diff --git a/pkg/container/parse_env_file.go b/pkg/container/parse_env_file.go
index b1c21f51b9a..b73beb137da 100644
--- a/pkg/container/parse_env_file.go
+++ b/pkg/container/parse_env_file.go
@@ -27,6 +27,7 @@ func parseEnvFile(e Container, srcPath string, env *map[string]string) common.Ex
 		s := bufio.NewScanner(reader)
 		s.Buffer(nil, 1024*1024*1024) // increase buffer to 1GB to avoid scanner buffer overflow
 		firstLine := true
+		var lastKey string
 		for s.Scan() {
 			line := s.Text()
 			if firstLine {
@@ -39,7 +40,8 @@ func parseEnvFile(e Container, srcPath string, env *map[string]string) common.Ex
 			singleLineEnv := strings.Index(line, "=")
 			multiLineEnv := strings.Index(line, "<<")
 			if singleLineEnv != -1 && (multiLineEnv == -1 || singleLineEnv < multiLineEnv) {
-				localEnv[line[:singleLineEnv]] = line[singleLineEnv+1:]
+				lastKey = line[:singleLineEnv]
+				localEnv[lastKey] = line[singleLineEnv+1:]
 			} else if multiLineEnv != -1 {
 				multiLineEnvContent := ""
 				multiLineEnvDelimiter := line[multiLineEnv+2:]
@@ -58,12 +60,14 @@ func parseEnvFile(e Container, srcPath string, env *map[string]string) common.Ex
 				if !delimiterFound {
 					return fmt.Errorf("invalid format delimiter '%v' not found before end of file", multiLineEnvDelimiter)
 				}
-				localEnv[line[:multiLineEnv]] = multiLineEnvContent
-			} else {
-				return fmt.Errorf("invalid format '%v', expected a line with '=' or '<<'", line)
+				lastKey = line[:multiLineEnv]
+				localEnv[lastKey] = multiLineEnvContent
+			} else if lastKey != "" {
+				localEnv[lastKey] += "\n" + line
 			}
 		}
 		env = &localEnv
+
 		return s.Err()
 	}
 }
diff --git a/pkg/container/parse_env_file_test.go b/pkg/container/parse_env_file_test.go
new file mode 100644
index 00000000000..418f5e17110
--- /dev/null
+++ b/pkg/container/parse_env_file_test.go
@@ -0,0 +1,190 @@
+package container
+
+import (
+	"archive/tar"
+	"bytes"
+	"context"
+	"io"
+	"testing"
+
+	"github.com/nektos/act/pkg/common"
+	assert "github.com/stretchr/testify/assert"
+)
+
+type mockContainer struct {
+	content string
+	err     error
+}
+
+func (m *mockContainer) GetContainerArchive(_ context.Context, _ string) (io.ReadCloser, error) {
+	if m.err != nil {
+		return nil, m.err
+	}
+
+	var buf bytes.Buffer
+	tw := tar.NewWriter(&buf)
+	hdr := &tar.Header{
+		Name: "env",
+		Size: int64(len(m.content)),
+	}
+	_ = tw.WriteHeader(hdr)
+	_, _ = tw.Write([]byte(m.content))
+	_ = tw.Close()
+
+	return io.NopCloser(&buf), nil
+}
+
+func (m *mockContainer) Create([]string, []string) common.Executor              { return nil }
+func (m *mockContainer) Copy(string, ...*FileEntry) common.Executor             { return nil }
+func (m *mockContainer) CopyTarStream(context.Context, string, io.Reader) error { return nil }
+func (m *mockContainer) CopyDir(string, string, bool) common.Executor           { return nil }
+func (m *mockContainer) Pull(bool) common.Executor                              { return nil }
+func (m *mockContainer) Start(bool) common.Executor                             { return nil }
+func (m *mockContainer) Exec([]string, map[string]string, string, string) common.Executor {
+	return nil
+}
+func (m *mockContainer) UpdateFromEnv(string, *map[string]string) common.Executor { return nil }
+func (m *mockContainer) UpdateFromImageEnv(*map[string]string) common.Executor    { return nil }
+func (m *mockContainer) Remove() common.Executor                                  { return nil }
+func (m *mockContainer) Close() common.Executor                                   { return nil }
