diff --git a/README.md b/README.md
index 1eef61a..88cd34b 100644
--- a/README.md
+++ b/README.md
@@ -65,6 +65,9 @@ steps:
         var3: |
           Lorem Ipsum
           Hello World
+      file_input: |
+        var4: ./path/to/long-text.txt
+        var5: ./path/to/config.json
 ```
 
 #### Simple prompt.yml example
@@ -116,7 +119,9 @@ jsonSchema: |-
 ```
 
 Variables in prompt.yml files are templated using `{{variable}}` format and are
-supplied via the `input` parameter in YAML format.
+supplied via the `input` parameter in YAML format. Additionally, you can
+provide file-based variables via `file_input`, where each key maps to a file
+path.
 
 ### Using a system prompt file
 
@@ -197,6 +202,7 @@ the action:
 | `prompt`             | The prompt to send to the model                                                                                                                               | N/A                                  |
 | `prompt-file`        | Path to a file containing the prompt (supports .txt and .prompt.yml formats). If both `prompt` and `prompt-file` are provided, `prompt-file` takes precedence | `""`                                 |
 | `input`              | Template variables in YAML format for .prompt.yml files (e.g., `var1: value1` on separate lines)                                                              | `""`                                 |
+| `file_input`         | Template variables in YAML where values are file paths. The file contents are read and used for templating                                                    | `""`                                 |
 | `system-prompt`      | The system prompt to send to the model                                                                                                                        | `"You are a helpful assistant"`      |
 | `system-prompt-file` | Path to a file containing the system prompt. If both `system-prompt` and `system-prompt-file` are provided, `system-prompt-file` takes precedence             | `""`                                 |
 | `model`              | The model to use for inference. Must be available in the [GitHub Models](https://github.com/marketplace?type=models) catalog                                  | `openai/gpt-4o`                      |
diff --git a/__tests__/main-prompt-integration.test.ts b/__tests__/main-prompt-integration.test.ts
index 5bba694..e1076eb 100644
--- a/__tests__/main-prompt-integration.test.ts
+++ b/__tests__/main-prompt-integration.test.ts
@@ -130,6 +130,49 @@ model: openai/gpt-4o
     expect(core.setOutput).toHaveBeenCalledWith('response-file', expect.any(String))
   })
 
+  it('supports file_input variables to load file contents', async () => {
+    mockExistsSync.mockReturnValue(true)
+
+    // First call: reading the prompt file. Second call: reading file_input referenced file contents.
+    const externalFilePath = 'vars.txt'
+    mockReadFileSync.mockImplementation((path: string) => {
+      if (path === 'test.prompt.yml') {
+        return `messages:\n  - role: user\n    content: 'Here is the data: {{blob}}'\nmodel: openai/gpt-4o\n`
+      }
+      if (path === externalFilePath) {
+        return 'FILE_CONTENTS'
+      }
+      return ''
+    })
+
+    core.getInput.mockImplementation((name: string) => {
+      switch (name) {
+        case 'prompt-file':
+          return 'test.prompt.yml'
+        case 'file_input':
+          return `blob: ${externalFilePath}`
+        case 'model':
+          return 'openai/gpt-4o'
+        case 'max-tokens':
+          return '200'
+        case 'endpoint':
+          return 'https://models.github.ai/inference'
+        case 'enable-github-mcp':
+          return 'false'
+        default:
+          return ''
+      }
+    })
+
+    await run()
+
+    expect(mockSimpleInference).toHaveBeenCalledWith(
+      expect.objectContaining({
+        messages: [{role: 'user', content: 'Here is the data: FILE_CONTENTS'}],
+      }),
+    )
+  })
+
   it('should fall back to legacy format when not using prompt YAML', async () => {
     mockExistsSync.mockReturnValue(false)
     core.getInput.mockImplementation((name: string) => {
diff --git a/__tests__/prompt.test.ts b/__tests__/prompt.test.ts
index 0bfaf11..2eba81d 100644
--- a/__tests__/prompt.test.ts
+++ b/__tests__/prompt.test.ts
@@ -1,7 +1,13 @@
 import {describe, it, expect} from 'vitest'
 import * as path from 'path'
 import {fileURLToPath} from 'url'
-import {parseTemplateVariables, replaceTemplateVariables, loadPromptFile, isPromptYamlFile} from '../src/prompt'
+import {
+  parseTemplateVariables,
+  replaceTemplateVariables,
+  loadPromptFile,
+  isPromptYamlFile,
+  parseFileTemplateVariables,
+} from '../src/prompt'
 
 const __filename = fileURLToPath(import.meta.url)
 const __dirname = path.dirname(__filename)
@@ -10,8 +16,8 @@ describe('prompt.ts', () => {
   describe('parseTemplateVariables', () => {
     it('should parse simple YAML variables', () => {
       const input = `
-a: hello
-b: world
+ a: hello
+ b: world
       `
       const result = parseTemplateVariables(input)
       expect(result).toEqual({a: 'hello', b: 'world'})
@@ -19,10 +25,10 @@ b: world
 
