diff --git a/README.md b/README.md
index 15d532f..06059ef 100644
--- a/README.md
+++ b/README.md
@@ -142,7 +142,7 @@ If the API rejects the request with an `Invalid assistant message: content or to
 
 ### Model configuration parameters
 
-(shared by all implementations; the config file — `.bantam.cfg` takes priority over `model.cfg` when both exist — is plain `key=value` with `#` comments. Values defined in the config file override corresponding `BANTAM_*` environment variables, which in turn override built-in defaults.)
+(shared by all implementations; `.bantam.cfg` takes priority over `model.cfg` when both exist — both are plain `key=value` with `#` comments. Values defined in `.bantam.cfg` override `BANTAM_*` environment variables; when `.bantam.cfg` is absent, `BANTAM_*` environment variables override `model.cfg` and built-in defaults.)
 
 - `endpoint` (base OpenAI-compatible API URL, default `https://api.kilo.ai/api/openrouter`; falls back to `BANTAM_ENDPOINT` env var)
 - `model` (model name, default `openrouter/free`; falls back to `BANTAM_MODEL` env var)
diff --git a/main.go b/main.go
index 12ee6e7..7374672 100644
--- a/main.go
+++ b/main.go
@@ -208,64 +208,7 @@ func listModels(cfg *Cfg) (string, error) {
   return b.String(), nil
 }
 