+func (m *mockContainer) ReplaceLogWriter(io.Writer, io.Writer) (io.Writer, io.Writer) {
+	return nil, nil
+}
+func (m *mockContainer) GetHealth(context.Context) Health { return HealthHealthy }
+
+func TestParseEnvFile(t *testing.T) {
+	tests := []struct {
+		name     string
+		content  string
+		initial  map[string]string
+		expected map[string]string
+	}{
+		{
+			name:    "single line env var",
+			content: "FOO=bar",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "bar",
+			},
+		},
+		{
+			name:    "multiple single line env vars",
+			content: "FOO=bar\nBAZ=qux",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "bar",
+				"BAZ": "qux",
+			},
+		},
+		{
+			name:    "value containing equals sign",
+			content: "FOO=bar=baz",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "bar=baz",
+			},
+		},
+		{
+			name:    "multiline env var with heredoc delimiter",
+			content: "FOO<<EOF\nline1\nline2\nEOF",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "line1\nline2",
+			},
+		},
+		{
+			name:    "continuation line appended to last key",
+			content: "FOO=bar\ncontinuation line",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "bar\ncontinuation line",
+			},
+		},
+		{
+			name:    "multiple continuation lines",
+			content: "FOO=first\nsecond\nthird",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "first\nsecond\nthird",
+			},
+		},
+		{
+			name:    "continuation only applies to most recent key",
+			content: "FOO=one\nBAR=two\ncontinued",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "one",
+				"BAR": "two\ncontinued",
+			},
+		},
+		{
+			name:    "continuation after multiline heredoc var",
+			content: "FOO<<EOF\nheredoc content\nEOF\nBAR=value\nextra line",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "heredoc content",
+				"BAR": "value\nextra line",
+			},
+		},
+		{
+			name:    "orphan line with no preceding key is ignored",
+			content: "orphan line\nFOO=bar",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "bar",
+			},
+		},
+		{
+			name:    "empty value",
+			content: "FOO=",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "",
+			},
+		},
+		{
+			name:    "preserves existing env vars",
+			content: "NEW=value",
+			initial: map[string]string{"EXISTING": "kept"},
+			expected: map[string]string{
+				"EXISTING": "kept",
+				"NEW":      "value",
+			},
+		},
+		{
+			name:    "utf8 bom is stripped from first line",
+			content: "\xef\xbb\xbfFOO=bar",
+			initial: map[string]string{},
+			expected: map[string]string{
+				"FOO": "bar",
+			},
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			mock := &mockContainer{content: tt.content}
+			env := tt.initial
+			executor := parseEnvFile(mock, "/path/to/env", &env)
+			err := executor(context.Background())
+			assert.NoError(t, err)
+			assert.Equal(t, tt.expected, env)
+		})
+	}
+}
+
+func TestParseEnvFileMultilineDelimiterNotFound(t *testing.T) {
+	mock := &mockContainer{content: "FOO<<EOF\nno closing delimiter"}
+	env := map[string]string{}
+	executor := parseEnvFile(mock, "/path/to/env", &env)
+	err := executor(context.Background())
+	assert.ErrorContains(t, err, "invalid format delimiter 'EOF' not found before end of file")
+}
+
+func TestParseEnvFileArchiveError(t *testing.T) {
+	mock := &mockContainer{err: io.ErrUnexpectedEOF}
+	env := map[string]string{}
+	executor := parseEnvFile(mock, "/path/to/env", &env)
+	err := executor(context.Background())
+	assert.NoError(t, err, "archive errors should be silently ignored")
+}