diff --git a/specification/configuration/file-configuration.md b/specification/configuration/file-configuration.md
index e9a40ba4d26..8b2bcec2564 100644
--- a/specification/configuration/file-configuration.md
+++ b/specification/configuration/file-configuration.md
@@ -12,6 +12,8 @@ linkTitle: File
 - [Configuration Model](#configuration-model)
   * [Stability Definition](#stability-definition)
 - [Configuration file](#configuration-file)
+  * [YAML file format](#yaml-file-format)
+  * [Environment variable substitution](#environment-variable-substitution)
 - [SDK Configuration](#sdk-configuration)
   * [In-Memory Configuration Model](#in-memory-configuration-model)
   * [Operations](#operations)
@@ -46,12 +48,86 @@ TODO: define stability guarantees and backwards compatibility
 
 ## Configuration file
 
-A configuration file is a file representation of
+A configuration file is a serialized file-based representation of
 the [Configuration Model](#configuration-model).
 
-TODO: define acceptable file formats
+Configuration files SHOULD use one the following serialization formats:
 
-TODO: define environment variable substitution
+### YAML file format
+
+[YAML](https://yaml.org/spec/1.2.2/) configuration files SHOULD follow YAML spec
+revision >= 1.2.
+
+YAML configuration files MUST use file extensions `.yaml` or `.yml`.
+
+TODO: decide if JSON file format is required
+
+### Environment variable substitution
+
+Configuration files support environment variables substitution for references
+which match the following regular expression:
+
+```regexp
+\$\{(?<ENV_NAME>[a-zA-Z_][a-zA-Z0-9_]*)}
+```
+
+The `ENV_NAME` MUST start with an alphabetic or `_` character, and is followed
+by 0 or more alphanumeric or `_` characters.
+
+For example, `${API_KEY}` is valid, while `${1API_KEY}` and `${API_$KEY}` are
+invalid.
+
+Environment variable substitution MUST only apply to scalar values. Mapping keys
+are not candidates for substitution.
+
+If a referenced environment variable is not defined, it MUST be replaced with an
+empty value.
+
+Node types MUST be interpreted after environment variable substitution takes
+place. This ensures the environment string representation of boolean, integer,
+or floating point fields can be properly converted to expected types.
+
+It MUST NOT be possible to inject YAML structures by environment variables. For
+example, references to `INVALID_MAP_VALUE` environment variable below.
+
+For example, consider the following environment variables,
+and [YAML](#yaml-file-format) configuration file:
+
+```shell
+export STRING_VALUE="value"
+export BOOl_VALUE="true"
+export INT_VALUE="1"
+export FLOAT_VALUE="1.1"
+export INVALID_MAP_VALUE"value\nkey:value" # An invalid attempt to inject a map key into the YAML
+```
+
+```yaml
+string_key: ${STRING_VALUE}                           # Valid reference to STRING_VALUE
+other_string_key: "${STRING_VALUE}"                   # Valid reference to STRING_VALUE inside double quotes
+another_string_key: "${BOOl_VALUE}"                   # Valid reference to BOOl_VALUE inside double quotes
+yet_another_string_key: ${INVALID_MAP_VALUE}          # Valid reference to INVALID_MAP_VALUE, but YAML structure from INVALID_MAP_VALUE MUST NOT be injected
+bool_key: ${BOOl_VALUE}                               # Valid reference to BOOl_VALUE
+int_key: ${INT_VALUE}                                 # Valid reference to INT_VALUE
+float_key: ${FLOAT_VALUE}                             # Valid reference to FLOAT_VALUE
+combo_string_key: foo ${STRING_VALUE} ${FLOAT_VALUE}  # Valid reference to STRING_VALUE and FLOAT_VALUE
+undefined_key: ${UNDEFINED_KEY}                       # Invalid reference, UNDEFINED_KEY is not defined and is replaced with ""
+${STRING_VALUE}: value                                # Invalid reference, substitution is not valid in mapping keys and reference is ignored
+```
+
+Environment variable substitution results in the following YAML:
+
+```yaml
+string_key: value                           # Interpreted as type string, tag URI tag:yaml.org,2002:str
+other_string_key: "value"                   # Interpreted as type string, tag URI tag:yaml.org,2002:str
+another_string_key: "true"                  # Interpreted as type string, tag URI tag:yaml.org,2002:str
+yet_another_string_key: "value\nkey:value"  # Interpreted as type string, tag URI tag:yaml.org,2002:str
+bool_key: true                              # Interpreted as type bool, tag URI tag:yaml.org,2002:bool
+int_key: 1                                  # Interpreted as type int, tag URI tag:yaml.org,2002:int
+float_key: 1.1                              # Interpreted as type float, tag URI tag:yaml.org,2002:float
+combo_string_key: foo value 1.1             # Interpreted as type string, tag URI tag:yaml.org,2002:str
+undefined_key:                              # Interpreted as type null, tag URI tag:yaml.org,2002:null
+${STRING_VALUE}: value                      # Interpreted as type string, tag URI tag:yaml.org,2002:str
+```
 
 ## SDK Configuration
 
@@ -81,10 +157,19 @@ with OpAmp
 
 Parse and validate a [configuration file](#configuration-file).
 
+Parse MUST perform [environment variable substitution](#environment-variable-substitution).
+
+Parse MUST interpret null as equivalent to unset.
+
 **Parameters:**
 
 * `file`: The [configuration file](#configuration-file) to parse. This MAY be a
   file path, or language specific file data structure, or a stream of a file's content.
+* `file_format`: The file format of the `file` (e.g. [yaml](#yaml-file-format)).
+  Implementations MAY accept a `file_format` parameter, or infer it from
+  the `file` extension, or include file format specific overloads of `parse`,
+  e.g. `parseYaml(file)`. If `parse` accepts `file_format`, the API SHOULD be
+  structured so a user is obligated to provide it.
 
 **Returns:** [configuration model](#in-memory-configuration-model)
 
@@ -94,12 +179,19 @@ This SHOULD return an error if:
 * The parsed `file` content does not conform to
   the [configuration model](#configuration-model) schema.
 
-TODO: define behavior if some portion of configuration model is not supported
-
 #### Create
 
 Interpret [configuration model](#in-memory-configuration-model) and return SDK components.
 
+If a field is null or unset and a default value is defined, Create MUST ensure
+the SDK component is configured with the default value. If a field is null or
+unset and no default value is defined, Create SHOULD return an error. For
+example, if configuring
+the [span batching processor](../trace/sdk.md#batching-processor) and
+the `scheduleDelayMillis` field is null or unset, the component is configured
+with the default value of `5000`. However, if the `exporter` field is null or
+unset, Create fails fast since there is no default value for `exporter`.
+
 **Parameters:**
 
 * `configuration` - The configuration model.
@@ -115,7 +207,10 @@ The multiple responses MAY be returned using a tuple, or some other data
 structure encapsulating the components.
 
 This SHOULD return an error if it encounters an error in `configuration` (i.e.
-fail fast).
+fail fast) in accordance with
+initialization [error handling principles](../error-handling.md#basic-error-handling-principles).
+
+TODO: define behavior if some portion of configuration model is not supported
 
 ## References