-func getCfg(path string) Cfg {
-  cfg := defCfg
-
-  // Environment variable fallbacks. These are applied BEFORE the config file is
-  // read so that any value explicitly set in the config file overrides them.
-  if v := strings.TrimSpace(os.Getenv("BANTAM_ENDPOINT")); v != "" {
-    cfg.Endpoint = v
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_MODEL")); v != "" {
-    cfg.Model = v
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_TEMP")); v != "" {
-    if f, e := strconv.ParseFloat(v, 64); e == nil {
-      cfg.Temperature = f
-    }
-  } else if v := strings.TrimSpace(os.Getenv("BANTAM_TEMPERATURE")); v != "" {
-    if f, e := strconv.ParseFloat(v, 64); e == nil {
-      cfg.Temperature = f
-    }
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_STREAM")); v != "" {
-    cfg.Stream = v == "true" || v == "1" || v == "yes"
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_COLOR")); v != "" {
-    cfg.Color = v
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_TIMEOUT")); v != "" {
-    cfg.Timeout = atoiD(v, cfg.Timeout)
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_SHELL_TIMEOUT")); v != "" {
-    cfg.ShellTimeout = atoiD(v, cfg.ShellTimeout)
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_MAX_AL_ITERATIONS")); v != "" {
-    cfg.MaxALIterations = atoiD(v, cfg.MaxALIterations)
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_CONTEXT_WINDOW")); v != "" {
-    cfg.ContextWindow = atoiD(v, cfg.ContextWindow)
-  }
-  re := "high"
-  if v := strings.TrimSpace(os.Getenv("BANTAM_REASONING_EFFORT")); v != "" {
-    re = v
-  }
-
-  cfg.Raw = map[string]string{
-    "endpoint": cfg.Endpoint, "model": cfg.Model, "temperature": fmt.Sprintf("%v", cfg.Temperature),
-    "api_key": cfg.APIKey, "stream": strconv.FormatBool(cfg.Stream), "color": cfg.Color,
-    "timeout": strconv.Itoa(cfg.Timeout), "shell_timeout": strconv.Itoa(cfg.ShellTimeout),
-    "max_al_iterations": strconv.Itoa(cfg.MaxALIterations),
-    "context_window": strconv.Itoa(cfg.ContextWindow),
-    "reasoning_effort": re,
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_TOOLS_DIR")); v != "" {
-    cfg.Raw["bantam_tools_dir"] = v
-  }
-  if v := strings.TrimSpace(os.Getenv("BANTAM_SKILLS_DIR")); v != "" {
-    cfg.Raw["bantam_skills_dir"] = v
-  }
-
+func parseCfgFile(path string, cfg *Cfg) {
   if d, err := os.ReadFile(path); err == nil {
     for _, ln := range strings.Split(string(d), "\n") {
       ln = strings.TrimSpace(ln)
@@ -287,6 +230,90 @@ func getCfg(path string) Cfg {
       }
     }
   }
+}
+
+func applyEnvCfg(cfg *Cfg) {
+  if v := strings.TrimSpace(os.Getenv("BANTAM_ENDPOINT")); v != "" {
+    cfg.Endpoint = v
+    cfg.Raw["endpoint"] = v
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_MODEL")); v != "" {
+    cfg.Model = v
+    cfg.Raw["model"] = v
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_TEMP")); v != "" {
+    if f, e := strconv.ParseFloat(v, 64); e == nil {
+      cfg.Temperature = f
+      cfg.Raw["temperature"] = v
+    }
+  } else if v := strings.TrimSpace(os.Getenv("BANTAM_TEMPERATURE")); v != "" {
+    if f, e := strconv.ParseFloat(v, 64); e == nil {
+      cfg.Temperature = f
+      cfg.Raw["temperature"] = v
+    }
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_STREAM")); v != "" {
+    cfg.Stream = v == "true" || v == "1" || v == "yes"
+    cfg.Raw["stream"] = strconv.FormatBool(cfg.Stream)
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_COLOR")); v != "" {
+    cfg.Color = v
+    cfg.Raw["color"] = v
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_TIMEOUT")); v != "" {
+    cfg.Timeout = atoiD(v, cfg.Timeout)
+    cfg.Raw["timeout"] = strconv.Itoa(cfg.Timeout)
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_SHELL_TIMEOUT")); v != "" {
+    cfg.ShellTimeout = atoiD(v, cfg.ShellTimeout)
+    cfg.Raw["shell_timeout"] = strconv.Itoa(cfg.ShellTimeout)
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_MAX_AL_ITERATIONS")); v != "" {
+    cfg.MaxALIterations = atoiD(v, cfg.MaxALIterations)
+    cfg.Raw["max_al_iterations"] = strconv.Itoa(cfg.MaxALIterations)
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_CONTEXT_WINDOW")); v != "" {
+    cfg.ContextWindow = atoiD(v, cfg.ContextWindow)
+    cfg.Raw["context_window"] = strconv.Itoa(cfg.ContextWindow)
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_REASONING_EFFORT")); v != "" {
+    cfg.Raw["reasoning_effort"] = v
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_TOOLS_DIR")); v != "" {
+    cfg.Raw["bantam_tools_dir"] = v
+  }
+  if v := strings.TrimSpace(os.Getenv("BANTAM_SKILLS_DIR")); v != "" {
+    cfg.Raw["bantam_skills_dir"] = v
+  }
+}
+
+func getCfg(path string) Cfg {
+  cfg := defCfg
+  cfg.Raw = map[string]string{
+    "endpoint": cfg.Endpoint, "model": cfg.Model, "temperature": fmt.Sprintf("%v", cfg.Temperature),
+    "api_key": cfg.APIKey, "stream": strconv.FormatBool(cfg.Stream), "color": cfg.Color,
+    "timeout": strconv.Itoa(cfg.Timeout), "shell_timeout": strconv.Itoa(cfg.ShellTimeout),
+    "max_al_iterations": strconv.Itoa(cfg.MaxALIterations),
+    "context_window": strconv.Itoa(cfg.ContextWindow),
+    "reasoning_effort": "high",
+  }
+
+  if filepath.Base(path) == "model.cfg" {
+    // When .bantam.cfg is absent, model.cfg provides base defaults,
+    // and BANTAM_* environment variables override them.
+    parseCfgFile(path, &cfg)
+    applyEnvCfg(&cfg)
+  } else {
+    // If a model.cfg exists in the same directory, read it first as base defaults.
+    modelCfgPath := filepath.Join(filepath.Dir(path), "model.cfg")
+    if _, err := os.Stat(modelCfgPath); err == nil {
+      parseCfgFile(modelCfgPath, &cfg)
+    }
+    // Environment variables override model.cfg.
+    applyEnvCfg(&cfg)
+    // The explicit override file (.bantam.cfg) takes highest priority and overrides env vars.
+    parseCfgFile(path, &cfg)
+  }
 
