diff --git a/packages/env/lib/commands/start.js b/packages/env/lib/commands/start.js
index dee80f38bea95..7375326c5f1aa 100644
--- a/packages/env/lib/commands/start.js
+++ b/packages/env/lib/commands/start.js
@@ -56,6 +56,14 @@ module.exports = async function start( { spinner, debug } ) {
 
 	const config = await initConfig( { spinner, debug } );
 
+	if ( ! config.detectedLocalConfig ) {
+		const { configDirectoryPath } = config;
+		spinner.warn(
+			`Warning: could not find a .wp-env.json configuration file and could not determine if '${ configDirectoryPath }' is a WordPress installation, a plugin, or a theme.`
+		);
+		spinner.start();
+	}
+
 	spinner.text = 'Downloading WordPress.';
 
 	await Promise.all( [
diff --git a/packages/env/lib/config/config.js b/packages/env/lib/config/config.js
index 364480f6294f2..fd5a722a41faf 100644
--- a/packages/env/lib/config/config.js
+++ b/packages/env/lib/config/config.js
@@ -23,6 +23,7 @@ const parseConfig = require( './parse-config' );
  * @property {string}                           configDirectoryPath     Path to the .wp-env.json file.
  * @property {string}                           workDirectoryPath       Path to the work directory located in ~/.wp-env.
  * @property {string}                           dockerComposeConfigPath Path to the docker-compose.yml file.
+ * @property {boolean}                          detectedLocalConfig     If true, wp-env detected local config and used it.
  * @property {Object.<string, WPServiceConfig>} env                     Specific config for different environments.
  * @property {boolean}                          debug                   True if debug mode is enabled.
  */
@@ -104,6 +105,9 @@ module.exports = async function readConfig( configPath ) {
 			configPath.replace( /\.wp-env\.json$/, '.wp-env.override.json' )
 		) ) || {};
 
+	const detectedLocalConfig =
+		Object.keys( { ...baseConfig, ...overrideConfig } ).length > 0;
+
 	// A quick validation before merging on a service by service level allows us
 	// to check the root configuration options and provide more helpful errors.
 	validateConfig(
@@ -166,6 +170,7 @@ module.exports = async function readConfig( configPath ) {
 		),
 		configDirectoryPath,
 		workDirectoryPath,
+		detectedLocalConfig,
 		env,
 	} );
 };
@@ -214,7 +219,8 @@ function mergeWpServiceConfigs( configs ) {
  * added to the default plugin sources.
  *
  * @param {string} configPath A path to the config file for the source to detect.
- * @return {Object} Basic config options for the detected source type.
+ * @return {Object} Basic config options for the detected source type. Empty
+ *                  object if no config detected.
  */
 async function getDefaultBaseConfig( configPath ) {
 	const configDirectoryPath = path.dirname( configPath );
@@ -228,9 +234,7 @@ async function getDefaultBaseConfig( configPath ) {
 		return { themes: [ '.' ] };
 	}
 
-	throw new ValidationError(
-		`No .wp-env.json file found at '${ configPath }' and could not determine if '${ configDirectoryPath }' is a WordPress installation, a plugin, or a theme.`
-	);
+	return {};
 }
 
 /**
diff --git a/packages/env/lib/config/test/__snapshots__/config.js.snap b/packages/env/lib/config/test/__snapshots__/config.js.snap
index 0cf3f3ad4890b..1420e8ab83f8d 100644
--- a/packages/env/lib/config/test/__snapshots__/config.js.snap
+++ b/packages/env/lib/config/test/__snapshots__/config.js.snap
@@ -3,6 +3,7 @@
 exports[`readConfig config file should match snapshot 1`] = `
 Object {
   "configDirectoryPath": ".",
+  "detectedLocalConfig": true,
   "env": Object {
     "development": Object {
       "config": Object {
diff --git a/packages/env/lib/wordpress.js b/packages/env/lib/wordpress.js
index 799606cb766b1..385b8911a4eea 100644
--- a/packages/env/lib/wordpress.js
+++ b/packages/env/lib/wordpress.js
@@ -171,7 +171,10 @@ async function resetDatabase(
 }
 
 async function setupWordPressDirectories( config ) {
-	if ( hasSameCoreSource( [ config.env.development, config.env.tests ] ) ) {
+	if (
+		config.env.development.coreSource &&
+		hasSameCoreSource( [ config.env.development, config.env.tests ] )
+	) {
 		await copyCoreFiles(
 			config.env.development.coreSource.path,
 			config.env.development.coreSource.testsPath