diff --git a/.github/workflows/ci.yml b/.github/workflows/ci.yml
index 08871404..850af7aa 100644
--- a/.github/workflows/ci.yml
+++ b/.github/workflows/ci.yml
@@ -195,6 +195,36 @@ jobs:
       if: ${{ matrix.task.run-if }}
 
 
+  pre-commit:
+    name: Check pre-commit integration
+    runs-on: ubuntu-latest
+
+    steps:
+    - uses: actions/checkout@v4
+      with:
+        fetch-depth: 0
+
+    - name: Set up python
+      uses: actions/setup-python@v5
+      with:
+        python-version: 3.12
+
+    - name: Install dependencies
+      run: python -m pip install pre-commit
+
+    - name: Install pre-commit
+      run: |
+        pre-commit install
+
+    - name: Update pre-commit
+      run: |
+        pre-commit autoupdate
+
+    - name: Run pre-commit
+      run: |
+        pre-commit run -a
+
+
   pypi-publish:
     name: Check tag and publish
     # Only trigger this for tag changes.
@@ -292,6 +322,7 @@ jobs:
       - test-windows
       - coverage
       - check
+      - pre-commit
     steps:
       - name: Require all successes
         uses: re-actors/alls-green@3a2de129f0713010a71314c74e33c0e3ef90e696
diff --git a/.pre-commit-config.yaml b/.pre-commit-config.yaml
index 5e6a6b43..a96ca41a 100644
--- a/.pre-commit-config.yaml
+++ b/.pre-commit-config.yaml
@@ -33,3 +33,8 @@ repos:
       - id: debug-statements
       - id: check-toml
       - id: check-yaml
+
+  - repo: https://github.com/twisted/towncrier
+    rev: 23.11.0
+    hooks:
+      - id: towncrier-check
diff --git a/RELEASE.rst b/RELEASE.rst
index eaeca382..8b457aa7 100644
--- a/RELEASE.rst
+++ b/RELEASE.rst
@@ -102,7 +102,14 @@ In ``src/towncrier/_version.py`` the version is set using ``incremental`` such a
 
 Commit and push the changes.
 
-Merge the commit in the main branch.
+Merge the commit in the main branch, **without using squash**.
+
+We tag the release based on a commit from the release branch.
+If we merge with squash,
+the release tag commit will no longer be found in the main branch history.
+With a squash merge, the whole branch history is lost.
+This causes the `pre-commit autoupdate` to fail.
+See `PR590 <https://github.com/twisted/towncrier/pull/590>`_ for more details.
 
 You can announce the release over IRC or Gitter.
 
diff --git a/docs/configuration.rst b/docs/configuration.rst
index f0eaeda4..e7c8a99d 100644
--- a/docs/configuration.rst
+++ b/docs/configuration.rst
@@ -43,7 +43,7 @@ Top level keys
 ``version``
     The version of your project.
 
-    Python projects that provide the ``package`` key can have the version to be automatically determined from a ``__version__`` variable in the package's module.
+    Python projects that provide the ``package`` key, if left empty then the version will be automatically determined from the installed package's version metadata or a ``__version__`` variable in the package's module.
 
     If not provided or able to be determined, the version must be passed explicitly by the command line argument ``--version``.
 
diff --git a/docs/pre-commit.rst b/docs/pre-commit.rst
index 452bd155..ebf04b54 100644
--- a/docs/pre-commit.rst
+++ b/docs/pre-commit.rst
@@ -16,7 +16,7 @@ Usage with the default configuration
 
     repos:
       - repo: https://github.com/twisted/towncrier
-        rev: 22.13.0  # run 'pre-commit autoupdate' to update
+        rev: 23.11.0  # run 'pre-commit autoupdate' to update
         hooks:
           - id: towncrier-check
 
@@ -30,7 +30,7 @@ News fragments are stored in ``changelog.d/`` in the root of the repository and
 
     repos:
       - repo: https://github.com/twisted/towncrier
-        rev: 22.13.0  # run 'pre-commit autoupdate' to update
+        rev: 23.11.0  # run 'pre-commit autoupdate' to update
         hooks:
           - id: towncrier-update
             files: $changelog\.d/
diff --git a/docs/tutorial.rst b/docs/tutorial.rst
index 7138cd9e..258a1323 100644
--- a/docs/tutorial.rst
+++ b/docs/tutorial.rst
@@ -48,19 +48,27 @@ Create this folder::
 The ``.gitignore`` will remain and keep Git from not tracking the directory.
 
