diff --git a/README.md b/README.md
index 6b40a1f..b04d98a 100644
--- a/README.md
+++ b/README.md
@@ -99,7 +99,7 @@ If a parameter is passed, available options:
 - `x.y.z` [Semver 2.0.0](https://semver.org/) string specifying the exact version to install
 - `latest` is a syntax to install latest version
 - `latest:<regex>` is a syntax to install latest version matching regex (used by grep -e)
-- `latest-allowed` is a syntax to scan your Terraform files to detect which version is maximally allowed.
+- `latest-allowed` is a syntax to scan your Terraform files to detect which version is maximally allowed. Only considers stable versions, not pre-releases.
 - `min-required` is a syntax to scan your Terraform files to detect which version is minimally required.
 
 See [required_version](https://developer.hashicorp.com/terraform/language/settings) docs. Also [see min-required & latest-allowed](#min-required) section below.
diff --git a/lib/helpers.sh b/lib/helpers.sh
index 0f0de24..98486c5 100755
--- a/lib/helpers.sh
+++ b/lib/helpers.sh
@@ -156,6 +156,7 @@ function check_dependencies() {
     alias grep=ggrep;
   fi;
 };
+
 export -f check_dependencies;
 
 source "$TFENV_ROOT/lib/tfenv-exec.sh";
diff --git a/libexec/tfenv-resolve-version b/libexec/tfenv-resolve-version
index 46d0704..c0a6023 100755
--- a/libexec/tfenv-resolve-version
+++ b/libexec/tfenv-resolve-version
@@ -138,11 +138,37 @@ if [[ "${version_requested}" =~ ^latest-allowed$ ]]; then
       version_requested=latest;
       ;;
     '<='*)
-      version_requested="${version_num}";
+      IFS='.-' read -r major minor patch pre_release <<< "${version_num}"
+      if [[ -n "${pre_release}" ]]; then
+        constraint_regex="^"
+        if [[ "$major" != 0 ]]; then
+          constraint_regex="^$(seq 0 $((major - 1)) | sed "s/[0-9]*/&\\\.[0-9]\\\+\\\.[0-9]\\\+\\\|/g" | tr -d '\n')"
+        fi
+
+        if [[ "$minor" != 0 ]]; then
+          constraint_regex+="$(seq 0 $((minor - 1)) | sed "s/[0-9]*/${major}\\\.&\\\.[0-9]\\\+\\\|/g" | tr -d '\n')"
+        fi
+
+        constraint_regex="${constraint_regex%\\|}" # Remove trailing '|'
+        constraint_regex+="$"
+        version_requested="latest:${constraint_regex}"
+      else
+        version_requested="${version_num}";
+      fi
       ;;
     '~>'*)
       version_without_rightmost="${version_num%.*}";
-      version_requested="latest:^${version_without_rightmost}\.";
+      if [[ "${version_without_rightmost}" == "${version_num}" ]]; then
+        version_requested=latest
+      else
+        IFS='.' read -ra version_without_rightmost_parts <<< "${version_without_rightmost}"
+        version_without_rightmost_count=${#version_without_rightmost_parts[@]}
+        version_requested="latest:^${version_without_rightmost}"
+        for (( i = version_without_rightmost_count; i < 3; i++ )); do
+            version_requested+="\.[0-9]\+"
+        done
+        version_requested+="$"
+      fi
       ;;
     *)
       log 'error' "Unsupported version spec: '${version_spec}', only >, >=, <=, and ~> are supported.";
diff --git a/test/test_use_latestallowed.sh b/test/test_use_latestallowed.sh
index bc4a07d..3b938e8 100755
--- a/test/test_use_latestallowed.sh
+++ b/test/test_use_latestallowed.sh
@@ -27,7 +27,7 @@ echo "terraform {
 cleanup || log 'error' 'Cleanup failed?!';
 
 
-log 'info' '### Install latest-allowed tagged version (#.#.#-tag#)'
+log 'info' '### Install latest-allowed tagged version (#.#.#-tag#) - should skip to stable'
 
 echo "terraform {
     required_version = \"<=0.13.0-rc1\"
@@ -36,8 +36,23 @@ echo "terraform {
 (
   tfenv install latest-allowed;
   tfenv use latest-allowed;
-  check_active_version 0.13.0-rc1;
-) || error_and_proceed 'Latest allowed tagged-version does not match. Requested: "<=0.13.0-rc1", Expected: 0.13.0-rc1';
+  check_active_version 0.12.31;
+) || error_and_proceed 'Latest allowed should skip pre-release. Requested: "<=0.13.0-rc1", Expected: 0.12.31 (stable)';
+
+cleanup || log 'error' 'Cleanup failed?!';
+
+
+log 'info' '### Install latest-allowed with alpha constraint - should skip to stable'
+
+echo "terraform {
+    required_version = \"<=1.1.0-alpha20211006\"
+}" > latest_allowed.tf;
+
+(
+  tfenv install latest-allowed;
+  tfenv use latest-allowed;
+  check_active_version 1.0.11;
+) || error_and_proceed 'Latest allowed should skip alpha versions. Requested: "<=1.1.0-alpha20211006", Expected: 1.0.11 (stable)';
 
 cleanup || log 'error' 'Cleanup failed?!';