diff --git a/.github/workflows/test-python.yml b/.github/workflows/test-python.yml
index 00043f438..02835a964 100644
--- a/.github/workflows/test-python.yml
+++ b/.github/workflows/test-python.yml
@@ -10,35 +10,46 @@ on:
       - '**.md'
   schedule:
     - cron: 30 3 * * *
+  workflow_dispatch:
 
 jobs:
-  default-version:
-    name: Setup default version
+  setup-versions-from-manifest:
+    name: Setup ${{ matrix.python }} ${{ matrix.os }}
     runs-on: ${{ matrix.os }}
     strategy:
       fail-fast: false
       matrix:
         os: [macos-latest, windows-latest, ubuntu-18.04, ubuntu-20.04]
+        python: [3.5.4, 3.6.7, 3.7.5, 3.8.1]
     steps:
     - name: Checkout
-      uses: actions/checkout@v2
+      uses: actions/checkout@v3
 
-    - name: setup default python
+    - name: setup-python ${{ matrix.python }}
       id: setup-python
       uses: ./
+      with:
+        python-version: ${{ matrix.python }}
 
     - name: Check python-path
       run: ./__tests__/check-python-path.sh '${{ steps.setup-python.outputs.python-path }}'
       shell: bash
 
     - name: Validate version
-      run: python --version
+      run: |
+        $pythonVersion = (python --version)
+        if ("Python ${{ matrix.python }}" -ne "$pythonVersion"){
+          Write-Host "The current version is $pythonVersion; expected version is ${{ matrix.python }}"
+          exit 1
+        }
+        $pythonVersion
+      shell: pwsh
 
-    - name: Run simple python code
+    - name: Run simple code
       run: python -c 'import math; print(math.factorial(5))'
 
-  setup-versions-from-manifest:
-    name: Setup ${{ matrix.python }} ${{ matrix.os }}
+  setup-versions-from-file:
+    name: Setup ${{ matrix.python }} ${{ matrix.os }} version file
     runs-on: ${{ matrix.os }}
     strategy:
       fail-fast: false
@@ -47,13 +58,16 @@ jobs:
         python: [3.5.4, 3.6.7, 3.7.5, 3.8.1]
     steps:
     - name: Checkout
-      uses: actions/checkout@v2
+      uses: actions/checkout@v3
+
+    - name: build-version-file ${{ matrix.python }}
+      run: echo ${{ matrix.python }} > .python-version
 
     - name: setup-python ${{ matrix.python }}
       id: setup-python
       uses: ./
       with:
-        python-version: ${{ matrix.python }}
+        python-version-file: '.python-version'
 
     - name: Check python-path
       run: ./__tests__/check-python-path.sh '${{ steps.setup-python.outputs.python-path }}'
@@ -81,7 +95,7 @@ jobs:
         os: [macos-latest, windows-latest, ubuntu-18.04, ubuntu-20.04]
     steps:
     - name: Checkout
-      uses: actions/checkout@v2
+      uses: actions/checkout@v3
 
