diff --git a/pkg/test/case.go b/pkg/test/case.go
index 97814b0d..d0b572bc 100644
--- a/pkg/test/case.go
+++ b/pkg/test/case.go
@@ -386,6 +386,10 @@ func (t *Case) determineNamespace() *namespace {
 		ns.Name = fmt.Sprintf("kuttl-test-%s", petname.Generate(2, "-"))
 		ns.AutoCreated = true
 	}
+
+	if _, ok := os.LookupEnv("NAMESPACE"); !ok { // user can supply this environment variable
+		os.Setenv("NAMESPACE", t.PreferredNamespace) // set this environment variable so it can be templated by other 'steps'
+	}
 	// if we have a preferred namespace, we do NOT auto-create
 	return ns
 }
diff --git a/pkg/test/utils/kubernetes.go b/pkg/test/utils/kubernetes.go
index 38603ba1..668f5eae 100644
--- a/pkg/test/utils/kubernetes.go
+++ b/pkg/test/utils/kubernetes.go
@@ -508,6 +508,9 @@ func LoadYAML(path string, r io.Reader) ([]client.Object, error) {
 			return nil, fmt.Errorf("error reading yaml %s: %w", path, err)
 		}
 
+		// replace all variables from the environment
+		data = []byte(os.ExpandEnv(string(data)))
+
 		unstructuredObj := &unstructured.Unstructured{}
 		decoder := yaml.NewYAMLOrJSONDecoder(bytes.NewBuffer(data), len(data))
 
diff --git a/pkg/test/utils/kubernetes_test.go b/pkg/test/utils/kubernetes_test.go
index 2cb1bdb1..6b04aa1a 100644
--- a/pkg/test/utils/kubernetes_test.go
+++ b/pkg/test/utils/kubernetes_test.go
@@ -5,6 +5,7 @@ import (
 	"context"
 	"errors"
 	"os"
+	"strconv"
 	"testing"
 	"time"
 
@@ -168,7 +169,8 @@ func TestRetryWithTimeout(t *testing.T) {
 }
 
 func TestLoadYAML(t *testing.T) {
-	tmpfile, err := os.CreateTemp("", "test.yaml")
+	tmpDir := t.TempDir()
+	tmpfile, err := os.CreateTemp(tmpDir, "test.yaml")
 	assert.Nil(t, err)
 	defer tmpfile.Close()
 
@@ -182,6 +184,11 @@ spec:
   containers:
   - name: nginx
     image: nginx:1.7.9
+  - name: app
+    image: app:$APP_VERSION
+    resources:
+      requests:
+        cpu: ${CPU_COUNT}
 ---
 apiVersion: v1
 kind: Pod
@@ -193,11 +200,36 @@ spec:
   containers:
   - name: nginx
     image: nginx:1.7.9
+---
+apiVersion: $GROUP_VERSION
+kind: $KIND
+metadata:
+  name: hello
+spec:
+  config:
+    $KEY_VAR: bar
 `), 0600)
 	if err != nil {
 		t.Fatal(err)
 	}
 
+	appVersion := "0.0.1-alpha"
+	t.Setenv("APP_VERSION", appVersion)
+	// test replacing a different type (int64 in this case)
+	// and nested values
+	cpuCount := int64(2)
+	t.Setenv("CPU_COUNT", strconv.Itoa(int(cpuCount)))
+
+	// test GVK
+	groupVersion := "example.com/v1"
+	t.Setenv("GROUP_VERSION", groupVersion)
+	kind := "custom"
+	t.Setenv("KIND", kind)
+
+	// key update
+	keyVar := "baz"
+	t.Setenv("KEY_VAR", keyVar)
+
 	objs, err := LoadYAMLFromFile(tmpfile.Name())
 	assert.Nil(t, err)
 
@@ -216,6 +248,15 @@ spec:
 						"image": "nginx:1.7.9",
 						"name":  "nginx",
 					},
+					map[string]interface{}{
+						"name":  "app",
+						"image": "app:" + appVersion,
+						"resources": map[string]interface{}{
+							"requests": map[string]interface{}{
+								"cpu": cpuCount,
+							},
+						},
+					},
 				},
 			},
 		},
@@ -241,10 +282,26 @@ spec:
 			},
 		},
 	}, objs[1])
+
+	assert.Equal(t, &unstructured.Unstructured{
+		Object: map[string]interface{}{
+			"apiVersion": groupVersion,
+			"kind":       kind,
+			"metadata": map[string]interface{}{
+				"name": "hello",
+			},
+			"spec": map[string]interface{}{
+				"config": map[string]interface{}{
+					keyVar: "bar",
+				},
+			},
+		},
+	}, objs[2])
 }
 
 func TestMatchesKind(t *testing.T) {
-	tmpfile, err := os.CreateTemp("", "test.yaml")
+	tmpDir := t.TempDir()	
+	tmpfile, err := os.CreateTemp(tmpDir, "test.yaml")
 	assert.Nil(t, err)
 	defer tmpfile.Close()
 
diff --git a/tools.go b/tools.go
index 655b4e6b..51f74411 100644
--- a/tools.go
+++ b/tools.go
@@ -1,3 +1,4 @@
+//go:build tools
 // +build tools
 
 // Package tools is used to import go modules that we use for tooling as dependencies.