diff --git a/.dvmrc b/.dvmrc
new file mode 100644
index 0000000..3987c47
--- /dev/null
+++ b/.dvmrc
@@ -0,0 +1 @@
+1.43.1
diff --git a/.github/workflows/test.yml b/.github/workflows/test.yml
index 97f7d36..9af7705 100644
--- a/.github/workflows/test.yml
+++ b/.github/workflows/test.yml
@@ -13,7 +13,7 @@ jobs:
       matrix:
         os: [ubuntu-latest, windows-latest, macos-latest]
         deno:
-          [1.x, "1.33.1", canary, ~1.32, b31cf9fde6ad5398c20370c136695db77df6beeb]
+          [1.x, "1.33.1", canary, ~1.32, b290fd01f3f5d32f9d010fc719ced0240759c049]
 
     steps:
       - uses: actions/checkout@v3
@@ -38,3 +38,19 @@ jobs:
       - name: Lint
         if: runner.os == 'Linux' && matrix.deno == 'canary'
         run: npm run lint
+
+  test-version-file:
+    runs-on: ubuntu-latest
+    strategy:
+      matrix:
+        deno-version-file: [.dvmrc, .tool-versions]
+    steps:
+      - uses: actions/checkout@v3
+
+      - name: Setup Deno
+        uses: ./
+        with:
+          deno-version-file: ${{ matrix.deno-version-file }}
+
+      - name: Check version
+        run: deno -V | grep -q "deno 1\.43\.1"
diff --git a/.tool-versions b/.tool-versions
new file mode 100644
index 0000000..5d7d2f5
--- /dev/null
+++ b/.tool-versions
@@ -0,0 +1,7 @@
+nodejs 20.5.1
+bun 1.1.4
+ruby 3.3.0
+lua 5.4.4
+deno 1.43.1
+rust 1.65.0
+python 3.11.0
diff --git a/README.md b/README.md
index 4d9a604..915c375 100644
--- a/README.md
+++ b/README.md
@@ -4,6 +4,20 @@ Set up your GitHub Actions workflow with a specific version of Deno.
 
 ## Usage
 
+### Version from file
+
+```yaml
+- uses: denoland/setup-deno@v1
+  with:
+    deno-version-file: .dvmrc
+```
+
+```yaml
+- uses: denoland/setup-deno@v1
+  with:
+    deno-version-file: .tool-versions
+```
+
 ### Latest stable for a major
 
 ```yaml
diff --git a/action.yml b/action.yml
index dd4bef0..74d15ef 100644
--- a/action.yml
+++ b/action.yml
@@ -8,6 +8,8 @@ inputs:
   deno-version:
     description: The Deno version to install. Can be a semver version of a stable release, "canary" for the latest canary, or the Git hash of a specific canary release.
     default: "1.x"
+  deno-version-file:
+    description: File containing the Deno version to install such as .dvmrc or .tool-versions.
 outputs:
   deno-version:
     description: "The Deno version that was installed."
diff --git a/main.js b/main.js
index 9242d7d..33574a0 100644
--- a/main.js
+++ b/main.js
@@ -1,7 +1,11 @@
 const process = require("process");
 const core = require("@actions/core");
 
-const { parseVersionRange, resolveVersion } = require("./src/version.js");
+const {
+  parseVersionRange,
+  getDenoVersionFromFile,
+  resolveVersion,
+} = require("./src/version.js");
 const { install } = require("./src/install.js");
 
 /**
@@ -15,7 +19,13 @@ function exit(message) {
 
 async function main() {
   try {
-    const range = parseVersionRange(core.getInput("deno-version"));
+    const denoVersionFile = core.getInput("deno-version-file");
+    const range = parseVersionRange(
+      denoVersionFile
+        ? getDenoVersionFromFile(denoVersionFile)
+        : core.getInput("deno-version"),
+    );
+
     if (range === null) {
       exit("The passed version range is not valid.");
     }
diff --git a/src/version.js b/src/version.js
index f053db0..b39bfe7 100644
--- a/src/version.js
+++ b/src/version.js
@@ -1,5 +1,6 @@
 const semver = require("semver");
 const { fetch } = require("undici");
+const fs = require("fs");
 
 const GIT_HASH_RE = /^[0-9a-fA-F]{40}$/;
 
@@ -41,6 +42,35 @@ function parseVersionRange(version) {
   return null;
 }
 
+/**
+ * Parses the version from the version file
+ *
+ * @param {string} versionFilePath
+ * @returns {string | undefined}
+ */
+function getDenoVersionFromFile(versionFilePath) {
+  if (!fs.existsSync(versionFilePath)) {
+    throw new Error(
+      `The specified node version file at: ${versionFilePath} does not exist`,
+    );
+  }
+
+  const contents = fs.readFileSync(versionFilePath, "utf8");
+
+  // .tool-versions typically looks like
+  // ```
+  // ruby 2.6.5
+  // deno 1.43.1
+  // node 20.0.0
+  // ```
+  // This parses the version of Deno from the file
+  const denoVersionInToolVersions = contents.match(
+    /^deno\s+v?(?<version>[^\s]+)$/m,
+  );
+
+  return denoVersionInToolVersions?.groups?.version || contents.trim();
+}
+
 /**
  * @param {VersionRange} range
  * @returns {Promise<Version | null>}
@@ -115,4 +145,5 @@ async function fetchWithRetries(url, maxRetries = 5) {
 module.exports = {
   parseVersionRange,
   resolveVersion,
+  getDenoVersionFromFile,
 };