diff --git a/internal/cmd/config.go b/internal/cmd/config.go
index 07d933b8dcd..d5e6f371379 100644
--- a/internal/cmd/config.go
+++ b/internal/cmd/config.go
@@ -2466,11 +2466,6 @@ func (c *Config) runHookPre(hook string) error {
 func (c *Config) setEncryption() error {
 	switch c.Encryption {
 	case "age":
-		// Only use builtin age encryption if age encryption is explicitly
-		// specified. Otherwise, chezmoi would fall back to using age encryption
-		// (rather than no encryption) if age is not in $PATH, which leads to
-		// error messages from the builtin age instead of error messages about
-		// encryption not being configured.
 		c.Age.UseBuiltin = c.UseBuiltinAge.Value(c.useBuiltinAgeAutoFunc)
 		c.encryption = &c.Age
 	case "gpg":
@@ -2480,8 +2475,17 @@ func (c *Config) setEncryption() error {
 		// gpg for backwards compatibility.
 		switch {
 		case !reflect.DeepEqual(c.GPG, defaultGPGEncryptionConfig):
+			c.errorf(
+				"warning: 'encryption' not set, using gpg configuration. " +
+					"Check if 'encryption' is correctly set as the top-level key.\n",
+			)
 			c.encryption = &c.GPG
 		case !reflect.DeepEqual(c.Age, defaultAgeEncryptionConfig):
+			c.errorf(
+				"warning: 'encryption' not set, using age configuration. " +
+					"Check if 'encryption' is correctly set as the top-level key.\n",
+			)
+			c.Age.UseBuiltin = c.UseBuiltinAge.Value(c.useBuiltinAgeAutoFunc)
 			c.encryption = &c.Age
 		default:
 			c.encryption = chezmoi.NoEncryption{}
@@ -2511,7 +2515,7 @@ func (c *Config) setEnvironmentVariables() error {
 	}
 	for key, value := range env {
 		if strings.HasPrefix(key, "CHEZMOI_") {
-			c.errorf("warning: %s: overriding reserved environment variable", key)
+			c.errorf("warning: %s: overriding reserved environment variable\n", key)
 		}
 		if err := os.Setenv(key, value); err != nil {
 			return err
diff --git a/internal/cmd/config_test.go b/internal/cmd/config_test.go
index 098ee3f2134..3b3ac722fe8 100644
--- a/internal/cmd/config_test.go
+++ b/internal/cmd/config_test.go
@@ -1,6 +1,7 @@
 package cmd
 
 import (
+	"bytes"
 	"fmt"
 	"io"
 	"io/fs"
@@ -303,6 +304,178 @@ func TestUpperSnakeCaseToCamelCase(t *testing.T) {
 	}
 }
 
+func TestIssue3980(t *testing.T) {
+	tests := []struct {
+		name                   string
+		filename               string
+		contents               string
+		expectsErr             bool
+		warns                  []string
+		expectedEncryptionType interface{}
+		usesBuiltinAge         bool
+	}{
+		{
+			name:     "empty_config",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"",
+			),
+			expectsErr:             false,
+			warns:                  nil,
+			expectedEncryptionType: chezmoi.NoEncryption{},
+			usesBuiltinAge:         false,
+		},
+		{
+			name:     "empty_encryption_no_configs",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"encryption = \"\"",
+			),
+			expectsErr:             false,
+			warns:                  nil,
+			expectedEncryptionType: chezmoi.NoEncryption{},
+			usesBuiltinAge:         false,
+		},
+		{
+			name:     "valid_age_config",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"encryption = \"age\"",
+				"[age]",
+				"command = \"fakeage\"",
+				"identity = \"key.txt\"",
+			),
+			expectsErr:             false,
+			warns:                  nil,
+			expectedEncryptionType: &chezmoi.AgeEncryption{},
+			usesBuiltinAge:         true,
+		},
+		{
+			name:     "valid_age_config_no_builtin",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"encryption = \"age\"",
