI bundle validate -o json --var-file=var_files/not_found.json
+Error: failed to read variables file: open var_files/not_found.json: no such file or directory
+
+
+Exit code: 1
+{
+  "job_cluster_key": "${var.cluster_key}",
+  "new_cluster": {
+    "node_type_id": "${var.cluster.node_type_id}",
+    "num_workers": "${var.cluster_workers}"
+  }
+}
+
+>>> errcode $CLI bundle validate -o json --var-file=var_files/invalid_json.json
+Error: failed to parse variables file: error decoding JSON at :0:0: invalid character 'o' in literal false (expecting 'a')
+
+
+Exit code: 1
+{
+  "job_cluster_key": "${var.cluster_key}",
+  "new_cluster": {
+    "node_type_id": "${var.cluster.node_type_id}",
+    "num_workers": "${var.cluster_workers}"
+  }
+}
+
+>>> errcode $CLI bundle validate -o json --var-file=var_files/wrong_file_structure.json
+Error: failed to parse variables file: var_files/wrong_file_structure.json:1:1: expected a map, found a sequence
+  in var_files/wrong_file_structure.json:1:1
+
+Variables file must be a JSON object with the following format:
+{"var1": "value1", "var2": "value2"}
+
+
+Exit code: 1
+{
+  "job_cluster_key": "${var.cluster_key}",
+  "new_cluster": {
+    "node_type_id": "${var.cluster.node_type_id}",
+    "num_workers": "${var.cluster_workers}"
+  }
+}
+
+>>> errcode $CLI bundle validate -o json --var-file=var_files/undeclared.json
+Error: variable undeclared_var has not been defined
+
+
+Exit code: 1
+{
+  "job_cluster_key": "${var.cluster_key}",
+  "new_cluster": {
+    "node_type_id": "${var.cluster.node_type_id}",
+    "num_workers": "${var.cluster_workers}"
+  }
+}
+
+>>> errcode $CLI bundle validate -o json --var-file=var_files/complex_to_string.json
+Error: expected a map to index "variables.cluster.value.node_type_id", found string
+
+
+Exit code: 1
+{
+  "job_cluster_key": "${var.cluster_key}",
+  "new_cluster": {
+    "node_type_id": "${var.cluster.node_type_id}",
+    "num_workers": "${var.cluster_workers}"
+  }
+}
+
+>>> errcode $CLI bundle validate -o json --var-file=var_files/string_to_complex.json
+Error: failed to assign map[node_type_id:Standard_DS3_v2] to cluster_key: variable type is not complex
+
+
+Exit code: 1
+{
+  "job_cluster_key": "${var.cluster_key}",
+  "new_cluster": {
+    "node_type_id": "${var.cluster.node_type_id}",
+    "num_workers": "${var.cluster_workers}"
+  }
+}
+
+>>> errcode $CLI bundle validate -o json --target without-defaults --var-file=var_files/empty.json
+Error: no value assigned to required variable cluster_workers. Assignment can be done through the "--var" or "--var-file" flag or by setting the BUNDLE_VAR_cluster_workers environment variable
+
+
+Exit code: 1
+{
+  "job_cluster_key": "${var.cluster_key}",
+  "new_cluster": {
+    "node_type_id": "${var.cluster.node_type_id}",
+    "num_workers": "${var.cluster_workers}"
+  }
+}
diff --git a/acceptance/bundle/variables/var_file_overrides/script b/acceptance/bundle/variables/var_file_overrides/script
new file mode 100644
index 000000000..147ce5acb
--- /dev/null
+++ b/acceptance/bundle/variables/var_file_overrides/script
@@ -0,0 +1,31 @@
+cluster_expr=".resources.jobs.job1.job_clusters[0]"
+
+# variable file
+trace $CLI bundle validate -o json --var-file=var_files/normal.json | jq $cluster_expr
+
+# variable flag
+trace $CLI bundle validate -o json --var="cluster_key=mlops_stacks-cluster" | jq $cluster_expr
+
+# both variable file and flag
+trace errcode $CLI bundle validate -o json --var-file=var_files/normal.json --var="cluster_key=mlops_stacks-cluster" | jq $cluster_expr
+
+# file not found
+trace errcode $CLI bundle validate -o json --var-file=var_files/not_found.json | jq $cluster_expr
+
+# file cannot be parsed
+trace errcode $CLI bundle validate -o json --var-file=var_files/invalid_json.json | jq $cluster_expr
+
+# file has wrong structure
+trace errcode $CLI bundle validate -o json --var-file=var_files/wrong_file_structure.json | jq $cluster_expr
+
+# file has variable name that is not defined
+trace errcode $CLI bundle validate -o json --var-file=var_files/undeclared.json | jq $cluster_expr
+
+# file has variable name that is complex but default is string
+trace errcode $CLI bundle validate -o json --var-file=var_files/complex_to_string.json | jq $cluster_expr
+
+# file has variable name that is string but default is complex
+trace errcode $CLI bundle validate -o json --var-file=var_files/string_to_complex.json | jq $cluster_expr
+
+# variable is required but it's not provided in the file
+trace errcode $CLI bundle validate -o json --target without-defaults --var-file=var_files/empty.json | jq $cluster_expr
diff --git a/acceptance/bundle/variables/var_file_overrides/var_files/complex_to_string.json b/acceptance/bundle/variables/var_file_overrides/var_files/complex_to_string.json
new file mode 100644
index 000000000..1ea719446
--- /dev/null
+++ b/acceptance/bundle/variables/var_file_overrides/var_files/complex_to_string.json
@@ -0,0 +1,3 @@
+{
+  "cluster": "mlops_stacks-cluster"
+}
diff --git a/acceptance/bundle/variables/var_file_overrides/var_files/empty.json b/acceptance/bundle/variables/var_file_overrides/var_files/empty.json
new file mode 100644
index 000000000..0967ef424
--- /dev/null
+++ b/acceptance/bundle/variables/var_file_overrides/var_files/empty.json
@@ -0,0 +1 @@
+{}
diff --git a/acceptance/bundle/variables/var_file_overrides/var_files/invalid_json.json b/acceptance/bundle/variables/var_file_overrides/var_files/invalid_json.json
new file mode 100644
index 000000000..257cc5642
--- /dev/null
+++ b/acceptance/bundle/variables/var_file_overrides/var_files/invalid_json.json
@@ -0,0 +1 @@
+foo
diff --git a/acceptance/bundle/variables/flag_overrides/vars.json b/acceptance/bundle/variables/var_file_overrides/var_files/normal.json
similarity index 100%
rename from acceptance/bundle/variables/flag_overrides/vars.json
rename to acceptance/bundle/variables/var_file_overrides/var_files/normal.json
diff --git a/acceptance/bundle/variables/var_file_overrides/var_files/string_to_complex.json b/acceptance/bundle/variables/var_file_overrides/var_files/string_to_complex.json
new file mode 100644
index 000000000..602567a68
--- /dev/null
+++ b/acceptance/bundle/variables/var_file_overrides/var_files/string_to_complex.json
@@ -0,0 +1,5 @@
+{
+  "cluster_key": {
+    "node_type_id": "Standard_DS3_v2"
+  }
+}
diff --git a/acceptance/bundle/variables/var_file_overrides/var_files/undeclared.json b/acceptance/bundle/variables/var_file_overrides/var_files/undeclared.json
new file mode 100644
index 000000000..2a137d23d
--- /dev/null
+++ b/acceptance/bundle/variables/var_file_overrides/var_files/undeclared.json
@@ -0,0 +1,3 @@
+{
+  "undeclared_var": 1
+}
diff --git a/acceptance/bundle/variables/var_file_overrides/var_files/wrong_file_structure.json b/acceptance/bundle/variables/var_file_overrides/var_files/wrong_file_structure.json
new file mode 100644
index 000000000..de140ba36
--- /dev/null
+++ b/acceptance/bundle/variables/var_file_overrides/var_files/wrong_file_structure.json
@@ -0,0 +1,3 @@
+[
+  "foo"
+]
diff --git a/acceptance/bundle/variables/flag_overrides/databricks.yml b/acceptance/bundle/variables/var_flag/databricks.yml
similarity index 78%
rename from acceptance/bundle/variables/flag_overrides/databricks.yml
rename to acceptance/bundle/variables/var_flag/databricks.yml
index 41c106ac6..f9de114e5 100644
--- a/acceptance/bundle/variables/flag_overrides/databricks.yml
+++ b/acceptance/bundle/variables/var_flag/databricks.yml
@@ -1,13 +1,13 @@
 bundle:
-  name: TestResolveVariablesFromFile
+  name: TestResolveVariablesFromFlag
 