     it('should parse multiline variables', () => {
       const input = `
-var1: hello
-var2: |
-  This is a
-  multiline string
+ var1: hello
+ var2: |
+   This is a
+   multiline string
       `
       const result = parseTemplateVariables(input)
       expect(result.var1).toBe('hello')
@@ -117,4 +123,17 @@ var2: |
       expect(() => loadPromptFile('non-existent.prompt.yml')).toThrow('Prompt file not found')
     })
   })
+
+  describe('parseFileTemplateVariables', () => {
+    it('reads file contents for variables', () => {
+      const configPath = path.join(__dirname, '../__fixtures__/prompts/json-schema.prompt.yml')
+      const data = parseFileTemplateVariables(`sample: ${configPath}`)
+      expect(data.sample).toContain('messages:')
+      expect(data.sample).toContain('responseFormat:')
+    })
+
+    it('errors on missing files', () => {
+      expect(() => parseFileTemplateVariables('x: ./does-not-exist.txt')).toThrow('was not found')
+    })
+  })
 })
diff --git a/action.yml b/action.yml
index 4c3c91c..bcaf783 100644
--- a/action.yml
+++ b/action.yml
@@ -22,6 +22,10 @@ inputs:
     description: Template variables in YAML format for .prompt.yml files
     required: false
     default: ''
+  file_input:
+    description: Template variables in YAML format mapping variable names to file paths. The file contents will be used for templating.
+    required: false
+    default: ''
   model:
     description: The model to use
     required: false
diff --git a/src/main.ts b/src/main.ts
index da05ad8..565e925 100644
--- a/src/main.ts
+++ b/src/main.ts
@@ -5,7 +5,13 @@ import * as path from 'path'
 import {connectToGitHubMCP} from './mcp.js'
 import {simpleInference, mcpInference} from './inference.js'
 import {loadContentFromFileOrInput, buildInferenceRequest} from './helpers.js'
-import {loadPromptFile, parseTemplateVariables, isPromptYamlFile, PromptConfig} from './prompt.js'
+import {
+  loadPromptFile,
+  parseTemplateVariables,
+  isPromptYamlFile,
+  PromptConfig,
+  parseFileTemplateVariables,
+} from './prompt.js'
 
 const RESPONSE_FILE = 'modelResponse.txt'
 
@@ -18,6 +24,7 @@ export async function run(): Promise<void> {
   try {
     const promptFilePath = core.getInput('prompt-file')
     const inputVariables = core.getInput('input')
+    const fileInputVariables = core.getInput('file_input')
 
     let promptConfig: PromptConfig | undefined = undefined
     let systemPrompt: string | undefined = undefined
@@ -27,8 +34,10 @@ export async function run(): Promise<void> {
     if (promptFilePath && isPromptYamlFile(promptFilePath)) {
       core.info('Using prompt YAML file format')
 
-      // Parse template variables
-      const templateVariables = parseTemplateVariables(inputVariables)
+      // Parse template variables from both string inputs and file-based inputs
+      const stringVars = parseTemplateVariables(inputVariables)
+      const fileVars = parseFileTemplateVariables(fileInputVariables)
+      const templateVariables = {...stringVars, ...fileVars}
 
       // Load and process prompt file
       promptConfig = loadPromptFile(promptFilePath, templateVariables)
diff --git a/src/prompt.ts b/src/prompt.ts
index 1683bea..2af78e4 100644
--- a/src/prompt.ts
+++ b/src/prompt.ts
@@ -37,6 +37,41 @@ export function parseTemplateVariables(input: string): TemplateVariables {
   }
 }
 
+/**
+ * Parse file-based template variables from YAML input string. The YAML should map
+ * variable names to file paths. File contents are read and returned as variables.
+ */
+export function parseFileTemplateVariables(fileInput: string): TemplateVariables {
+  if (!fileInput.trim()) {
+    return {}
+  }
+
+  try {
+    const parsed = yaml.load(fileInput) as Record<string, unknown>
+    if (typeof parsed !== 'object' || parsed === null) {
+      throw new Error('File template variables must be a YAML object')
+    }
+
+    const result: TemplateVariables = {}
+    for (const [key, value] of Object.entries(parsed)) {
+      if (typeof value !== 'string') {
+        throw new Error(`File template variable '${key}' must be a string file path`)
+      }
+      const filePath = value
+      if (!fs.existsSync(filePath)) {
+        throw new Error(`File for template variable '${key}' was not found: ${filePath}`)
+      }
+      result[key] = fs.readFileSync(filePath, 'utf-8')
+    }
+
+    return result
+  } catch (error) {
+    throw new Error(
+      `Failed to parse file template variables: ${error instanceof Error ? error.message : 'Unknown error'}`,
+    )
+  }
+}
+
 /**
  * Replace template variables in text using {{variable}} syntax
  */