diff --git a/CHANGELOG.md b/CHANGELOG.md
index e5260104f3fe..3acec84fec5d 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -9,15 +9,6 @@ garbage collector.
 
 Contributed by Jukka Lehtosalo (PR [18306](https://github.com/python/mypy/pull/18306)).
 
-### Drop Support for Python 3.8
-
-Mypy no longer supports running with Python 3.8, which has reached end-of-life.
-When running mypy with Python 3.9+, it is still possible to type check code
-that needs to support Python 3.8 with the `--python-version 3.8` argument.
-Support for this will be dropped in the first half of 2025!
-
-Contributed by Marc Mueller (PR [17492](https://github.com/python/mypy/pull/17492)).
-
 ### Mypyc accelerated mypy wheels for aarch64
 
 Mypy can compile itself to C extension modules using mypyc. This makes mypy 3-5x faster
@@ -25,7 +16,9 @@ than if mypy is interpreted with pure Python. We now build and upload mypyc acce
 mypy wheels for `manylinux_aarch64` to PyPI, making it easy for users on such platforms
 to realise this speedup.
 
-Contributed by Christian Bundy (PR [mypy_mypyc-wheels#76](https://github.com/mypyc/mypy_mypyc-wheels/pull/76))
+Contributed by Christian Bundy and Marc Mueller
+(PR [mypy_mypyc-wheels#76](https://github.com/mypyc/mypy_mypyc-wheels/pull/76),
+PR [mypy_mypyc-wheels#89](https://github.com/mypyc/mypy_mypyc-wheels/pull/89)).
 
 ### `--strict-bytes`
 
@@ -48,6 +41,16 @@ Contributed by Christoph Tyralla (PR [18180](https://github.com/python/mypy/pull
 (Speaking of partial types, another reminder that mypy plans on enabling `--local-partial-types`
 by default in **mypy 2.0**).
 
+### Better discovery of configuration files
+
+Mypy will now walk up the filesystem (up until a repository or file system root) to discover
+configuration files. See the
+[mypy configuration file documentation](https://mypy.readthedocs.io/en/stable/config_file.html)
+for more details.
+
+Contributed by Mikhail Shiryaev and Shantanu Jain
+(PR [16965](https://github.com/python/mypy/pull/16965), PR [18482](https://github.com/python/mypy/pull/18482)
+
 ### Better line numbers for decorators and slice expressions
 
 Mypy now uses more correct line numbers for decorators and slice expressions. In some cases, this
@@ -56,6 +59,15 @@ may necessitate changing the location of a `# type: ignore` comment.
 Contributed by Shantanu Jain (PR [18392](https://github.com/python/mypy/pull/18392),
 PR [18397](https://github.com/python/mypy/pull/18397)).
 
+### Drop Support for Python 3.8
+
+Mypy no longer supports running with Python 3.8, which has reached end-of-life.
+When running mypy with Python 3.9+, it is still possible to type check code
+that needs to support Python 3.8 with the `--python-version 3.8` argument.
+Support for this will be dropped in the first half of 2025!
+
+Contributed by Marc Mueller (PR [17492](https://github.com/python/mypy/pull/17492)).
+
 ## Mypy 1.14
 
 We’ve just uploaded mypy 1.14 to the Python Package Index ([PyPI](https://pypi.org/project/mypy/)).
diff --git a/docs/source/config_file.rst b/docs/source/config_file.rst
index 747ef3a9fdaa..ce7661f93f5e 100644
--- a/docs/source/config_file.rst
+++ b/docs/source/config_file.rst
@@ -7,22 +7,30 @@ Mypy is very configurable. This is most useful when introducing typing to
 an existing codebase. See :ref:`existing-code` for concrete advice for
 that situation.
 
-Mypy supports reading configuration settings from a file with the following precedence order:
+Mypy supports reading configuration settings from a file. By default, mypy will
+discover configuration files by walking up the file system (up until the root of
+a repository or the root of the filesystem). In each directory, it will look for
+the following configuration files (in this order):
 
-    1. ``./mypy.ini``
-    2. ``./.mypy.ini``
-    3. ``./pyproject.toml``
-    4. ``./setup.cfg``
-    5. ``$XDG_CONFIG_HOME/mypy/config``
-    6. ``~/.config/mypy/config``
-    7. ``~/.mypy.ini``
+    1. ``mypy.ini``
+    2. ``.mypy.ini``
+    3. ``pyproject.toml`` (containing a ``[tool.mypy]`` section)
+    4. ``setup.cfg`` (containing a ``[mypy]`` section)
+
+If no configuration file is found by this method, mypy will then look for
+configuration files in the following locations (in this order):
+
+    1. ``$XDG_CONFIG_HOME/mypy/config``
+    2. ``~/.config/mypy/config``
+    3. ``~/.mypy.ini``
+
+The :option:`--config-file <mypy --config-file>` command-line flag has the
+highest precedence and must be point towards a valid configuration file;
+otherwise mypy will report an error and exit. Without the command line option,
+mypy will look for configuration files in the precedence order above.
 
 It is important to understand that there is no merging of configuration
-files, as it would lead to ambiguity. The :option:`--config-file <mypy --config-file>`
-command-line flag has the highest precedence and
-must be correct; otherwise mypy will report an error and exit. Without the
-command line option, mypy will look for configuration files in the
-precedence order above.
+files, as it would lead to ambiguity.
 
 Most flags correspond closely to :ref:`command-line flags
 <command-line>` but there are some differences in flag names and some