diff --git a/.github/workflows/ci.yml b/.github/workflows/ci.yml
index 04dbe1daf..e467f0841 100644
--- a/.github/workflows/ci.yml
+++ b/.github/workflows/ci.yml
@@ -30,7 +30,9 @@ jobs:
           python3 -m pytest -vv test_action.py
         env:
           CONNECTION_URI: ${{ steps.postgres.outputs.connection-uri }}
+          SERVICE_NAME: ${{ steps.postgres.outputs.service-name }}
           EXPECTED_CONNECTION_URI: postgresql://postgres:postgres@localhost:5432/postgres
+          EXPECTED_SERVICE_NAME: postgres
         shell: bash
 
   parametrized:
@@ -59,5 +61,7 @@ jobs:
           python3 -m pytest -vv test_action.py
         env:
           CONNECTION_URI: ${{ steps.postgres.outputs.connection-uri }}
+          SERVICE_NAME: ${{ steps.postgres.outputs.service-name }}
           EXPECTED_CONNECTION_URI: postgresql://yoda:GrandMaster@localhost:34837/jedi_order
+          EXPECTED_SERVICE_NAME: yoda
         shell: bash
diff --git a/README.md b/README.md
index 5d2c09794..ff390b266 100644
--- a/README.md
+++ b/README.md
@@ -24,6 +24,7 @@ key features:
 | Username | `postgres`                                          |
 | Password | `postgres`                                          |
 | Database | `postgres`                                          |
+| Service  | `postgres`                                          |
 
 #### User permissions
 
@@ -53,7 +54,57 @@ steps:
 