+				"useBuiltinAge = \"off\"",
+				"[age]",
+				"command = \"fakeage\"",
+				"identity = \"key.txt\"",
+			),
+			expectsErr:             false,
+			warns:                  nil,
+			expectedEncryptionType: &chezmoi.AgeEncryption{},
+			usesBuiltinAge:         false,
+		},
+		{
+			name:     "valid_gpg_config",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"encryption = \"gpg\"",
+				"[gpg]",
+				"command = \"fakegpg\"",
+				"symmetric = true",
+			),
+			expectsErr:             false,
+			warns:                  nil,
+			expectedEncryptionType: &chezmoi.GPGEncryption{},
+			usesBuiltinAge:         false,
+		},
+		{
+			name:     "unset_encryption_uses_gpg",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"[gpg]",
+				"command = \"fakegpg\"",
+				"symmetric = true",
+			),
+			expectsErr:             false,
+			warns:                  []string{"warning: 'encryption' not set, using gpg configuration"},
+			expectedEncryptionType: &chezmoi.GPGEncryption{},
+			usesBuiltinAge:         false,
+		},
+		{
+			name:     "unset_encryption_uses_age",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"[age]",
+				"command = \"fakeage\"",
+				"identity = \"key.txt\"",
+			),
+			expectsErr:             false,
+			warns:                  []string{"warning: 'encryption' not set, using age configuration"},
+			expectedEncryptionType: &chezmoi.AgeEncryption{},
+			usesBuiltinAge:         true,
+		},
+		{
+			name:     "unset_encryption_uses_age_no_builtin",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"useBuiltinAge = \"off\"",
+				"[age]",
+				"command = \"fakeage\"",
+				"identity = \"key.txt\"",
+			),
+			expectsErr:             false,
+			warns:                  []string{"warning: 'encryption' not set, using age configuration"},
+			expectedEncryptionType: &chezmoi.AgeEncryption{},
+			usesBuiltinAge:         false,
+		},
+		{
+			name:     "unset_encryption_gpg_priority",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"[age]",
+				"command = \"fakeage\"",
+				"identity = \"key.txt\"",
+				"[gpg]",
+				"command = \"fakegpg\"",
+				"symmetric = true",
+			),
+			expectsErr:             false,
+			warns:                  []string{"warning: 'encryption' not set, using gpg configuration"},
+			expectedEncryptionType: &chezmoi.GPGEncryption{},
+			usesBuiltinAge:         false,
+		},
+		{
+			name:     "unknown_encryption",
+			filename: "chezmoi.toml",
+			contents: chezmoitest.JoinLines(
+				"encryption = \"unknown\"",
+			),
+			expectsErr:     true,
+			warns:          nil,
+			usesBuiltinAge: false,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			chezmoitest.WithTestFS(t, map[string]any{
+				"/home/user/.config/chezmoi/" + tt.filename: tt.contents,
+			}, func(fileSystem vfs.FS) {
+				c := newTestConfig(t, fileSystem)
+
+				// Create a buffer to capture stderr.
+				var stderr bytes.Buffer
+				c.stderr = &stderr
+
+				err := c.execute([]string{"init"})
+
+				if tt.expectsErr {
+					assert.Error(t, err)
+				} else {
+					assert.NoError(t, err)
+				}
+				assert.Equal(t, reflect.TypeOf(tt.expectedEncryptionType), reflect.TypeOf(c.encryption))
+				assert.Equal(t, tt.usesBuiltinAge, c.Age.UseBuiltin)
+
+				for _, warn := range tt.warns {
+					assert.Contains(t, stderr.String(), warn)
+				}
+			})
+		})
+	}
+}
+
 func newTestConfig(t *testing.T, fileSystem vfs.FS, options ...configOption) *Config {
 	t.Helper()
 	system := chezmoi.NewRealSystem(fileSystem)