diff --git a/.changeset/fifty-news-serve.md b/.changeset/fifty-news-serve.md
new file mode 100644
index 00000000000..ed495bf936e
--- /dev/null
+++ b/.changeset/fifty-news-serve.md
@@ -0,0 +1,5 @@
+---
+"@smithy/middleware-endpoint": patch
+---
+
+fix resolving file/env configured endpoint
diff --git a/packages/middleware-endpoint/src/adaptors/getEndpointFromInstructions.spec.ts b/packages/middleware-endpoint/src/adaptors/getEndpointFromInstructions.spec.ts
new file mode 100644
index 00000000000..812e4ebe430
--- /dev/null
+++ b/packages/middleware-endpoint/src/adaptors/getEndpointFromInstructions.spec.ts
@@ -0,0 +1,54 @@
+import { afterAll, describe, expect, test as it, vi } from "vitest";
+
+import { getEndpointFromInstructions } from "./getEndpointFromInstructions";
+
+describe(getEndpointFromInstructions.name, () => {
+  afterAll(async () => {
+    delete process.env.AWS_ENDPOINT_URL;
+  });
+
+  it("should set the isCustomEndpoint flag after resolving an externally configured endpoint", async () => {
+    process.env.AWS_ENDPOINT_URL = "https://localhost";
+
+    const config = {
+      serviceId: "service id",
+      isCustomEndpoint: false,
+      endpointProvider: vi.fn(),
+    };
+
+    await getEndpointFromInstructions(
+      {},
+      {
+        getEndpointParameterInstructions() {
+          return {};
+        },
+      },
+      config
+    );
+
+    expect(config.isCustomEndpoint).toBe(true);
+  });
+
+  it("should not use externally configured endpoint if code-level endpoint was set", async () => {
+    process.env.AWS_ENDPOINT_URL = "https://localhost";
+
+    const config = {
+      serviceId: "service id",
+      isCustomEndpoint: true,
+      endpointProvider: vi.fn().mockReturnValue(Symbol.for("endpoint")),
+    };
+
+    const endpoint = await getEndpointFromInstructions(
+      {},
+      {
+        getEndpointParameterInstructions() {
+          return {};
+        },
+      },
+      config
+    );
+
+    expect(config.isCustomEndpoint).toBe(true);
+    expect(endpoint).toBe(Symbol.for("endpoint"));
+  });
+});
diff --git a/packages/middleware-endpoint/src/adaptors/getEndpointFromInstructions.ts b/packages/middleware-endpoint/src/adaptors/getEndpointFromInstructions.ts
index c2ceca75dc3..0889ea27151 100644
--- a/packages/middleware-endpoint/src/adaptors/getEndpointFromInstructions.ts
+++ b/packages/middleware-endpoint/src/adaptors/getEndpointFromInstructions.ts
@@ -52,6 +52,7 @@ export const getEndpointFromInstructions = async <
 
     if (endpointFromConfig) {
       clientConfig.endpoint = () => Promise.resolve(toEndpointV1(endpointFromConfig!));
+      clientConfig.isCustomEndpoint = true;
     }
   }