diff --git a/CHANGELOG.md b/CHANGELOG.md
index 55bff43c1a3..c7ab2b91519 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -25,6 +25,7 @@
   
 ### Other changes
 
+- cli: fix init command to generate correct config.yaml (close #4036)
 - cli: fix command path not being set in telemetry data (close #4127)
 - fix deploy script to upload github release assets
 - cli: fix parse error returned on console api (close #4126)
diff --git a/cli/cli.go b/cli/cli.go
index acc34586b60..4a0344e9de3 100644
--- a/cli/cli.go
+++ b/cli/cli.go
@@ -8,10 +8,12 @@
 package cli
 
 import (
+	"fmt"
 	"io/ioutil"
 	"net/url"
 	"os"
 	"path/filepath"
+	"strconv"
 	"strings"
 	"time"
 
@@ -59,6 +61,42 @@ const (
 	V2
 )
 
+// ErrInvalidConfigVersion - if the config version is not valid
+var ErrInvalidConfigVersion error = fmt.Errorf("invalid config version")
+
+// NewConfigVersionValue returns ConfigVersion set with default value
+func NewConfigVersionValue(val ConfigVersion, p *ConfigVersion) *ConfigVersion {
+	*p = val
+	return p
+}
+
+// Set sets the value of the named command-line flag.
+func (c *ConfigVersion) Set(s string) error {
+	v, err := strconv.ParseInt(s, 0, 64)
+	*c = ConfigVersion(v)
+	if err != nil {
+		return err
+	}
+	if !c.IsValid() {
+		return ErrInvalidConfigVersion
+	}
+	return nil
+}
+
+// Type returns a string that uniquely represents this flag's type.
+func (c *ConfigVersion) Type() string {
+	return "int"
+}
+
+func (c *ConfigVersion) String() string {
+	return strconv.Itoa(int(*c))
+}
+
+// IsValid returns if its a valid config version
+func (c ConfigVersion) IsValid() bool {
+	return c != 0 && c <= V2
+}
+
 // ServerConfig has the config values required to contact the server
 type ServerConfig struct {
 	// Endpoint for the GraphQL Engine
@@ -84,17 +122,17 @@ func (s *ServerConfig) ParseEndpoint() error {
 // Config represents configuration required for the CLI to function
 type Config struct {
 	// Version of the config.
-	Version ConfigVersion `yaml:"version"`
+	Version ConfigVersion `yaml:"version,omitempty"`
 
 	// ServerConfig to be used by CLI to contact server.
 	ServerConfig `yaml:",inline"`
 
 	// MetadataDirectory defines the directory where the metadata files were stored.
-	MetadataDirectory string `yaml:"metadata_directory"`
+	MetadataDirectory string `yaml:"metadata_directory,omitempty"`
 	// MigrationsDirectory defines the directory where the migration files were stored.
 	MigrationsDirectory string `yaml:"migrations_directory,omitempty"`
 	// ActionConfig defines the config required to create or generate codegen for an action.
-	ActionConfig types.ActionExecutionConfig `yaml:"actions"`
+	ActionConfig *types.ActionExecutionConfig `yaml:"actions,omitempty"`
 }
 
 // ExecutionContext contains various contextual information required by the cli
@@ -427,7 +465,7 @@ func (ec *ExecutionContext) readConfig() error {
 		},
 		MetadataDirectory:   v.GetString("metadata_directory"),
 		MigrationsDirectory: v.GetString("migrations_directory"),
-		ActionConfig: types.ActionExecutionConfig{
+		ActionConfig: &types.ActionExecutionConfig{
 			Kind:                  v.GetString("actions.kind"),
 			HandlerWebhookBaseURL: v.GetString("actions.handler_webhook_baseurl"),
 			Codegen: &types.CodegenExecutionConfig{
@@ -437,6 +475,9 @@ func (ec *ExecutionContext) readConfig() error {
 			},
 		},
 	}
+	if !ec.Config.Version.IsValid() {
+		return ErrInvalidConfigVersion
+	}
 	return ec.Config.ServerConfig.ParseEndpoint()
 }
 
diff --git a/cli/commands/init.go b/cli/commands/init.go
index 91474fd42b8..e155af340c4 100644
--- a/cli/commands/init.go
+++ b/cli/commands/init.go
@@ -65,7 +65,7 @@ func NewInitCmd(ec *cli.ExecutionContext) *cobra.Command {
 	}
 
