diff --git a/packages/@vue/cli-service/__tests__/Service.spec.js b/packages/@vue/cli-service/__tests__/Service.spec.js
index a62eb85d8..2a30c9369 100644
--- a/packages/@vue/cli-service/__tests__/Service.spec.js
+++ b/packages/@vue/cli-service/__tests__/Service.spec.js
@@ -10,13 +10,13 @@ const mockPkg = json => {
   fs.writeFileSync('/package.json', JSON.stringify(json, null, 2))
 }
 
-const createMockService = (plugins = [], init = true) => {
+const createMockService = (plugins = [], init = true, mode) => {
   const service = new Service('/', {
     plugins,
     useBuiltIn: false
   })
   if (init) {
-    service.init()
+    service.init(mode)
   }
   return service
 }
@@ -30,9 +30,33 @@ test('env loading', () => {
   fs.writeFileSync('/.env.local', `FOO=1\nBAR=2`)
   fs.writeFileSync('/.env', `BAR=3\nBAZ=4`)
   createMockService()
+
   expect(process.env.FOO).toBe('0')
   expect(process.env.BAR).toBe('2')
   expect(process.env.BAZ).toBe('4')
+
+  delete process.env.FOO
+  delete process.env.BAR
+  delete process.env.BAZ
+  fs.unlinkSync('/.env.local')
+  fs.unlinkSync('/.env')
+})
+
+test('env loading for custom mode', () => {
+  const prevNodeEnv = process.env.NODE_ENV
+  delete process.env.NODE_ENV
+
+  fs.writeFileSync('/.env', 'FOO=1')
+  fs.writeFileSync('/.env.staging', 'FOO=2\nNODE_ENV=production')
+  createMockService([], true, 'staging')
+
+  expect(process.env.FOO).toBe('2')
+  expect(process.env.NODE_ENV).toBe('production')
+
+  delete process.env.FOO
+  process.env.NODE_ENV = prevNodeEnv
+  fs.unlinkSync('/.env')
+  fs.unlinkSync('/.env.staging')
 })
 
 test('loading plugins from package.json', () => {
diff --git a/packages/@vue/cli-service/lib/Service.js b/packages/@vue/cli-service/lib/Service.js
index 86e27a56f..0f29950ab 100644
--- a/packages/@vue/cli-service/lib/Service.js
+++ b/packages/@vue/cli-service/lib/Service.js
@@ -81,15 +81,6 @@ module.exports = class Service {
   }
 
   loadEnv (mode) {
-    if (mode) {
-      // by default, NODE_ENV and BABEL_ENV are set to "development" unless mode
-      // is production or test. However this can be overwritten in .env files.
-      process.env.NODE_ENV = process.env.BABEL_ENV =
-        (mode === 'production' || mode === 'test')
-          ? mode
-          : 'development'
-    }
-
     const logger = debug('vue:env')
     const basePath = path.resolve(this.context, `.env${mode ? `.${mode}` : ``}`)
     const localPath = `${basePath}.local`
@@ -108,6 +99,19 @@ module.exports = class Service {
 
     load(localPath)
     load(basePath)
+
+    // by default, NODE_ENV and BABEL_ENV are set to "development" unless mode
+    // is production or test. However the value in .env files will take higher
+    // priority.
+    const defaultNodeEnv = (mode === 'production' || mode === 'test')
+      ? mode
+      : 'development'
+    if (process.env.NODE_ENV == null) {
+      process.env.NODE_ENV = defaultNodeEnv
+    }
+    if (process.env.BABEL_ENV == null) {
+      process.env.BABEL_ENV = defaultNodeEnv
+    }
   }
 
   resolvePlugins (inlinePlugins, useBuiltIn) {