diff --git a/docs/source/markdown/options/env-merge.md b/docs/source/markdown/options/env-merge.md
index 4bc1c388da..20a35f666e 100644
--- a/docs/source/markdown/options/env-merge.md
+++ b/docs/source/markdown/options/env-merge.md
@@ -7,3 +7,7 @@
 Preprocess default environment variables for the containers. For example
 if image contains environment variable `hello=world` user can preprocess
 it using `--env-merge hello=${hello}-some` so new value is `hello=world-some`.
+
+Please note that if the environment variable `hello` is not present in the image,
+then it'll be replaced by an empty string and so using `--env-merge hello=${hello}-some`
+would result in the new value of `hello=-some`, notice the leading `-` delimiter.
diff --git a/pkg/specgen/generate/container.go b/pkg/specgen/generate/container.go
index 7a3f479b19..c43d61f821 100644
--- a/pkg/specgen/generate/container.go
+++ b/pkg/specgen/generate/container.go
@@ -135,10 +135,16 @@ func CompleteSpec(ctx context.Context, r *libpod.Runtime, s *specgen.SpecGenerat
 		if err != nil {
 			return nil, fmt.Errorf("unable to process variables for --env-merge %s: %w", e, err)
 		}
-		splitWord := strings.Split(processedWord, "=")
-		if _, ok := defaultEnvs[splitWord[0]]; ok {
-			defaultEnvs[splitWord[0]] = splitWord[1]
+
+		key, val, found := strings.Cut(processedWord, "=")
+		if !found {
+			return nil, fmt.Errorf("missing `=` for --env-merge substitution %s", e)
 		}
+
+		// the env var passed via --env-merge
+		// need not be defined in the image
+		// continue with an empty string
+		defaultEnvs[key] = val
 	}
 
 	for _, e := range s.UnsetEnv {
diff --git a/test/e2e/run_env_test.go b/test/e2e/run_env_test.go
index 5ba6bbe98d..9006bff048 100644
--- a/test/e2e/run_env_test.go
+++ b/test/e2e/run_env_test.go
@@ -76,6 +76,11 @@ ENV hello=world
 		session.WaitWithDefaultTimeout()
 		Expect(session).Should(Exit(0))
 		Expect(session.OutputToString()).To(ContainSubstring("world-earth"))
+
+		session = podmanTest.Podman([]string{"run", "--rm", "--env-merge", "foo=${bar}-earth", "test", "printenv", "foo"})
+		session.WaitWithDefaultTimeout()
+		Expect(session).Should(Exit(0))
+		Expect(session.OutputToString()).To(Equal("-earth"))
 	})
 
 	It("podman run --env-host environment test", func() {