diff --git a/packages/next-env/index.ts b/packages/next-env/index.ts
index 343e80251879..97df9677629d 100644
--- a/packages/next-env/index.ts
+++ b/packages/next-env/index.ts
@@ -2,7 +2,7 @@
 import * as fs from 'fs'
 import * as path from 'path'
 import * as dotenv from 'dotenv'
-import dotenvExpand from 'dotenv-expand'
+import { expand as dotenvExpand } from 'dotenv-expand'
 
 export type Env = { [key: string]: string }
 export type LoadedEnvFiles = Array<{
diff --git a/packages/next-env/package.json b/packages/next-env/package.json
index 9e9540c9ae1e..5bf5140b5425 100644
--- a/packages/next-env/package.json
+++ b/packages/next-env/package.json
@@ -31,6 +31,6 @@
   "devDependencies": {
     "@vercel/ncc": "0.33.1",
     "dotenv": "10.0.0",
-    "dotenv-expand": "5.1.0"
+    "dotenv-expand": "8.0.1"
   }
 }
diff --git a/test/development/dotenv-default-expansion/index.test.ts b/test/development/dotenv-default-expansion/index.test.ts
new file mode 100644
index 000000000000..01b6cd0f9bc3
--- /dev/null
+++ b/test/development/dotenv-default-expansion/index.test.ts
@@ -0,0 +1,32 @@
+import { createNext } from 'e2e-utils'
+import { NextInstance } from 'test/lib/next-modes/base'
+import webdriver from 'next-webdriver'
+
+describe('Dotenv default expansion', () => {
+  let next: NextInstance
+
+  beforeAll(async () => {
+    next = await createNext({
+      files: {
+        'pages/index.js': `
+          export default function Page() { 
+            return <p>{process.env.NEXT_PUBLIC_TEST}</p>
+          } 
+        `,
+        '.env': `
+          NEXT_PUBLIC_TEST=\${MISSING_KEY:-default}
+        `,
+      },
+      dependencies: {},
+    })
+  })
+  afterAll(() => next.destroy())
+
+  it('should work', async () => {
+    const browser = await webdriver(next.appPort, '/')
+    const text = await browser.elementByCss('p').text()
+    expect(text).toBe('default')
+
+    await browser.close()
+  })
+})
diff --git a/yarn.lock b/yarn.lock
index 53743dacc843..935c13e59280 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -9118,10 +9118,10 @@ dot-prop@^6.0.1:
   dependencies:
     is-obj "^2.0.0"
 
-dotenv-expand@5.1.0:
-  version "5.1.0"
-  resolved "https://registry.yarnpkg.com/dotenv-expand/-/dotenv-expand-5.1.0.tgz#3fbaf020bfd794884072ea26b1e9791d45a629f0"
-  integrity sha512-YXQl1DSa4/PQyRfgrv6aoNjhasp/p4qs9FjJ4q4cQk+8m4r6k4ZSiEyytKG8f8W9gi8WsQtIObNmKd+tMzNTmA==
+dotenv-expand@8.0.1:
+  version "8.0.1"
+  resolved "https://registry.yarnpkg.com/dotenv-expand/-/dotenv-expand-8.0.1.tgz#332aa17c14b12e28e2e230f8d183eecc1c014fdc"
+  integrity sha512-j/Ih7bIERDR5PzI89Zu8ayd3tXZ6E3dbY0ljQ9Db0K87qBO8zdLsi2dIvDHMWtjC3Yxb8XixOTHAtia0fDHRpg==
 
 dotenv@10.0.0:
   version "10.0.0"
@@ -14663,6 +14663,7 @@ minipass-fetch@^1.3.0, minipass-fetch@^1.3.2:
   resolved "https://registry.yarnpkg.com/minipass-fetch/-/minipass-fetch-1.3.3.tgz#34c7cea038c817a8658461bf35174551dce17a0a"
   integrity sha512-akCrLDWfbdAWkMLBxJEeWTdNsjML+dt5YgOI4gJ53vuO0vrmYQkUPxa6j6V65s9CcePIr2SSWqjT2EcrNseryQ==
   dependencies:
+    encoding "^0.1.12"
     minipass "^3.1.0"
     minipass-sized "^1.0.3"
     minizlib "^2.0.0"