   - run: pytest -vv tests/
     env:
-      DATABASE_URI: ${{ steps.postgres.outputs.connection-uri }}
+      CONNECTION_STR: ${{ steps.postgres.outputs.connection-uri }}
+
+  - run: pytest -vv tests/
+    env:
+      CONNECTION_STR: service=${{ steps.postgres.outputs.service-name }}
+```
+
+## Recipes
+
+#### Create a new user w/ database via CLI
+
+```yaml
+steps:
+  - uses: ikalnytskyi/action-setup-postgres@v3
+
+  - run: |
+      createuser myuser
+      createdb --owner myuser mydatabase
+      psql -c "ALTER USER myuser WITH PASSWORD 'mypassword'"
+
+    env:
+      # This activates connection parameters for the superuser created by
+      # the action in the step above. It's mandatory to set this before using
+      # createuser/psql/etc tools.
+      #
+      # The service name is the same as the username (i.e. 'postgres') but
+      # it's recommended to use action's output to get the name in order to
+      # be forward compatible.
+      PGSERVICE: ${{ steps.postgres.outputs.service-name }}
+    shell: bash
+```
+
+#### Create a new user w/ database via psycopg
+
+```yaml
+steps:
+  - uses: ikalnytskyi/action-setup-postgres@v3
+```
+
+```python
+import psycopg
+
+# 'postgres' is the username here, but it's recommended to use the
+# action's 'service-name' output parameter here.
+connection = psycopg.connect("service=postgres")
+
+# CREATE/DROP USER statements don't work within transactions, and with
+# autocommit disabled transactions are created by psycopg automatically.
+connection.autocommit = True
+connection.execute(f"CREATE USER myuser WITH PASSWORD 'mypassword'")
+connection.execute(f"CREATE DATABASE mydatabase WITH OWNER 'myuser'")
 ```
 
 ## Rationale
diff --git a/action.yml b/action.yml
index 5d8d471c4..cf33b14cf 100644
--- a/action.yml
+++ b/action.yml
@@ -24,7 +24,10 @@ inputs:
 outputs:
   connection-uri:
     description: The connection URI to connect to PostgreSQL.
-    value: ${{ steps.connection-uri.outputs.value }}
+    value: ${{ steps.set-outputs.outputs.connection-uri }}
+  service-name:
+    description: The service name with connection parameters.
+    value: ${{ steps.set-outputs.outputs.service-name }}
 runs:
   using: composite
   steps:
@@ -71,21 +74,27 @@ runs:
         echo "port = ${{ inputs.port }}" >> "$PGDATA/postgresql.conf"
         pg_ctl start
 
-        # Set environment variables for PostgreSQL client applications [1] such
-        # as 'psql' or 'createuser'.
+        # Save required connection parameters for created superuser to the
+        # connection service file [1]. This allows using these connection
+        # parameters by setting 'PGSERVICE' environment variable or by
+        # requesting them via connection string.
         #
-        # PGHOST is required for Linux/macOS because we turned off unix sockets
-        # and they use them by default.
+        # HOST is required for Linux/macOS because these OS-es default to unix
+        # sockets but we turned them off.
         #
-        # PGPORT, PGUSER, PGPASSWORD and PGDATABASE are required because they
-        # could be parametrized via action input parameters.
+        # PORT, USER, PASSWORD and DBNAME are required because they could be
+        # parametrized via action input parameters.
         #
-        # [1] https://www.postgresql.org/docs/15/reference-client.html
-        echo "PGHOST=localhost" >> $GITHUB_ENV
-        echo "PGPORT=${{ inputs.port }}" >> $GITHUB_ENV
-        echo "PGUSER=${{ inputs.username }}" >> $GITHUB_ENV
-        echo "PGPASSWORD=${{ inputs.password }}" >> $GITHUB_ENV
-        echo "PGDATABASE=${{ inputs.database }}" >> $GITHUB_ENV
+        # [1] https://www.postgresql.org/docs/15/libpq-pgservice.html
+        cat <<EOF > "$PGDATA/pg_service.conf"
+        [${{ inputs.username }}]
+        host=localhost
+        port=${{ inputs.port }}
+        user=${{ inputs.username }}
+        password=${{ inputs.password }}
+        dbname=${{ inputs.database }}
+        EOF
+        echo "PGSERVICEFILE=$PGDATA/pg_service.conf" >> $GITHUB_ENV
       shell: bash
 
     - name: Setup PostgreSQL database
@@ -97,11 +106,15 @@ runs:
         if [ "${{ inputs.database }}" != "postgres" ]; then
           createdb -O "${{ inputs.username }}" "${{ inputs.database }}"
         fi
+      env:
+        PGSERVICE: ${{ inputs.username }}
       shell: bash
 
-    - name: Expose connection URI
+    - name: Set action outputs
       run: |
-        CONNECTION_URI="postgresql://${{ inputs.username }}:${{ inputs.password }}@localhost:${{inputs.port}}/${{ inputs.database }}"
-        echo "value=$CONNECTION_URI" >> $GITHUB_OUTPUT
+        CONNECTION_URI="postgresql://${{ inputs.username }}:${{ inputs.password }}@localhost:${{ inputs.port }}/${{ inputs.database }}"
+
+        echo "connection-uri=$CONNECTION_URI" >> $GITHUB_OUTPUT
+        echo "service-name=${{ inputs.username }}" >> $GITHUB_OUTPUT
       shell: bash
-      id: connection-uri
+      id: set-outputs
diff --git a/test_action.py b/test_action.py
index 50b80c8c5..ebf955135 100644
--- a/test_action.py
+++ b/test_action.py
@@ -21,6 +21,16 @@ def connection_uri() -> str:
     return connection_uri
 
 
+@pytest.fixture(scope="function")
+def service_name() -> str:
+    """Read and return connection URI from environment."""
+
+    service_name = os.getenv("SERVICE_NAME")
+    if service_name is None:
+        pytest.fail("SERVICE_NAME: environment variable is not set")
+    return service_name
+
+
 @pytest.fixture(scope="function")
 def connection_factory() -> ConnectionFactory:
     """Return 'psycopg.Connection' factory."""
@@ -30,19 +40,32 @@ def factory(connection_uri: str) -> psycopg.Connection:
     return factory
 
 
-@pytest.fixture(scope="function")
-def connection(connection_uri: str, connection_factory: ConnectionFactory) -> psycopg.Connection:
+@pytest.fixture(scope="function", params=["uri", "kv-string"])
+def connection(
+    request: pytest.FixtureRequest,
+    connection_factory: ConnectionFactory,
+    connection_uri: str,
+    service_name: str,
+) -> psycopg.Connection:
     """Return 'psycopg.Connection' for connection URI set in environment."""
 
-    return connection_factory(connection_uri)
+    if request.param == "uri":
+        return connection_factory(connection_uri)
+    elif request.param == "kv-string":
+        return connection_factory(f"service={service_name}")
+    raise RuntimeError("f{request.param}: unknown value")
 
 
-def test_connection_uri():
+def test_connection_uri(connection_uri):
     """Test that CONNECTION_URI matches EXPECTED_CONNECTION_URI."""
 
-    connection_uri = os.getenv("CONNECTION_URI")
-    expected_connection_uri = os.getenv("EXPECTED_CONNECTION_URI")
-    assert connection_uri == expected_connection_uri
+    assert connection_uri == os.getenv("EXPECTED_CONNECTION_URI")
+
+
+def test_service_name(service_name):
+    """Test that SERVICE_NAME matches EXPECTED_SERVICE_NAME."""
+
+    assert service_name == os.getenv("EXPECTED_SERVICE_NAME")
 
 
 def test_server_encoding(connection: psycopg.Connection):
@@ -146,9 +169,18 @@ def test_user_create_drop_user(
         connection.execute(f"DROP USER {username}")
 
 
-def test_client_applications(connection_factory: ConnectionFactory, connection_uri: str):
+def test_client_applications(
+    connection_factory: ConnectionFactory,
+    service_name: str,
+    connection_uri: str,
+    monkeypatch: pytest.MonkeyPatch,
+):
     """Test that PostgreSQL client applications can be used."""
 
+    # Request connection parameters from the connection service file prepared
+    # by our action.
+    monkeypatch.setenv("PGSERVICE", service_name)
+
     username = "us3rname"
     password = "passw0rd"
     database = "databas3"