diff --git a/pkg/state/state_exec_tmpl.go b/pkg/state/state_exec_tmpl.go
index 2a8e3877..346aee3d 100644
--- a/pkg/state/state_exec_tmpl.go
+++ b/pkg/state/state_exec_tmpl.go
@@ -3,6 +3,7 @@ package state
 import (
 	"errors"
 	"fmt"
+	"path/filepath"
 	"reflect"
 	"strings"
 
@@ -110,27 +111,33 @@ func (st *HelmState) ExecuteTemplates() (*HelmState, error) {
 			release.KubeVersion = st.KubeVersion
 		}
 
-		successFlag := false
-		for it, prev := 0, release; it < 6; it++ {
-			tmplData := st.createReleaseTemplateData(prev, vals)
-			renderer := tmpl.NewFileRenderer(st.fs, st.basePath, tmplData)
-			r, err := release.ExecuteTemplateExpressions(renderer)
-			if err != nil {
-				return nil, fmt.Errorf("failed executing templates in release \"%s\".\"%s\": %v", st.FilePath, release.Name, err)
-			}
-			if reflect.DeepEqual(prev, r) {
-				successFlag = true
-				if err := updateBoolTemplatedValues(r); err != nil {
+		// Only process templates if the file has .gotmpl extension
+		if filepath.Ext(st.FilePath) == ".gotmpl" {
+			successFlag := false
+			for it, prev := 0, release; it < 6; it++ {
+				tmplData := st.createReleaseTemplateData(prev, vals)
+				renderer := tmpl.NewFileRenderer(st.fs, st.basePath, tmplData)
+				r, err := release.ExecuteTemplateExpressions(renderer)
+				if err != nil {
 					return nil, fmt.Errorf("failed executing templates in release \"%s\".\"%s\": %v", st.FilePath, release.Name, err)
 				}
-				st.Releases[i] = *r
-				break
+				if reflect.DeepEqual(prev, r) {
+					successFlag = true
+					if err := updateBoolTemplatedValues(r); err != nil {
+						return nil, fmt.Errorf("failed executing templates in release \"%s\".\"%s\": %v", st.FilePath, release.Name, err)
+					}
+					st.Releases[i] = *r
+					break
+				}
+				prev = r
 			}
-			prev = r
-		}
-		if !successFlag {
-			return nil, fmt.Errorf("failed executing templates in release \"%s\".\"%s\": %s", st.FilePath, release.Name,
-				"recursive references can't be resolved")
+			if !successFlag {
+				return nil, fmt.Errorf("failed executing templates in release \"%s\".\"%s\": %s", st.FilePath, release.Name,
+					"recursive references can't be resolved")
+			}
+		} else {
+			// For non-.gotmpl files, skip template processing entirely
+			st.Releases[i] = *release
 		}
 
