diff --git a/README.md b/README.md
index 2d1e25ea..a619c70e 100644
--- a/README.md
+++ b/README.md
@@ -614,6 +614,59 @@ target "db" {
 Complete list of valid target fields:
 	args, cache-from, cache-to, context, dockerfile, inherits, labels, no-cache, output, platform, pull, secrets, ssh, tags, target
 
+#### HCL variable interpolation
+
+Similar to how Terraform provides a way to
+[define variables](https://www.terraform.io/docs/configuration/variables.html#declaring-an-input-variable),
+the HCL file format also supports variable block definitions. These can be used
+to define variables with values provided by the current environment or a
+default value when unset.
+
+
+Example of using interpolation to tag an image with the git sha:
+
+```
+$ cat <<'EOF' > docker-bake.hcl
+variable "TAG" {
+	default = "latest"
+}
+
+group "default" {
+	targets = ["webapp"]
+}
+
+target "webapp" {
+	tags = ["docker.io/username/webapp:${TAG}"]
+}
+EOF
+
+$ docker buildx bake --print webapp
+{
+   "target": {
+      "webapp": {
+         "context": ".",
+         "dockerfile": "Dockerfile",
+         "tags": [
+            "docker.io/username/webapp:latest"
+         ]
+      }
+   }
+}
+
+$ TAG=$(git rev-parse --short HEAD) docker buildx bake --print webapp
+{
+   "target": {
+      "webapp": {
+         "context": ".",
+         "dockerfile": "Dockerfile",
+         "tags": [
+            "docker.io/username/webapp:985e9e9"
+         ]
+      }
+   }
+}
+```
+
 ### `buildx imagetools create [OPTIONS] [SOURCE] [SOURCE...]`
 
 Imagetools contains commands for working with manifest lists in the registry. These commands are useful for inspecting multi-platform build results.