 	f := initCmd.Flags()
-	f.StringVar(&opts.Version, "version", "2", "config version to be used")
+	f.Var(cli.NewConfigVersionValue(cli.V2, &opts.Version), "version", "config version to be used")
 	f.StringVar(&opts.InitDir, "directory", "", "name of directory where files will be created")
 	f.StringVar(&opts.MetadataDir, "metadata-directory", "metadata", "name of directory where metadata files will be created")
 	f.StringVar(&opts.Endpoint, "endpoint", "", "http(s) endpoint for Hasura GraphQL Engine")
@@ -83,7 +83,7 @@ func NewInitCmd(ec *cli.ExecutionContext) *cobra.Command {
 type InitOptions struct {
 	EC *cli.ExecutionContext
 
-	Version     string
+	Version     cli.ConfigVersion
 	Endpoint    string
 	AdminSecret string
 	InitDir     string
@@ -163,7 +163,7 @@ func (o *InitOptions) createFiles() error {
 	}
 	// set config object
 	var config *cli.Config
-	if o.Version == "1" {
+	if o.Version == cli.V1 {
 		config = &cli.Config{
 			ServerConfig: cli.ServerConfig{
 				Endpoint: "http://localhost:8080",
@@ -171,12 +171,12 @@ func (o *InitOptions) createFiles() error {
 		}
 	} else {
 		config = &cli.Config{
-			Version: cli.V2,
+			Version: o.Version,
 			ServerConfig: cli.ServerConfig{
 				Endpoint: "http://localhost:8080",
 			},
 			MetadataDirectory: o.MetadataDir,
-			ActionConfig: types.ActionExecutionConfig{
+			ActionConfig: &types.ActionExecutionConfig{
 				Kind:                  o.ActionKind,
 				HandlerWebhookBaseURL: o.ActionHandler,
 			},
diff --git a/cli/integration_test/v1/init.go b/cli/integration_test/v1/init.go
index bdc3fa80127..1401bf544d2 100644
--- a/cli/integration_test/v1/init.go
+++ b/cli/integration_test/v1/init.go
@@ -24,7 +24,7 @@ func TestInitCmd(t *testing.T, ec *cli.ExecutionContext, initDir string) {
 	}{
 		{"only-init-dir", &commands.InitOptions{
 			EC:          ec,
-			Version:     "1",
+			Version:     cli.V1,
 			Endpoint:    os.Getenv("HASURA_GRAPHQL_TEST_ENDPOINT"),
 			AdminSecret: os.Getenv("HASURA_GRAPHQL_TEST_ADMIN_SECRET"),
 			InitDir:     filepath.Join(os.TempDir(), "hasura-cli-test-"+strconv.Itoa(rand.Intn(1000))),
diff --git a/cli/integration_test/v2/init.go b/cli/integration_test/v2/init.go
index c50c80d1b04..55aa7665681 100644
--- a/cli/integration_test/v2/init.go
+++ b/cli/integration_test/v2/init.go
@@ -24,7 +24,7 @@ func TestInitCmd(t *testing.T, ec *cli.ExecutionContext, initDir string) {
 	}{
 		{"only-init-dir", &commands.InitOptions{
 			EC:          ec,
-			Version:     "2",
+			Version:     cli.V2,
 			Endpoint:    os.Getenv("HASURA_GRAPHQL_TEST_ENDPOINT"),
 			AdminSecret: os.Getenv("HASURA_GRAPHQL_TEST_ADMIN_SECRET"),
 			InitDir:     filepath.Join(os.TempDir(), "hasura-cli-test-"+strconv.Itoa(rand.Intn(1000))),
diff --git a/cli/metadata/actions/actions.go b/cli/metadata/actions/actions.go
index 6cff86b34f2..1aa9ea5a56c 100644
--- a/cli/metadata/actions/actions.go
+++ b/cli/metadata/actions/actions.go
@@ -29,7 +29,7 @@ const (
 
 type ActionConfig struct {
 	MetadataDir        string
-	ActionConfig       types.ActionExecutionConfig
+	ActionConfig       *types.ActionExecutionConfig
 	serverFeatureFlags *version.ServerFeatureFlags
 	pluginsCfg         *plugins.Config
 	cliExtensionConfig *cliextension.Config