diff --git a/pkg/environment/environment_test.go b/pkg/environment/environment_test.go
index cd4f0fba..0883d28e 100644
--- a/pkg/environment/environment_test.go
+++ b/pkg/environment/environment_test.go
@@ -205,3 +205,33 @@ func TestEnvironment_GetMergedValues_Issue2281_SparseArrayMerge(t *testing.T) {
 	assert.Equal(t, "second thing", elem1["thing"])
 	assert.Equal(t, "cmdline", elem1["anotherThing"])
 }
+
+func TestEnvironment_GetMergedValues_Issue2527_DefaultsOverrideValues(t *testing.T) {
+	env := &Environment{
+		Name: "test",
+		Defaults: map[string]any{
+			"helmDefaults": map[string]any{
+				"atomic":  false,
+				"wait":    true,
+				"timeout": 300,
+			},
+		},
+		Values: map[string]any{
+			"appName": "my-app",
+			"helmDefaults": map[string]any{
+				"atomic":  true,
+				"wait":    true,
+				"timeout": 300,
+			},
+		},
+		CLIOverrides: map[string]any{},
+	}
+
+	mergedValues, err := env.GetMergedValues()
+	require.NoError(t, err)
+
+	hd := mergedValues["helmDefaults"].(map[string]any)
+	assert.Equal(t, true, hd["atomic"], "Values should override Defaults atomic value")
+	assert.Equal(t, true, hd["wait"])
+	assert.Equal(t, 300, hd["timeout"])
+}
diff --git a/pkg/state/types.go b/pkg/state/types.go
index b210bf19..991ac73b 100644
--- a/pkg/state/types.go
+++ b/pkg/state/types.go
@@ -2,6 +2,7 @@ package state
 
 import (
 	"github.com/helmfile/helmfile/pkg/environment"
+	"github.com/helmfile/helmfile/pkg/maputil"
 )
 
 // TemplateSpec defines the structure of a reusable and composable template for helm releases.
@@ -21,11 +22,9 @@ type EnvironmentTemplateData struct {
 }
 
 func NewEnvironmentTemplateData(env environment.Environment, namespace string, values map[string]any) *EnvironmentTemplateData {
-	// Create a copy of the environment with merged values for template access.
-	// This ensures templates accessing .Environment.Values see the same merged values
-	// (Defaults + Values + CLIOverrides) as templates accessing .Values directly.
 	envCopy := env
-	envCopy.Values = values
+	envCopy.Values = maputil.MergeMaps(env.Values, env.CLIOverrides,
+		maputil.MergeOptions{ArrayStrategy: maputil.ArrayMergeStrategyMerge})
 	d := EnvironmentTemplateData{envCopy, namespace, values, nil}
 	d.StateValues = &d.Values
 	return &d
diff --git a/pkg/state/types_test.go b/pkg/state/types_test.go
new file mode 100644
index 00000000..dd22c8d1
--- /dev/null
+++ b/pkg/state/types_test.go
@@ -0,0 +1,52 @@
+package state
+
+import (
+	"testing"
+
+	"github.com/stretchr/testify/assert"
+	"github.com/stretchr/testify/require"
+
+	"github.com/helmfile/helmfile/pkg/environment"
+)
+
+func TestNewEnvironmentTemplateData_EnvironmentValuesExcludesDefaults_Issue2527(t *testing.T) {
+	env := environment.Environment{
+		Name: "myenv",
+		Defaults: map[string]any{
+			"helmDefaults": map[string]any{
+				"atomic":  true,
+				"wait":    true,
+				"timeout": 300,
+			},
+		},
+		Values: map[string]any{
+			"appName": "my-app",
+		},
+		CLIOverrides: map[string]any{
+			"cliFlag": "cliValue",
+		},
+	}
+
+	mergedVals := map[string]any{
+		"appName": "my-app",
+		"cliFlag": "cliValue",
+		"helmDefaults": map[string]any{
+			"atomic":  true,
+			"wait":    true,
+			"timeout": 300,
+		},
+	}
+
+	tmplData := NewEnvironmentTemplateData(env, "ns", mergedVals)
+	require.NotNil(t, tmplData)
+
+	assert.Equal(t, mergedVals, tmplData.Values, ".Values should contain full merged values")
+
+	_, hasDefaults := tmplData.Environment.Values["helmDefaults"]
+	assert.False(t, hasDefaults, ".Environment.Values should NOT contain Defaults (helmDefaults)")
+
+	assert.Equal(t, "my-app", tmplData.Environment.Values["appName"],
+		".Environment.Values should contain env Values")
+	assert.Equal(t, "cliValue", tmplData.Environment.Values["cliFlag"],
+		".Environment.Values should contain CLI overrides")
+}