diff --git a/lib/compose.ts b/lib/compose.ts
index f815e2e..f49069a 100644
--- a/lib/compose.ts
+++ b/lib/compose.ts
@@ -413,6 +413,18 @@ function normalizeService(
 	// Delete env_file, as compose-go adds env_file vars to service.environment
 	delete service.env_file;
 
+	// Coerce null/undefined env var values to empty string.
+	// `KEY: null` is valid in the Compose spec, but the API
+	// rejects null values for env vars, so we coerce to '' to match
+	// @balena/compose parser behavior prior to integrating compose-parser.
+	if (service.environment) {
+		for (const [key, value] of Object.entries(service.environment)) {
+			if (value == null) {
+				service.environment[key] = '';
+			}
+		}
+	}
+
 	// Delete label_file, as compose-go adds label_file labels to service.labels
 	delete service.label_file;
 
diff --git a/test/compose.spec.ts b/test/compose.spec.ts
index ea5ee26..9913721 100644
--- a/test/compose.spec.ts
+++ b/test/compose.spec.ts
@@ -458,6 +458,34 @@ describe('compose-go parsing & validation', () => {
 			});
 		});
 
+		it('should coerce null/undefined environment values to empty string', async () => {
+			const composition = await parse(
+				'test/fixtures/compose/services/null_env.yml',
+			);
+			expect(composition).to.deep.equal({
+				services: {
+					main: {
+						image: 'alpine:latest',
+						command: ['sh', '-c', 'sleep infinity'],
+						environment: {
+							EXPLICIT_VALUE: 'hello',
+							EXPLICIT_EMPTY: '',
+							NULL_DICT_FORM: '',
+							IMPLICIT_NULL_DICT_FORM: '',
+						},
+						networks: {
+							default: null,
+						},
+					},
+				},
+				networks: {
+					default: {
+						ipam: {},
+					},
+				},
+			});
+		});
+
 		it('should merge services from extends config', async () => {
 			const composition = await parse(
 				'test/fixtures/compose/services/extends.yml',
diff --git a/test/fixtures/compose/services/null_env.yml b/test/fixtures/compose/services/null_env.yml
new file mode 100644
index 0000000..ab71d12
--- /dev/null
+++ b/test/fixtures/compose/services/null_env.yml
@@ -0,0 +1,9 @@
+services:
+  main:
+    image: alpine:latest
+    command: sh -c "sleep infinity"
+    environment:
+      EXPLICIT_VALUE: hello
+      EXPLICIT_EMPTY: ""
+      NULL_DICT_FORM: null
+      IMPLICIT_NULL_DICT_FORM: