diff --git a/bigchaindb/config_utils.py b/bigchaindb/config_utils.py
index c9da67b1..e1c45718 100644
--- a/bigchaindb/config_utils.py
+++ b/bigchaindb/config_utils.py
@@ -183,6 +183,20 @@ def set_config(config):
     bigchaindb.config['CONFIGURED'] = True
 
 
+def update_config(config):
+    """Update bigchaindb.config with whatever is in the provided config dict,
+    and then set bigchaindb.config['CONFIGURED'] = True
+
+    Args:
+        config (dict): the config dict to read for changes
+                       to the default config
+    """
+
+    # Update the default config with whatever is in the passed config
+    update(bigchaindb.config, update_types(config, bigchaindb.config))
+    bigchaindb.config['CONFIGURED'] = True
+
+
 def write_config(config, filename=None):
     """Write the provided configuration to a specific location.
 
@@ -206,13 +220,18 @@ def autoconfigure(filename=None, config=None, force=False):
         logger.debug('System already configured, skipping autoconfiguration')
         return
 
-    newconfig = env_config(bigchaindb.config)
+    # start with the current configuration
+    newconfig = bigchaindb.config
 
+    # update configuration from file
     try:
         newconfig = update(newconfig, file_config(filename=filename))
     except FileNotFoundError as e:
         logger.warning('Cannot find config file `%s`.' % e.filename)
 
+    # override configuration with env variables
+    newconfig = env_config(newconfig)
+
     if config:
         newconfig = update(newconfig, config)
 
diff --git a/tests/utils/test_config_utils.py b/tests/utils/test_config_utils.py
index 29aa5d0b..89572183 100644
--- a/tests/utils/test_config_utils.py
+++ b/tests/utils/test_config_utils.py
@@ -168,3 +168,41 @@ def test_autoconfigure_read_both_from_file_and_env(monkeypatch):
         'consensus_plugin': 'default',
     }
 
+
+def test_autoconfigure_env_precedence(monkeypatch):
+    file_config = {
+        'database': {'host': 'test-host', 'name': 'bigchaindb', 'port': 28015}
+    }
+    monkeypatch.setattr('bigchaindb.config_utils.file_config', lambda *args, **kwargs: file_config)
+    monkeypatch.setattr('os.environ', {'BIGCHAINDB_DATABASE_NAME': 'test-dbname',
+                                       'BIGCHAINDB_DATABASE_PORT': '4242',
+                                       'BIGCHAINDB_SERVER_BIND': 'localhost:9985'})
+
+    import bigchaindb
+    from bigchaindb import config_utils
+    config_utils.autoconfigure()
+
+    assert bigchaindb.config['CONFIGURED']
+    assert bigchaindb.config['database']['host'] == 'test-host'
+    assert bigchaindb.config['database']['name'] == 'test-dbname'
+    assert bigchaindb.config['database']['port'] == 4242
+    assert bigchaindb.config['server']['bind'] == 'localhost:9985'
+
+
+def test_update_config(monkeypatch):
+    import bigchaindb
+    from bigchaindb import config_utils
+
+    file_config = {
+        'database': {'host': 'test-host', 'name': 'bigchaindb', 'port': 28015}
+    }
+    monkeypatch.setattr('bigchaindb.config_utils.file_config', lambda *args, **kwargs: file_config)
+    config_utils.autoconfigure()
+
+    # update configuration, retaining previous changes
+    config_utils.update_config({'database': {'port': 28016, 'name': 'bigchaindb_other'}})
+
+    assert bigchaindb.config['database']['host'] == 'test-host'
+    assert bigchaindb.config['database']['name'] == 'bigchaindb_other'
+    assert bigchaindb.config['database']['port'] == 28016
+