     - name: setup-python 3.9.0-beta.4
       id: setup-python
diff --git a/action.yml b/action.yml
index 00c1e5e49..27474e2aa 100644
--- a/action.yml
+++ b/action.yml
@@ -4,8 +4,9 @@ description: 'Set up a specific version of Python and add the command-line tools
 author: 'GitHub'
 inputs:
   python-version:
-    description: "Version range or exact version of a Python version to use, using SemVer's version range syntax."
-    default: '3.x'
+    description: "Version range or exact version of Python to use, using SemVer's version range syntax. Reads from .python-version if unset."
+  python-version-file:
+    description: "File containing the Python version to use. Example: .python-version"
   cache:
     description: 'Used to specify a package manager for caching in the default directory. Supported values: pip, pipenv, poetry.'
     required: false
diff --git a/dist/setup/index.js b/dist/setup/index.js
index 60ad85859..9ab89d404 100644
--- a/dist/setup/index.js
+++ b/dist/setup/index.js
@@ -64527,12 +64527,16 @@ var __awaiter = (this && this.__awaiter) || function (thisArg, _arguments, P, ge
         step((generator = generator.apply(thisArg, _arguments || [])).next());
     });
 };
+var __importDefault = (this && this.__importDefault) || function (mod) {
+    return (mod && mod.__esModule) ? mod : { "default": mod };
+};
 Object.defineProperty(exports, "__esModule", ({ value: true }));
 const core = __importStar(__nccwpck_require__(2186));
 const finder = __importStar(__nccwpck_require__(9996));
 const finderPyPy = __importStar(__nccwpck_require__(4003));
 const path = __importStar(__nccwpck_require__(1017));
 const os = __importStar(__nccwpck_require__(2037));
+const fs_1 = __importDefault(__nccwpck_require__(7147));
 const cache_factory_1 = __nccwpck_require__(7549);
 const utils_1 = __nccwpck_require__(1314);
 function isPyPyVersion(versionSpec) {
@@ -64545,6 +64549,23 @@ function cacheDependencies(cache, pythonVersion) {
         yield cacheDistributor.restoreCache();
     });
 }
+function resolveVersionInput() {
+    let version = core.getInput('python-version');
+    const versionFile = core.getInput('python-version-file');
+    if (version && versionFile) {
+        core.warning('Both python-version and python-version-file inputs are specified, only python-version will be used');
+    }
+    if (version) {
+        return version;
+    }
+    const versionFilePath = path.join(process.env.GITHUB_WORKSPACE, versionFile || '.python-version');
+    if (!fs_1.default.existsSync(versionFilePath)) {
+        throw new Error(`The specified python version file at: ${versionFilePath} does not exist`);
+    }
+    version = fs_1.default.readFileSync(versionFilePath, 'utf8');
+    core.info(`Resolved ${versionFile} as ${version}`);
+    return version;
+}
 function run() {
     var _a;
     return __awaiter(this, void 0, void 0, function* () {
@@ -64556,7 +64577,7 @@ function run() {
             core.debug(`Python is expected to be installed into RUNNER_TOOL_CACHE==${process.env['RUNNER_TOOL_CACHE']}`);
         }
         try {
-            const version = core.getInput('python-version');
+            const version = resolveVersionInput();
             if (version) {
                 let pythonVersion;
                 const arch = core.getInput('architecture') || os.arch();
diff --git a/package.json b/package.json
index 4fafdb998..d7d88f24a 100644
--- a/package.json
+++ b/package.json
@@ -1,6 +1,6 @@
 {
   "name": "setup-python",
-  "version": "3.1.1",
+  "version": "4.0.0",
   "private": true,
   "description": "Setup python action",
   "main": "dist/index.js",
diff --git a/src/setup-python.ts b/src/setup-python.ts
index e8789de64..f5f8c919d 100644
--- a/src/setup-python.ts
+++ b/src/setup-python.ts
@@ -3,6 +3,7 @@ import * as finder from './find-python';
 import * as finderPyPy from './find-pypy';
 import * as path from 'path';
 import * as os from 'os';
+import fs from 'fs';
 import {getCacheDistributor} from './cache-distributions/cache-factory';
 import {isCacheFeatureAvailable} from './utils';
 
@@ -21,6 +22,35 @@ async function cacheDependencies(cache: string, pythonVersion: string) {
   await cacheDistributor.restoreCache();
 }
 
+function resolveVersionInput(): string {
+  let version = core.getInput('python-version');
+  const versionFile = core.getInput('python-version-file');
+
+  if (version && versionFile) {
+    core.warning(
+      'Both python-version and python-version-file inputs are specified, only python-version will be used'
+    );
+  }
+
+  if (version) {
+    return version;
+  }
+
+  const versionFilePath = path.join(
+    process.env.GITHUB_WORKSPACE!,
+    versionFile || '.python-version'
+  );
+  if (!fs.existsSync(versionFilePath)) {
+    throw new Error(
+      `The specified python version file at: ${versionFilePath} does not exist`
+    );
+  }
+  version = fs.readFileSync(versionFilePath, 'utf8');
+  core.info(`Resolved ${versionFile} as ${version}`);
+
+  return version;
+}
+
 async function run() {
   if (process.env.AGENT_TOOLSDIRECTORY?.trim()) {
     core.debug(
@@ -33,7 +63,7 @@ async function run() {
     );
   }
   try {
-    const version = core.getInput('python-version');
+    const version = resolveVersionInput();
     if (version) {
       let pythonVersion: string;
       const arch: string = core.getInput('architecture') || os.arch();