diff --git a/README.md b/README.md
index 8df9dc61..d18d5d2e 100644
--- a/README.md
+++ b/README.md
@@ -42,6 +42,55 @@ task assets build
 If Bash is available (Linux and Windows while on Git Bash), the commands will
 run in Bash, otherwise will fallback to `cmd` (on Windows).
 
+### Variables
+
+```yml
+build:
+  deps: [setvar]
+  cmds:
+  - echo "{{prefix}} {{THEVAR}}"
+  variables:
+    prefix: "Path:"
+
+setvar:
+  cmds:
+  - echo "{{PATH}}"
+  set: THEVAR
+```
+
+The above sample saves the path into a new variable which is then again echoed.
+
+You can use environment variables, task level variables and a file called `Variables` as source of variables.
+
+They are evaluated in the following order:
+
+Task local variables are overwritten by variables found in `Variables`. Variables found in `Variables` are overwritten with variables from the environment. The output of the last command is stored in the environment. So you can do something like this:
+
+```yml
+build:
+  deps: [setvar]
+  cmds:
+  - echo "{{prefix}} '{{THEVAR}}'"
+  variables:
+    prefix: "Result: "
+
+setvar:
+  cmds:
+  - echo -n "a"
+  - echo -n "{{THEVAR}}b"
+  - echo -n "{{THEVAR}}c"
+  set: THEVAR
+```
+
+The result of a run of build would be:
+
+```
+a
+ab
+abc
+Result:  'abc'
+```
+
 ### Running task in another dir
 
 By default, tasks will be executed in the directory where the Taskfile is
diff --git a/task.go b/task.go
index 535b2e7d..09a15fbd 100644
--- a/task.go
+++ b/task.go
@@ -2,6 +2,7 @@ package task
 
 import (
 	"encoding/json"
+	"fmt"
 	"io/ioutil"
 	"log"
 	"os"
@@ -45,6 +46,8 @@ type Task struct {
 	Sources   []string
 	Generates []string
 	Dir       string
+	Variables map[string]string
+	Set       string
 }
 
 // Run runs Task
@@ -81,8 +84,13 @@ func RunTask(name string) error {
 		return &taskNotFoundError{name}
 	}
 
+	vars, err := t.handleVariables()
+	if err != nil {
+		return &taskRunError{name, err}
+	}
+
 	for _, d := range t.Deps {
-		if err := RunTask(d); err != nil {
+		if err := RunTask(ReplaceVariables(d, vars)); err != nil {
 			return err
 		}
 	}
@@ -93,9 +101,23 @@ func RunTask(name string) error {
 	}
 
 	for _, c := range t.Cmds {
-		if err := runCommand(c, t.Dir); err != nil {
+		// read in a each time, as a command could change a variable or it has been changed by a dependency
+		vars, err = t.handleVariables()
+		if err != nil {
 			return &taskRunError{name, err}
 		}
+		var (
+			output string
+			err    error
+		)
+		if output, err = runCommand(ReplaceVariables(c, vars), ReplaceVariables(t.Dir, vars)); err != nil {
+			return &taskRunError{name, err}
+		}
+		if t.Set != "" {
+			os.Setenv(t.Set, output)
+		} else {
+			fmt.Println(output)
+		}
 	}
 	return nil
 }
@@ -118,8 +140,12 @@ func isTaskUpToDate(t *Task) bool {
 	return generatesMinTime.After(sourcesMaxTime)
 }
 
-func runCommand(c, path string) error {
-	var cmd *exec.Cmd
+func runCommand(c, path string) (string, error) {
+	var (
+		cmd *exec.Cmd
+		b   []byte
+		err error
+	)
 	if ShExists {
 		cmd = exec.Command(ShPath, "-c", c)
 	} else {
@@ -128,12 +154,11 @@ func runCommand(c, path string) error {
 	if path != "" {
 		cmd.Dir = path
 	}
-	cmd.Stdout = os.Stdout
 	cmd.Stderr = os.Stderr
-	if err := cmd.Run(); err != nil {
-		return err
+	if b, err = cmd.Output(); err != nil {
+		return "", err
 	}
-	return nil
+	return string(b), nil
 }
 
 func readTaskfile() (tasks map[string]*Task, err error) {
diff --git a/variable_handling.go b/variable_handling.go
new file mode 100644
index 00000000..651dd9ed
--- /dev/null
+++ b/variable_handling.go
@@ -0,0 +1,82 @@
+package task
+
+import (
+	"encoding/json"
+	"fmt"
+	"io/ioutil"
+	"os"
+	"strings"
+
+	"github.com/BurntSushi/toml"
+	"gopkg.in/yaml.v2"
+)
+
+var (
+	// VariableFilePath file containing additional variables
+	VariableFilePath = "Taskvars"
+)
+
+func (t Task) handleVariables() (map[string]string, error) {
+	localVariables := make(map[string]string)
+	for key, value := range t.Variables {
+		localVariables[key] = value
+	}
+	if fileVariables, err := readVariablefile(); err == nil {
+		for key, value := range fileVariables {
+			localVariables[key] = value
+		}
+	} else {
+		return nil, err
+	}
+	for key, value := range getEnvironmentVariables() {
+		localVariables[key] = value
+	}
+	return localVariables, nil
+}
+
+// ReplaceVariables writes variables into initial string
+func ReplaceVariables(initial string, variables map[string]string) string {
+	replaced := initial
+	for name, val := range variables {
+		replaced = strings.Replace(replaced, fmt.Sprintf("{{%s}}", name), val, -1)
+	}
+	return replaced
+}
+
+// GetEnvironmentVariables returns environment variables as map
+func getEnvironmentVariables() map[string]string {
+	getenvironment := func(data []string, getkeyval func(item string) (key, val string)) map[string]string {
+		items := make(map[string]string)
+		for _, item := range data {
+			key, val := getkeyval(item)
+			items[key] = val
+		}
+		return items
+	}
+	return getenvironment(os.Environ(), func(item string) (key, val string) {
+		splits := strings.Split(item, "=")
+		key = splits[0]
+		val = splits[1]
+		return
+	})
+}
+
+func readVariablefile() (map[string]string, error) {
+	var variables map[string]string
+	if b, err := ioutil.ReadFile(VariableFilePath + ".yml"); err == nil {
+		if err := yaml.Unmarshal(b, &variables); err != nil {
+			return nil, err
+		}
+	}
+	if b, err := ioutil.ReadFile(VariableFilePath + ".json"); err == nil {
+		if err := json.Unmarshal(b, &variables); err != nil {
+			return nil, err
+		}
+	}
+	if b, err := ioutil.ReadFile(VariableFilePath + ".toml"); err == nil {
+		if err := toml.Unmarshal(b, &variables); err != nil {
+			return nil, err
+		}
+	}
+	return variables, nil
+}