diff --git a/packages/playwright-test/src/index.ts b/packages/playwright-test/src/index.ts
index cb4b6990c9..fc758f4ac7 100644
--- a/packages/playwright-test/src/index.ts
+++ b/packages/playwright-test/src/index.ts
@@ -64,8 +64,8 @@ export const test = _baseTest.extend<TestFixtures, WorkerFixtures>({
       await use(require('playwright-core'));
     }
   }, { scope: 'worker' } ],
-  headless: [ true, { scope: 'worker', option: true } ],
-  channel: [ undefined, { scope: 'worker', option: true } ],
+  headless: [ ({ launchOptions }, use) => use(launchOptions.headless ?? true), { scope: 'worker', option: true } ],
+  channel: [ ({ launchOptions }, use) => use(launchOptions.channel), { scope: 'worker', option: true } ],
   launchOptions: [ {}, { scope: 'worker', option: true } ],
   connectOptions: [ undefined, { scope: 'worker', option: true } ],
   screenshot: [ 'off', { scope: 'worker', option: true } ],
diff --git a/tests/playwright-test/playwright.config.spec.ts b/tests/playwright-test/playwright.config.spec.ts
new file mode 100644
index 0000000000..35f6668463
--- /dev/null
+++ b/tests/playwright-test/playwright.config.spec.ts
@@ -0,0 +1,69 @@
+/**
+ * Copyright (c) Microsoft Corporation.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+import { test, expect } from './playwright-test-fixtures';
+
+test('should fall back to launchOptions', async ({ runInlineTest }) => {
+  const result = await runInlineTest({
+    'playwright.config.ts': `
+      module.exports = {
+        use: {
+          launchOptions: {
+            headless: false,
+            channel: 'chrome',
+          }
+        }
+      };
+    `,
+    'a.test.ts': `
+      const { test } = pwt;
+      test('pass', async ({ headless, channel }) => {
+        expect.soft(headless).toBe(false);
+        expect.soft(channel).toBe('chrome');
+      });
+    `,
+  }, { workers: 1 });
+
+  expect(result.exitCode).toBe(0);
+  expect(result.passed).toBe(1);
+});
+
+test('should override launchOptions', async ({ runInlineTest }) => {
+  const result = await runInlineTest({
+    'playwright.config.ts': `
+      module.exports = {
+        use: {
+          headless: false,
+          channel: 'chrome',
+          launchOptions: {
+            headless: true,
+            channel: 'msedge',
+          }
+        }
+      };
+    `,
+    'a.test.ts': `
+      const { test } = pwt;
+      test('pass', async ({ headless, channel }) => {
+        expect.soft(headless).toBe(false);
+        expect.soft(channel).toBe('chrome');
+      });
+    `,
+  }, { workers: 1 });
+
+  expect(result.exitCode).toBe(0);
+  expect(result.passed).toBe(1);
+});