diff --git a/__tests__/data/.tool-versions b/__tests__/data/.tool-versions
new file mode 100644
index 000000000..10b40f8be
--- /dev/null
+++ b/__tests__/data/.tool-versions
@@ -0,0 +1,2 @@
+yarn 1.22.4
+nodejs 17.6.0
diff --git a/__tests__/installer.test.ts b/__tests__/installer.test.ts
index 4565dd4ce..8721f71f4 100644
--- a/__tests__/installer.test.ts
+++ b/__tests__/installer.test.ts
@@ -601,6 +601,32 @@ describe('setup-node', () => {
       );
     });
 
+    it('reads node-version-file of `asdf` if provided', async () => {
+      // Arrange
+      const versionSpec = `yarn 1.22.4
+nodejs 17.6.0
+`;
+      const versionFile = '.tool-versions';
+      const expectedVersionSpec = '17.6.0';
+      process.env['GITHUB_WORKSPACE'] = path.join(__dirname, 'data');
+      inputs['node-version-file'] = versionFile;
+
+      parseNodeVersionSpy.mockImplementation(() => expectedVersionSpec);
+      existsSpy.mockImplementationOnce(
+        input => input === path.join(__dirname, 'data', versionFile)
+      );
+      // Act
+      await main.run();
+
+      // Assert
+      expect(existsSpy).toHaveBeenCalledTimes(1);
+      expect(existsSpy).toHaveReturnedWith(true);
+      expect(parseNodeVersionSpy).toHaveBeenCalledWith(versionSpec);
+      expect(logSpy).toHaveBeenCalledWith(
+        `Resolved ${versionFile} as ${expectedVersionSpec}`
+      );
+    });
+
     it('both node-version-file and node-version are provided', async () => {
       inputs['node-version'] = '12';
       const versionSpec = 'v14';
diff --git a/src/installer.ts b/src/installer.ts
index a9baae0a1..12db1a7cf 100644
--- a/src/installer.ts
+++ b/src/installer.ts
@@ -468,6 +468,14 @@ function translateArchToDistUrl(arch: string): string {
 export function parseNodeVersionFile(contents: string): string {
   let nodeVersion = contents.trim();
 
+  if (contents.indexOf('nodejs') !== -1) {
+    const lineWithNodeJsVersions = contents.match(/^nodejs.*$/gm);
+    const firstLineWithNodeJsVersion =
+      lineWithNodeJsVersions && lineWithNodeJsVersions[0];
+    nodeVersion =
+      firstLineWithNodeJsVersion?.replace('nodejs', '').trim() || nodeVersion;
+  }
+
   if (/^v\d/.test(nodeVersion)) {
     nodeVersion = nodeVersion.substring(1);
   }