diff --git a/pkg/client/compose/project.go b/pkg/client/compose/project.go
index 7bfd3a25..d8cf5e84 100644
--- a/pkg/client/compose/project.go
+++ b/pkg/client/compose/project.go
@@ -53,6 +53,11 @@ func LoadProject(ctx context.Context, paths []string, opts ...composecli.Project
 		return nil, err
 	}
 
+	// Process image templates in services to expand Go template expressions using git repo state.
+	if project, err = ProcessImageTemplates(project); err != nil {
+		return nil, err
+	}
+
 	return project, nil
 }
 
diff --git a/pkg/client/compose/service_test.go b/pkg/client/compose/service_test.go
index 2e3c467f..89beb4ca 100644
--- a/pkg/client/compose/service_test.go
+++ b/pkg/client/compose/service_test.go
@@ -20,7 +20,8 @@ import (
 	"github.com/stretchr/testify/require"
 )
 
-// loadProjectFromContent loads a compose project from YAML content
+// loadProjectFromContent loads a compose project from YAML content.
+// Keep the implementation in sync with LoadProject.
 func loadProjectFromContent(t *testing.T, content string) (*types.Project, error) {
 	t.Helper()
 	ctx := context.Background()
@@ -62,6 +63,11 @@ func loadProjectFromContent(t *testing.T, content string) (*types.Project, error
 		return nil, err
 	}
 
+	// Process image templates in services to expand Go template expressions using git repo state.
+	if project, err = ProcessImageTemplates(project); err != nil {
+		return nil, err
+	}
+
 	return project, nil
 }
 
diff --git a/test/e2e/compose_build_test.go b/test/e2e/compose_build_test.go
index 87a035df..9e873f76 100644
--- a/test/e2e/compose_build_test.go
+++ b/test/e2e/compose_build_test.go
@@ -5,6 +5,7 @@ import (
 	"fmt"
 	"path"
 	"strconv"
+	"strings"
 	"testing"
 
 	composecli "github.com/compose-spec/compose-go/v2/cli"
@@ -99,7 +100,7 @@ func TestComposeBuild(t *testing.T) {
 		require.NoError(t, err)
 		servicesToBuild, err := cliInternal.ServicesThatNeedBuild(project, nil, false)
 		require.NoError(t, err)
-		serviceImage1 := fmt.Sprintf("127.0.0.1:%d/service-first", registryHostPort)
+		serviceImage1 := project.Services["service-first"].Image // contains auto-generated default tag
 		serviceImage2 := fmt.Sprintf("127.0.0.1:%d/service-second:version2", registryHostPort)
 		t.Cleanup(func() {
 			// Remove the images after the test
@@ -146,12 +147,15 @@ func TestComposeBuild(t *testing.T) {
 		cli.BuildServices(context.Background(), servicesToBuild, buildOpts)
 
 		// Check the image of the first service
-		ref1, err := name.NewRepository(fmt.Sprintf("127.0.0.1:%d/service-first", registryHostPort))
+		tagSeparatorIdx := strings.LastIndex(serviceImage1, ":")
+		serviceRepo1, serviceTag1 := serviceImage1[:tagSeparatorIdx], serviceImage1[tagSeparatorIdx+1:]
+
+		ref1, err := name.NewRepository(serviceRepo1)
 		require.NoError(t, err)
 		tags, err := remote.List(ref1)
 		require.NoError(t, err)
 
-		assert.Equal(t, tags, []string{"latest"}, "Tags for service service-first do not match")
+		assert.Equal(t, tags, []string{serviceTag1}, "Tags for service service-first do not match")
 
 		// Check the image of the second service
 		ref2, err := name.NewRepository(fmt.Sprintf("127.0.0.1:%d/service-second", registryHostPort))