diff --git a/docs/manifest.json b/docs/manifest.json
index 12b5d9890ffc5..4bfaf6aadb64a 100644
--- a/docs/manifest.json
+++ b/docs/manifest.json
@@ -190,6 +190,11 @@
           "description": "Prompt the user for additional information about a workspace",
           "path": "./templates/parameters.md"
         },
+        {
+          "title": "Variables",
+          "description": "Prompt the template administrator for additional information about a template",
+          "path": "./templates/variables.md"
+        },
         {
           "title": "Administering templates",
           "description": "Configuration settings for template admins",
diff --git a/docs/templates/parameters.md b/docs/templates/parameters.md
index 8084bec2a34db..1bf935cbf6afe 100644
--- a/docs/templates/parameters.md
+++ b/docs/templates/parameters.md
@@ -282,23 +282,6 @@ data "coder_parameter" "project_id" {
 }
 ```
 
-## Terraform template-wide variables
-
-As parameters are intended to be used only for workspace customization purposes,
-Terraform variables can be freely managed by the template author to build
-templates. Workspace users are not able to modify template variables.
-
-```hcl
-
-variable "CLOUD_API_KEY" {
-  type        = string
-  description = "API key for the service"
-  default     = "1234567890"
-  sensitive   = true
-}
-
-```
-
 ## Create Autofill
 
 When the template doesn't specify default values, Coder may still autofill
diff --git a/docs/templates/variables.md b/docs/templates/variables.md
new file mode 100644
index 0000000000000..7ee8fe3ba4129
--- /dev/null
+++ b/docs/templates/variables.md
@@ -0,0 +1,126 @@
+# Terraform template-wide variables
+
+In Coder, Terraform templates offer extensive flexibility through template-wide
+variables. These variables, managed by template authors, facilitate the
+construction of customizable templates. Unlike parameters, which are primarily
+for workspace customization, template variables remain under the control of the
+template author, ensuring workspace users cannot modify them.
+
+```hcl
+variable "CLOUD_API_KEY" {
+  type        = string
+  description = "API key for the service"
+  default     = "1234567890"
+  sensitive   = true
+}
+```
+
+Given that variables are a
+[fundamental concept in Terraform](https://developer.hashicorp.com/terraform/language/values/variables),
+Coder endeavors to fully support them. Native support includes `string`,
+`number`, and `bool` formats. However, other types such as `list(string)` or
+`map(any)` will default to being treated as strings.
+
+## Default value
+
+Upon adding a template variable, it's mandatory to provide a value during the
+first push. At this stage, the template administrator faces two choices:
+
+1. _No `default` property_: opt not to define a default property. Instead,
+   utilize the `--var name=value` command-line argument during the push to
+   supply the variable's value.
+2. _Define `default` property_: set a default property for the template
+   variable. If the administrator doesn't input a value via CLI, Coder
+   automatically uses this default during the push.
+
+After the initial push, variables are stored in the database table, associated
+with the specific template version. They can be conveniently managed via
+_Template Settings_ without requiring an extra push.
+
+### Resolved values vs. default values
+
+It's crucial to note that Coder templates operate based on resolved values
+during a push, rather than default values. This ensures that default values do
+not inadvertently override the configured variable settings during the push
+process.
+
+This approach caters to users who prefer to avoid accidental overrides of their
+variable settings with default values during pushes, thereby enhancing control
+and predictability.
+
+If you encounter a situation where you need to override template settings for
+variables, you can employ a straightforward solution:
+
+1. Create a `terraform.tfvars` file in in the template directory:
+
+```hcl
+coder_image = newimage:tag
+```
+
+2. Push the new template revision using Coder CLI:
+
+```
+coder templates push my-template -y # no need to use --var
+```
+
+This file serves as a mechanism to override the template settings for variables.
+It can be stored in the repository for easy access and reference. Coder CLI
+automatically detects it and loads variable values.
+
+## Input options
+
+When working with Terraform configurations in Coder, you have several options
+for providing values to variables using the Coder CLI:
+
+1. _Manual input in CLI_: You can manually input values for Terraform variables
+   directly in the CLI during the deployment process.
+2. _Command-line argument_: Utilize the `--var name=value` command-line argument
+   to specify variable values inline as key-value pairs.
+3. _Variables file selection_: Alternatively, you can use a variables file
+   selected via the `--variables-file values.yml` command-line argument. This
+   approach is particularly useful when dealing with multiple variables or to
+   avoid manual input of numerous values. Variables files can be versioned for
+   better traceability and management, and it enhances reproducibility.
+
+Here's an example of a YAML-formatted variables file, `values.yml`:
+
+```yaml
+region: us-east-1
+bucket_name: magic
+zone_types: '{"us-east-1":"US East", "eu-west-1": "EU West"}'
+cpu: 1
+```
+
+In this sample file:
+
+- `region`, `bucket_name`, `zone_types`, and `cpu` are Terraform variable names.
+- Corresponding values are provided for each variable.
+- The `zone_types` variable demonstrates how to provide a JSON-formatted string
+  as a value in YAML.
+
+## Terraform .tfvars files
+
+In Terraform, `.tfvars` files provide a convenient means to define variable
+values for a project in a reusable manner. These files, ending with either
+`.tfvars` or `.tfvars.json`, streamline the process of setting numerous
+variables.
+
+By utilizing `.tfvars` files, you can efficiently manage and organize variable
+values for your Terraform projects. This approach offers several advantages:
+
+- Clarity and consistency: Centralize variable definitions in dedicated files,
+  enhancing clarity, instead of input values on template push.
+- Ease of maintenance: Modify variable values in a single location under version
+  control, simplifying maintenance and updates.
+
+Coder automatically loads variable definition files following a specific order,
+providing flexibility and control over variable configuration. The loading
+sequence is as follows:
+
+1. `terraform.tfvars`: This file contains variable values and is loaded first.
+2. `terraform.tfvars.json`: If present, this JSON-formatted file is loaded after
+   `terraform.tfvars`.
+3. `\*.auto.tfvars`: Files matching this pattern are loaded next, ordered
+   alphabetically.
+4. `\*.auto.tfvars.json`: JSON-formatted files matching this pattern are loaded
+   last.