diff --git a/go.mod b/go.mod
index ca1c67fe0..7b6e92fd0 100644
--- a/go.mod
+++ b/go.mod
@@ -7,7 +7,7 @@ require (
 	github.com/Microsoft/go-winio v0.6.2
 	github.com/acarl005/stripansi v0.0.0-20180116102854-5a71ef0e047d
 	github.com/buger/goterm v1.0.4
-	github.com/compose-spec/compose-go/v2 v2.1.3
+	github.com/compose-spec/compose-go/v2 v2.1.4-0.20240708103555-327323ea44d4
 	github.com/containerd/containerd v1.7.18
 	github.com/davecgh/go-spew v1.1.1
 	github.com/distribution/reference v0.6.0
diff --git a/go.sum b/go.sum
index 9726b8e6e..c26212559 100644
--- a/go.sum
+++ b/go.sum
@@ -86,8 +86,8 @@ github.com/cncf/xds/go v0.0.0-20230607035331-e9ce68804cb4 h1:/inchEIKaYC1Akx+H+g
 github.com/cncf/xds/go v0.0.0-20230607035331-e9ce68804cb4/go.mod h1:eXthEFrGJvWHgFFCl3hGmgk+/aYT6PnTQLykKQRLhEs=
 github.com/codahale/rfc6979 v0.0.0-20141003034818-6a90f24967eb h1:EDmT6Q9Zs+SbUoc7Ik9EfrFqcylYqgPZ9ANSbTAntnE=
 github.com/codahale/rfc6979 v0.0.0-20141003034818-6a90f24967eb/go.mod h1:ZjrT6AXHbDs86ZSdt/osfBi5qfexBrKUdONk989Wnk4=
-github.com/compose-spec/compose-go/v2 v2.1.3 h1:bD67uqLuL/XgkAK6ir3xZvNLFPxPScEi1KW7R5esrLE=
-github.com/compose-spec/compose-go/v2 v2.1.3/go.mod h1:lFN0DrMxIncJGYAXTfWuajfwj5haBJqrBkarHcnjJKc=
+github.com/compose-spec/compose-go/v2 v2.1.4-0.20240708103555-327323ea44d4 h1:jpoA30Hs8qGuT2Rv/mk9pga4y/Glw/5O+jyOCv2la3I=
+github.com/compose-spec/compose-go/v2 v2.1.4-0.20240708103555-327323ea44d4/go.mod h1:lFN0DrMxIncJGYAXTfWuajfwj5haBJqrBkarHcnjJKc=
 github.com/containerd/cgroups v1.1.0 h1:v8rEWFl6EoqHB+swVNjVoCJE8o3jX7e8nqBGPLaDFBM=
 github.com/containerd/cgroups v1.1.0/go.mod h1:6ppBcbh/NOOUU+dMKrykgaBnK9lCIBxHqJDGwsa1mIw=
 github.com/containerd/console v1.0.4 h1:F2g4+oChYvBTsASRTz8NP6iIAi97J3TtSAsLbIFn4ro=
diff --git a/pkg/e2e/compose_environment_test.go b/pkg/e2e/compose_environment_test.go
index e5d0373b4..62d6c9ebc 100644
--- a/pkg/e2e/compose_environment_test.go
+++ b/pkg/e2e/compose_environment_test.go
@@ -222,3 +222,24 @@ func TestCommentsInEnvFile(t *testing.T) {
 		c.RunDockerComposeCmd(t, "--project-name", "env-file-comments", "down", "--rmi", "all")
 	})
 }
+
+func TestUnsetEnv(t *testing.T) {
+	c := NewParallelCLI(t)
+	t.Cleanup(func() {
+		c.RunDockerComposeCmd(t, "--project-name", "empty-variable", "down", "--rmi", "all")
+	})
+
+	t.Run("override env variable", func(t *testing.T) {
+		c.RunDockerComposeCmd(t, "-f", "./fixtures/environment/empty-variable/compose.yaml", "build")
+
+		res := c.RunDockerComposeCmd(t, "-f", "./fixtures/environment/empty-variable/compose.yaml",
+			"run", "-e", "EMPTY=hello", "--rm", "empty-variable")
+		res.Assert(t, icmd.Expected{Out: `=hello=`})
+	})
+
+	t.Run("unset env variable", func(t *testing.T) {
+		res := c.RunDockerComposeCmd(t, "-f", "./fixtures/environment/empty-variable/compose.yaml",
+			"run", "--rm", "empty-variable")
+		res.Assert(t, icmd.Expected{Out: `==`})
+	})
+}
diff --git a/pkg/e2e/fixtures/environment/empty-variable/Dockerfile b/pkg/e2e/fixtures/environment/empty-variable/Dockerfile
new file mode 100644
index 000000000..a7dac49e0
--- /dev/null
+++ b/pkg/e2e/fixtures/environment/empty-variable/Dockerfile
@@ -0,0 +1,17 @@
+#   Copyright 2020 Docker Compose CLI authors
+
+#   Licensed under the Apache License, Version 2.0 (the "License");
+#   you may not use this file except in compliance with the License.
+#   You may obtain a copy of the License at
+
+#       http://www.apache.org/licenses/LICENSE-2.0
+
+#   Unless required by applicable law or agreed to in writing, software
+#   distributed under the License is distributed on an "AS IS" BASIS,
+#   WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+#   See the License for the specific language governing permissions and
+#   limitations under the License.
+
+FROM alpine
+ENV  EMPTY=not_empty
+CMD ["sh", "-c", "echo \"=$EMPTY=\""]
diff --git a/pkg/e2e/fixtures/environment/empty-variable/compose.yaml b/pkg/e2e/fixtures/environment/empty-variable/compose.yaml
new file mode 100644
index 000000000..6ac057af3
--- /dev/null
+++ b/pkg/e2e/fixtures/environment/empty-variable/compose.yaml
@@ -0,0 +1,7 @@
+services:
+  empty-variable:
+    build:
+      context: .
+    image: empty-variable
+    environment:
+      - EMPTY # expect to propagate value from user's env OR unset in container
\ No newline at end of file