diff --git a/.github/workflows/build-and-test.yml b/.github/workflows/build-and-test.yml
index 4e9d0c420..9327995c2 100644
--- a/.github/workflows/build-and-test.yml
+++ b/.github/workflows/build-and-test.yml
@@ -45,11 +45,11 @@ jobs:
       - name: Set-up OCaml
         uses: ocaml/setup-ocaml@v3
         with:
-          ocaml-compiler: "ocaml-variants.5.4.0+trunk"
+          ocaml-compiler: "5.4"
 
       # Remove this pin once a compatible version of Merlin has been released
       - name: Pin dev Merlin
-        run: opam --cli=2.1 pin --with-version=5.6-504 https://github.com/voodoos/merlin.git#504-rebase
+        run: opam --cli=2.1 pin --with-version=5.6-504 https://github.com/voodoos/merlin.git#main
 
       - name: Build and install dependencies
         run: opam install .
@@ -81,7 +81,7 @@ jobs:
       - name: Set-up OCaml
         uses: ocaml/setup-ocaml@v3
         with:
-          ocaml-compiler: "ocaml-variants.5.4.0+trunk"
+          ocaml-compiler: "5.4"
 
       - name: Set git user
         run: |
@@ -90,7 +90,7 @@ jobs:
 
       # Remove this pin once a compatible version of Merlin has been released
       - name: Pin dev Merlin
-        run: opam --cli=2.1 pin --with-version=5.6-504 https://github.com/voodoos/merlin.git#504-rebase
+        run: opam --cli=2.1 pin --with-version=5.6-504 https://github.com/voodoos/merlin.git#main
 
       - name: Install dependencies
         run: |
diff --git a/CHANGES.md b/CHANGES.md
index edbddcf9f..f244e9e8e 100644
--- a/CHANGES.md
+++ b/CHANGES.md
@@ -1,3 +1,10 @@
+# Unreleased
+
+## Fixes
+
+- Fallback on `.merlin` configuration if no `dune-project` file is found and if
+  `dot-merlin-reader` is installed. (#1563, fixes #1522)
+
 # 1.24.0
 
 ## Features
diff --git a/ocaml-lsp-server/bin/main.ml b/ocaml-lsp-server/bin/main.ml
index 6aef73d00..4c80d727a 100644
--- a/ocaml-lsp-server/bin/main.ml
+++ b/ocaml-lsp-server/bin/main.ml
@@ -4,20 +4,23 @@ module Cli = Lsp.Cli
 let () =
   Printexc.record_backtrace true;
   let version = ref false in
-  let read_dot_merlin = ref false in
+  let prefer_dot_merlin = ref false in
   let arg = Lsp.Cli.Arg.create () in
   let spec =
     [ "--version", Arg.Set version, "print version"
     ; ( "--fallback-read-dot-merlin"
-      , Arg.Set read_dot_merlin
-      , "read Merlin config from .merlin files. The `dot-merlin-reader` package must be \
-         installed" )
+      , Arg.Set prefer_dot_merlin
+      , "deprecated, same as --prefer-dot-merlin" )
+    ; ( "--prefer-dot-merlin"
+      , Arg.Set prefer_dot_merlin
+      , "always read Merlin config from existing .merlin files. \
+         The `dot-merlin-reader` package must be installed" )
     ]
     @ Cli.Arg.spec arg
   in
   let usage =
     "ocamllsp [ --stdio | --socket PORT | --port PORT | --pipe PIPE ] [ \
-     --clientProcessId pid ]"
+     --clientProcessId pid ] [ --prefer-dot-merlin ]"
   in
   Arg.parse spec (fun _ -> raise @@ Arg.Bad "anonymous arguments aren't allowed") usage;
   let channel =
@@ -37,7 +40,7 @@ let () =
     let module Exn_with_backtrace = Stdune.Exn_with_backtrace in
     match
       Exn_with_backtrace.try_with
-        (Ocaml_lsp_server.run channel ~read_dot_merlin:!read_dot_merlin)
+        (Ocaml_lsp_server.run channel ~prefer_dot_merlin:!prefer_dot_merlin)
     with
     | Ok () -> ()
     | Error exn ->
diff --git a/ocaml-lsp-server/src/merlin_config.ml b/ocaml-lsp-server/src/merlin_config.ml
index a9d152a03..4878b25f9 100644
--- a/ocaml-lsp-server/src/merlin_config.ml
+++ b/ocaml-lsp-server/src/merlin_config.ml
@@ -118,7 +118,7 @@ module Dot_protocol_io =
       let write t x = write t [ x ]
     end)
 
-let should_read_dot_merlin = ref false
+let prefer_dot_merlin = ref false
 
 type db =
   { running : (string, entry) Table.t
@@ -298,13 +298,13 @@ let config (t : t) : Mconfig.t Fiber.t =
     t.entry <- Some entry
   in
   let* () = Fiber.return () in
-  if !should_read_dot_merlin
+  if !prefer_dot_merlin
   then Fiber.return (Mconfig.get_external_config t.path t.initial)
   else (
     match find_project_context t.directory with
     | None ->
       let+ () = destroy t in
-      t.initial
+      Mconfig.get_external_config t.path t.initial
     | Some (ctx, config_path) ->
       let* entry = get_process t.db ~dir:ctx.process_dir in
       let* () =
diff --git a/ocaml-lsp-server/src/merlin_config.mli b/ocaml-lsp-server/src/merlin_config.mli
index bc057f038..b8431d471 100644
--- a/ocaml-lsp-server/src/merlin_config.mli
+++ b/ocaml-lsp-server/src/merlin_config.mli
@@ -4,7 +4,7 @@ open Import
 
 type t
 
-val should_read_dot_merlin : bool ref
+val prefer_dot_merlin : bool ref
 val config : t -> Mconfig.t Fiber.t
 val destroy : t -> unit Fiber.t
 
diff --git a/ocaml-lsp-server/src/ocaml_lsp_server.ml b/ocaml-lsp-server/src/ocaml_lsp_server.ml
index ec7f8e119..b09c9234d 100644
--- a/ocaml-lsp-server/src/ocaml_lsp_server.ml
+++ b/ocaml-lsp-server/src/ocaml_lsp_server.ml
@@ -988,10 +988,10 @@ let run_in_directory =
   fun () -> if Sys.win32 then for_windows else run_in_directory
 ;;
 
-let run channel ~read_dot_merlin () =
+let run channel ~prefer_dot_merlin () =
   Merlin_utils.Lib_config.set_program_name "ocamllsp";
   Merlin_utils.Lib_config.System.set_run_in_directory (run_in_directory ());
-  Merlin_config.should_read_dot_merlin := read_dot_merlin;
+  Merlin_config.prefer_dot_merlin := prefer_dot_merlin;
   Unix.putenv "__MERLIN_MASTER_PID" (string_of_int (Unix.getpid ()));
   Lev_fiber.run ~sigpipe:`Ignore (fun () ->
     let* input, output = stream_of_channel channel in
diff --git a/ocaml-lsp-server/src/ocaml_lsp_server.mli b/ocaml-lsp-server/src/ocaml_lsp_server.mli
index e74891253..76cc6c224 100644
--- a/ocaml-lsp-server/src/ocaml_lsp_server.mli
+++ b/ocaml-lsp-server/src/ocaml_lsp_server.mli
@@ -1,4 +1,4 @@
-val run : Lsp.Cli.Channel.t -> read_dot_merlin:bool -> unit -> unit
+val run : Lsp.Cli.Channel.t -> prefer_dot_merlin:bool -> unit -> unit
 
 module Diagnostics = Diagnostics
 module Version = Version