   // The api_key "-" / empty sentinel means "fall back to BANTAM_API_KEY"; this
   // is evaluated after the file is read so an explicit key still wins.
diff --git a/main_test.go b/main_test.go
index 4a536ac..79a77cf 100644
--- a/main_test.go
+++ b/main_test.go
@@ -420,7 +420,8 @@ func TestGetCfgEnvOverriddenByFile(t *testing.T) {
   t.Setenv("BANTAM_TOOLS_DIR", "/env/tools")
   t.Setenv("BANTAM_SKILLS_DIR", "/env/skills")
 
-  p := writeCfg(t, strings.Join([]string{
+  p := filepath.Join(t.TempDir(), ".bantam.cfg")
+  if err := os.WriteFile(p, []byte(strings.Join([]string{
     "endpoint=http://file-endpoint/v1",
     "model=file-model",
     "temperature=0.1",
@@ -433,7 +434,9 @@ func TestGetCfgEnvOverriddenByFile(t *testing.T) {
     "reasoning_effort=high",
     "bantam_tools_dir=/file/tools",
     "bantam_skills_dir=/file/skills",
-  }, "\n"))
+  }, "\n")), 0644); err != nil {
+    t.Fatal(err)
+  }
   cfg := getCfg(p)
   if cfg.Endpoint != "http://file-endpoint/v1" {
     t.Errorf("endpoint: got %q, want file value", cfg.Endpoint)
@@ -512,6 +515,70 @@ func TestGetCfgEnvFallbackWhenNoFile(t *testing.T) {
   }
 }
 
