diff --git a/CHANGELOG.md b/CHANGELOG.md
index 00f08f58..ba113dac 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -10,6 +10,7 @@ project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0.html).
 ### Fixed
 
 - An unquoted empty value followed by an inline comment (e.g. `KEY= # comment`) is now parsed as an empty string instead of the comment text by [@Noethix55555] in [#663]
+- Improve the performance of variable interpolation for files with many entries by avoiding repeated copies of previously resolved values
 
 ## [1.2.3] - 2026-08-16
 
diff --git a/src/dotenv/main.py b/src/dotenv/main.py
index 3123690a..81a9fc08 100644
--- a/src/dotenv/main.py
+++ b/src/dotenv/main.py
@@ -5,7 +5,7 @@
 import stat
 import sys
 import tempfile
-from collections import OrderedDict
+from collections import ChainMap, OrderedDict
 from contextlib import contextmanager
 from typing import IO, Dict, Iterable, Iterator, Mapping, Optional, Tuple, Union
 
@@ -302,13 +302,12 @@ def resolve_variables(
             result = None
         else:
             atoms = parse_variables(value)
-            env: Dict[str, Optional[str]] = {}
+            os_environ: Dict[str, Optional[str]] = {**os.environ}
+            env: Mapping[str, Optional[str]]
             if override:
-                env.update(os.environ)  # type: ignore
-                env.update(new_values)
+                env = ChainMap(new_values, os_environ)
             else:
-                env.update(new_values)
-                env.update(os.environ)  # type: ignore
+                env = ChainMap(os_environ, new_values)
             result = "".join(atom.resolve(env) for atom in atoms)
 
         new_values[name] = result
diff --git a/tests/test_main.py b/tests/test_main.py
index 6f9d4c5c..95b0db53 100644
--- a/tests/test_main.py
+++ b/tests/test_main.py
@@ -10,7 +10,7 @@
 import pytest
 
 import dotenv
-from dotenv.main import DotEnv
+from dotenv.main import DotEnv, resolve_variables
 
 
 def test_set_key_no_file(tmp_path):
@@ -756,3 +756,50 @@ def test_dotenv_values_empty_value_with_inline_comment(string, expected):
     result = dotenv.dotenv_values(stream=io.StringIO(string))
 
     assert result == expected
+
+
+@pytest.mark.parametrize(
+    "env,values,override,expected",
+    [
+        # Interpolation sees earlier file bindings; file wins with override=True
+        (
+            {"A": "env"},
+            [("A", "file"), ("B", "${A}")],
+            True,
+            {"A": "file", "B": "file"},
+        ),
+        # ... while the environment wins with override=False
+        (
+            {"A": "env"},
+            [("A", "file"), ("B", "${A}")],
+            False,
+            {"A": "file", "B": "env"},
+        ),
+        # File values stay visible with override=False when the environment
+        # does not define the interpolated key
+        (
+            {},
+            [("A", "file"), ("B", "${A}")],
+            False,
+            {"A": "file", "B": "file"},
+        ),
+        # Duplicate keys re-resolve against the live, winning source
+        (
+            {"A": "env"},
+            [("A", "first"), ("A", "${A}-more")],
+            True,
+            {"A": "first-more"},
+        ),
+        (
+            {"A": "env"},
+            [("A", "first"), ("A", "${A}-more")],
+            False,
+            {"A": "env-more"},
+        ),
+        # Key without value stays None and resolves to "" elsewhere
+        ({}, [("A", None), ("B", "${A}")], True, {"A": None, "B": ""}),
+    ],
+)
+def test_resolve_variables_override_precedence(env, values, override, expected):
+    with mock.patch.dict(os.environ, env, clear=True):
+        assert dict(resolve_variables(values, override=override)) == expected