diff --git a/packages/varlock/src/cli/helpers/find-env-files.ts b/packages/varlock/src/cli/helpers/find-env-files.ts
index 211c071..953f460 100644
--- a/packages/varlock/src/cli/helpers/find-env-files.ts
+++ b/packages/varlock/src/cli/helpers/find-env-files.ts
@@ -4,29 +4,54 @@ import fs from 'node:fs/promises';
 // our tool may generate some additional files which we want to ignore
 const SKIP_FILE_TYPES = ['.md', '.d.ts'];
 
+// Directories to skip when searching for .env files
+const SKIP_DIRECTORIES = ['node_modules', '.git', 'dist', 'build', '.next', '.nuxt', 'out'];
+
 export async function findEnvFiles(opts?: {
   cwd?: string,
+  searchSubdirectories?: boolean,
 }) {
   const cwd = opts?.cwd || process.cwd();
+  const searchSubdirectories = opts?.searchSubdirectories ?? false;
 
-  const envFiles = [];
+  const envFiles: string[] = [];
+  const envFilesInSubdirs: string[] = [];
 
-  const filesWithinDir = await fs.readdir(cwd);
+  async function scanDirectory(dir: string, isRootDir: boolean) {
+    const filesWithinDir = await fs.readdir(dir, { withFileTypes: true });
 
-  // Filter for files starting with .env and check if they exist
-  for (const fileName of filesWithinDir) {
-    if (fileName === '.env' || fileName.startsWith('.env.')) { // this ignores `.envrc` files
-      let skip = false;
-      for (const fileType of SKIP_FILE_TYPES) {
-        if (fileName.endsWith(fileType)) skip = true;
+    // Filter for files starting with .env and check if they exist
+    for (const entry of filesWithinDir) {
+      if (entry.isFile()) {
+        const fileName = entry.name;
+        if (fileName === '.env' || fileName.startsWith('.env.')) { // this ignores `.envrc` files
+          let skip = false;
+          for (const fileType of SKIP_FILE_TYPES) {
+            if (fileName.endsWith(fileType)) skip = true;
+          }
+          if (skip) continue;
+          
+          const filePath = path.join(dir, fileName);
+          if (isRootDir) {
+            envFiles.push(filePath);
+          } else {
+            envFilesInSubdirs.push(filePath);
+          }
+        }
+      } else if (entry.isDirectory() && searchSubdirectories && !isRootDir) {
+        // Only search subdirectories if we're looking for monorepo detection
+        // Skip common directories that shouldn't contain .env files
+        if (!SKIP_DIRECTORIES.includes(entry.name)) {
+          await scanDirectory(path.join(dir, entry.name), false);
+        }
       }
-      if (skip) continue;
-      envFiles.push(path.join(cwd, fileName));
     }
   }
 
+  await scanDirectory(cwd, true);
+
   // TODO: we may want to look up or down the folder tree?
   // TODO: we could support looking within specific directories ("config", "env", etc)
 
-  return envFiles;
+  return { envFiles, envFilesInSubdirs };
 }