+func TestGetCfgModelCfgOverriddenByEnvWhenBantamCfgAbsent(t *testing.T) {
+  clearBantamEnv(t)
+  t.Setenv("BANTAM_ENDPOINT", "http://env-endpoint/v1")
+  t.Setenv("BANTAM_MODEL", "env-model")
+  t.Setenv("BANTAM_TEMP", "0.9")
+  t.Setenv("BANTAM_TOOLS_DIR", "/env/tools")
+  t.Setenv("BANTAM_SKILLS_DIR", "/env/skills")
+
+  dir := t.TempDir()
+  modelCfg := filepath.Join(dir, "model.cfg")
+  if err := os.WriteFile(modelCfg, []byte("endpoint=http://file-endpoint/v1\nmodel=file-model\ntemperature=0.1\nbantam_tools_dir=/file/tools\nbantam_skills_dir=/file/skills\n"), 0644); err != nil {
+    t.Fatal(err)
+  }
+
+  // When .bantam.cfg is absent, model.cfg yields to existing BANTAM_* env vars:
+  cfg := getCfg(modelCfg)
+  if cfg.Endpoint != "http://env-endpoint/v1" {
+    t.Errorf("endpoint: got %q, want env value", cfg.Endpoint)
+  }
+  if cfg.Model != "env-model" {
+    t.Errorf("model: got %q, want env value", cfg.Model)
+  }
+  if cfg.Temperature != 0.9 {
+    t.Errorf("temperature: got %v, want env value", cfg.Temperature)
+  }
+  if toolsDir(&cfg) != "/env/tools" {
+    t.Errorf("toolsDir: got %q, want /env/tools", toolsDir(&cfg))
+  }
+  if skillsDir(&cfg) != "/env/skills" {
+    t.Errorf("skillsDir: got %q, want /env/skills", skillsDir(&cfg))
+  }
+}
+
+func TestGetCfgBantamCfgOverridesEnvAndModelCfg(t *testing.T) {
+  clearBantamEnv(t)
+  t.Setenv("BANTAM_ENDPOINT", "http://env-endpoint/v1")
+  t.Setenv("BANTAM_MODEL", "env-model")
+  t.Setenv("BANTAM_TEMP", "0.9")
+
+  dir := t.TempDir()
+  modelCfg := filepath.Join(dir, "model.cfg")
+  if err := os.WriteFile(modelCfg, []byte("endpoint=http://model-endpoint/v1\nmodel=model-model\ncolor=never\n"), 0644); err != nil {
+    t.Fatal(err)
+  }
+  bantamCfg := filepath.Join(dir, ".bantam.cfg")
+  if err := os.WriteFile(bantamCfg, []byte("model=bantam-model\n"), 0644); err != nil {
+    t.Fatal(err)
+  }
+
+  cfg := getCfg(bantamCfg)
+  // bantam.cfg overrides env and model.cfg for model:
+  if cfg.Model != "bantam-model" {
+    t.Errorf("model: got %q, want bantam-model", cfg.Model)
+  }
+  // endpoint falls back to env:
+  if cfg.Endpoint != "http://env-endpoint/v1" {
+    t.Errorf("endpoint: got %q, want env-endpoint", cfg.Endpoint)
+  }
+  // color falls back to model.cfg since not in bantam.cfg or env:
+  if cfg.Color != "never" {
+    t.Errorf("color: got %q, want never from model.cfg", cfg.Color)
+  }
+}
+
 func TestAtoiD(t *testing.T) {
   cases := []struct {
     s    string
diff --git a/mb b/mb
index eef22f7..2743dd2 100755
--- a/mb
+++ b/mb
@@ -8,8 +8,7 @@ my $DEF_SP = "You are Bantam, a tiny, powerful AI agent. Solve the user's task u
 my $SDIR = ($ENV{HOME} || $ENV{USERPROFILE} || '.') . '/.bantam/sessions';
 sub cfg {
   my %d = (endpoint=>'https://api.kilo.ai/api/openrouter', model=>'openrouter/free', temperature=>0.7, api_key=>'-', timeout=>300, shell_timeout=>120, max_al_iterations=>1000, reasoning_effort=>'high');
-  # Environment variable fallbacks are applied BEFORE the config file is read,
-  # so any value set in the config file overrides the environment variable.
+  if (-f 'model.cfg' && open my $mf, '<:encoding(UTF-8)', 'model.cfg') { while (<$mf>) { /^([^\s=]+)\s*=\s*(.+)$/ and $d{$1} = $2; } }
   $d{endpoint}          = $ENV{BANTAM_ENDPOINT}          if $ENV{BANTAM_ENDPOINT};
   $d{model}             = $ENV{BANTAM_MODEL}             if $ENV{BANTAM_MODEL};
   my $t = $ENV{BANTAM_TEMP} // $ENV{BANTAM_TEMPERATURE};
@@ -18,8 +17,7 @@ sub cfg {
   $d{shell_timeout}     = $ENV{BANTAM_SHELL_TIMEOUT}     if defined $ENV{BANTAM_SHELL_TIMEOUT} && $ENV{BANTAM_SHELL_TIMEOUT} =~ /^\d+$/;
   $d{max_al_iterations} = $ENV{BANTAM_MAX_AL_ITERATIONS} if defined $ENV{BANTAM_MAX_AL_ITERATIONS} && $ENV{BANTAM_MAX_AL_ITERATIONS} =~ /^\d+$/;
   $d{reasoning_effort}  = $ENV{BANTAM_REASONING_EFFORT}  if $ENV{BANTAM_REASONING_EFFORT};
-  my $cf = -f '.bantam.cfg' ? '.bantam.cfg' : 'model.cfg';
-  if (open my $f, '<:encoding(UTF-8)', $cf) { while (<$f>) { /^([^\s=]+)\s*=\s*(.+)$/ and $d{$1} = $2; } }
+  if (-f '.bantam.cfg' && open my $bf, '<:encoding(UTF-8)', '.bantam.cfg') { while (<$bf>) { /^([^\s=]+)\s*=\s*(.+)$/ and $d{$1} = $2; } }
   $d{api_key}           = $ENV{BANTAM_API_KEY}           if ($d{api_key} eq '-' || !$d{api_key}) && $ENV{BANTAM_API_KEY};
   \%d }
 sub filter_text { my $s = shift // ''; $s =~ s/[^\x20\t\n\p{L}\p{N}\p{P}\p{S}\p{M}\p{Zs}]//g; $s }