 		if st.Releases[i].Chart == "" {
diff --git a/pkg/state/state_exec_tmpl_test.go b/pkg/state/state_exec_tmpl_test.go
index 33a0a47c..d204d21e 100644
--- a/pkg/state/state_exec_tmpl_test.go
+++ b/pkg/state/state_exec_tmpl_test.go
@@ -172,6 +172,7 @@ func TestHelmState_executeTemplates(t *testing.T) {
 				fs: &filesystem.FileSystem{
 					Glob: func(s string) ([]string, error) { return nil, nil }},
 				basePath: ".",
+				FilePath: "helmfile.yaml.gotmpl", // Set to .gotmpl to enable template processing
 				ReleaseSetSpec: ReleaseSetSpec{
 					HelmDefaults: HelmSpec{
 						KubeContext: "test_context",
@@ -269,6 +270,7 @@ func TestHelmState_recursiveRefsTemplates(t *testing.T) {
 		t.Run(tt.name, func(t *testing.T) {
 			state := &HelmState{
 				basePath: ".",
+				FilePath: "helmfile.yaml.gotmpl", // Set to .gotmpl to enable template processing for error tests
 				fs: &filesystem.FileSystem{
 					Glob: func(s string) ([]string, error) { return nil, nil },
 				},
@@ -294,3 +296,97 @@ func TestHelmState_recursiveRefsTemplates(t *testing.T) {
 		})
 	}
 }
+
+func TestHelmState_executeTemplates_yaml_vs_gotmpl(t *testing.T) {
+	tests := []struct {
+		name     string
+		filePath string
+		input    ReleaseSpec
+		want     ReleaseSpec
+	}{
+		{
+			name:     "YAML file should NOT process templates",
+			filePath: "helmfile.yaml",
+			input: ReleaseSpec{
+				Chart:     "test-charts/{{ .Release.Name }}",
+				Version:   "{{ .Release.Name }}-0.1",
+				Name:      "test-app",
+				Namespace: "test-namespace-{{ .Release.Name }}",
+				Labels:    map[string]string{"id": "{{ .Release.Name }}"},
+			},
+			want: ReleaseSpec{
+				Chart:     "test-charts/{{ .Release.Name }}", // Template NOT processed
+				Version:   "{{ .Release.Name }}-0.1",        // Template NOT processed
+				Name:      "test-app",
+				Namespace: "test-namespace-{{ .Release.Name }}", // Template NOT processed
+				Labels:    map[string]string{"id": "{{ .Release.Name }}"}, // Template NOT processed
+			},
+		},
+		{
+			name:     "GOTMPL file should process templates",
+			filePath: "helmfile.yaml.gotmpl",
+			input: ReleaseSpec{
+				Chart:     "test-charts/{{ .Release.Name }}",
+				Version:   "{{ .Release.Name }}-0.1",
+				Name:      "test-app",
+				Namespace: "test-namespace-{{ .Release.Name }}",
+				Labels:    map[string]string{"id": "{{ .Release.Name }}"},
+			},
+			want: ReleaseSpec{
+				Chart:     "test-charts/test-app",        // Template processed
+				Version:   "test-app-0.1",               // Template processed
+				Name:      "test-app",
+				Namespace: "test-namespace-test-app",    // Template processed
+				Labels:    map[string]string{"id": "test-app"}, // Template processed
+			},
+		},
+	}
+
+	for i := range tests {
+		tt := tests[i]
+		t.Run(tt.name, func(t *testing.T) {
+			state := &HelmState{
+				fs: &filesystem.FileSystem{
+					Glob: func(s string) ([]string, error) { return nil, nil }},
+				basePath: ".",
+				FilePath: tt.filePath, // This is the key difference
+				ReleaseSetSpec: ReleaseSetSpec{
+					HelmDefaults: HelmSpec{
+						KubeContext: "test_context",
+					},
+					Env:               environment.Environment{Name: "test_env"},
+					OverrideNamespace: "test-namespace_",
+					Repositories:      nil,
+					Releases: []ReleaseSpec{
+						tt.input,
+					},
+				},
+				RenderedValues: map[string]any{},
+			}
+
+			r, err := state.ExecuteTemplates()
+			if err != nil {
+				t.Errorf("Unexpected error: %v", err)
+				t.FailNow()
+			}
+
+			actual := r.Releases[0]
+
+			if !reflect.DeepEqual(actual.Name, tt.want.Name) {
+				t.Errorf("expected Name %+v, got %+v", tt.want.Name, actual.Name)
+			}
+			if !reflect.DeepEqual(actual.Chart, tt.want.Chart) {
+				t.Errorf("expected Chart %+v, got %+v", tt.want.Chart, actual.Chart)
+			}
+			if !reflect.DeepEqual(actual.Namespace, tt.want.Namespace) {
+				t.Errorf("expected Namespace %+v, got %+v", tt.want.Namespace, actual.Namespace)
+			}
+			if !reflect.DeepEqual(actual.Version, tt.want.Version) {
+				t.Errorf("expected Version %+v, got %+v", tt.want.Version, actual.Version)
+			}
+			if diff := deep.Equal(actual.Labels, tt.want.Labels); diff != nil && len(actual.Labels) > 0 {
+				t.Errorf("Labels differs \n%+v", strings.Join(diff, "\n"))
+			}
+		})
+	}
+}