 variables:
   cluster:
     type: "complex"
     default:
-      node_type_id: "unused"
+      node_type_id: "undefined"
   cluster_key:
-    default: "unused"
+    default: "undefined"
   cluster_workers:
     default: 1
 
diff --git a/acceptance/bundle/variables/var_flag/output.txt b/acceptance/bundle/variables/var_flag/output.txt
new file mode 100644
index 000000000..b5390d371
--- /dev/null
+++ b/acceptance/bundle/variables/var_flag/output.txt
@@ -0,0 +1,3 @@
+
+>>> $CLI bundle validate -o json --var=cluster_key=mlops_stacks-cluster
+"mlops_stacks-cluster"
diff --git a/acceptance/bundle/variables/var_flag/script b/acceptance/bundle/variables/var_flag/script
new file mode 100644
index 000000000..66a1217d8
--- /dev/null
+++ b/acceptance/bundle/variables/var_flag/script
@@ -0,0 +1,2 @@
+# single flag
+trace $CLI bundle validate -o json --var="cluster_key=mlops_stacks-cluster" | jq .resources.jobs.job1.job_clusters[0].job_cluster_key
diff --git a/bundle/config/mutator/set_variables.go b/bundle/config/mutator/set_variables.go
index 9e9f2dcfe..7b16571e2 100644
--- a/bundle/config/mutator/set_variables.go
+++ b/bundle/config/mutator/set_variables.go
@@ -64,7 +64,7 @@ func setVariable(ctx context.Context, v dyn.Value, variable *variable.Variable,
 	}
 
 	// We should have had a value to set for the variable at this point.
-	return dyn.InvalidValue, fmt.Errorf(`no value assigned to required variable %s. Assignment can be done through the "--var" flag or by setting the %s environment variable`, name, bundleVarPrefix+name)
+	return dyn.InvalidValue, fmt.Errorf(`no value assigned to required variable %s. Assignment can be done through the "--var" or "--var-file" flag or by setting the %s environment variable`, name, bundleVarPrefix+name)
 }
 
 func (m *setVariables) Apply(ctx context.Context, b *bundle.Bundle) diag.Diagnostics {