 
-Detecting Dates & Versions
---------------------------
+Detecting Version
+-----------------
 
-``towncrier`` needs to know what version your project is, and there are two ways you can give it:
+``towncrier`` needs to know what version your project is when generating news files.
+These are the ways you can provide it, in order of precedence (with the first taking precedence over the second, and so on):
 
-- For Python 2/3-compatible projects, a ``__version__`` in the top level package.
-  This can be either a string literal, a tuple, or an `Incremental <https://github.com/twisted/incremental>`_ version.
-- Manually passing ``--version=<myversionhere>`` when interacting with ``towncrier``.
+1. Manually pass ``--version=<myversionhere>`` when interacting with ``towncrier``.
+2. Set a value for the ``version`` option in your configuration file.
+3. For Python projects with a ``package`` key in the configuration file:
 
-As an example, if your package doesn't have a ``__version__``, you can manually specify it when calling ``towncrier`` on the command line with the ``--version`` flag::
+   - install the package to use its metadata version information
+   - add a ``__version__`` in the top level package that is either a string literal, a tuple, or an `Incremental <https://github.com/twisted/incremental>`_ version
+
+As an example, you can manually specify the version when calling ``towncrier`` on the command line with the ``--version`` flag::
 
    $ towncrier build --version=1.2.3post4
 
+
+Setting Date
+------------
+
 ``towncrier`` will also include the current date (in ``YYYY-MM-DD`` format) when generating news files.
 You can change this with the ``--date`` flag::
 
diff --git a/pyproject.toml b/pyproject.toml
index 245e7dd4..d6f8fa6d 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -31,6 +31,7 @@ requires-python = ">=3.8"
 dependencies = [
     "click",
     "importlib-resources>=5; python_version<'3.10'",
+    "importlib-metadata>=4.6; python_version<'3.10'",
     "incremental",
     "jinja2",
     "tomli; python_version<'3.11'",
diff --git a/src/towncrier/_project.py b/src/towncrier/_project.py
index cfaa11fa..53e72e95 100644
--- a/src/towncrier/_project.py
+++ b/src/towncrier/_project.py
@@ -5,17 +5,24 @@
 Responsible for getting the version and name from a project.
 """
 
-
 from __future__ import annotations
 
 import sys
 
 from importlib import import_module
+from importlib.metadata import version as metadata_version
 from types import ModuleType
+from typing import Any
 
 from incremental import Version as IncrementalVersion
 
 
+if sys.version_info >= (3, 10):
+    from importlib.metadata import packages_distributions
+else:
+    from importlib_metadata import packages_distributions  # type: ignore
+
+
 def _get_package(package_dir: str, package: str) -> ModuleType:
     try:
         module = import_module(package)
@@ -37,13 +44,40 @@ def _get_package(package_dir: str, package: str) -> ModuleType:
     return module
 
 
+def _get_metadata_version(package: str) -> str | None:
+    """
+    Try to get the version from the package metadata.
+    """
+    distributions = packages_distributions()
+    distribution_names = distributions.get(package)
+    if not distribution_names or len(distribution_names) != 1:
+        # We can only determine the version if there is exactly one matching distribution.
+        return None
+    return metadata_version(distribution_names[0])
+
+
 def get_version(package_dir: str, package: str) -> str:
+    """
+    Get the version of a package.
+
+    Try to extract the version from the distribution version metadata that matches
+    `package`, then fall back to looking for the package in `package_dir`.
+    """
+    version: Any
+
+    # First try to get the version from the package metadata.
+    if version := _get_metadata_version(package):
+        return version
+
+    # When no version if found, fall back to looking for the package in `package_dir`.
     module = _get_package(package_dir, package)
 
     version = getattr(module, "__version__", None)
 
     if not version:
-        raise Exception("No __version__, I don't know how else to look")
+        raise Exception(
+            f"No __version__ or metadata version info for the '{package}' package."
+        )
 
     if isinstance(version, str):
         return version.strip()
diff --git a/src/towncrier/_settings/load.py b/src/towncrier/_settings/load.py
index 66a6c546..724a7768 100644
--- a/src/towncrier/_settings/load.py
+++ b/src/towncrier/_settings/load.py
@@ -65,26 +65,53 @@ def __init__(self, *args: str, **kwargs: str):
 def load_config_from_options(
     directory: str | None, config_path: str | None
 ) -> tuple[str, Config]:
+    """
+    Load the configuration from a given directory or specific configuration file.
+
+    Unless an explicit configuration file is given, traverse back from the given
+    directory looking for a configuration file.
+
+    Returns a tuple of the base directory and the parsed Config instance.
+    """
     if config_path is None:
-        if directory is None:
-            directory = os.getcwd()
+        return traverse_for_config(directory)
+
+    config_path = os.path.abspath(config_path)
 
+    # When a directory is provided (in addition to the config file), use it as the base
+    # directory. Otherwise use the directory containing the config file.
+    if directory is not None:
         base_directory = os.path.abspath(directory)
-        config = load_config(base_directory)
     else:
-        config_path = os.path.abspath(config_path)
-        if directory is None:
-            base_directory = os.path.dirname(config_path)
-        else:
-            base_directory = os.path.abspath(directory)
-        config = load_config_from_file(os.path.dirname(config_path), config_path)
+        base_directory = os.path.dirname(config_path)
 
-    if config is None:
-        raise ConfigError(f"No configuration file found.\nLooked in: {base_directory}")
+    if not os.path.isfile(config_path):
+        raise ConfigError(f"Configuration file '{config_path}' not found.")
+    config = load_config_from_file(base_directory, config_path)
 
     return base_directory, config
 
 
+def traverse_for_config(path: str | None) -> tuple[str, Config]:
+    """
+    Search for a configuration file in the current directory and all parent directories.
+
+    Returns the directory containing the configuration file and the parsed configuration.
+    """
+    start_directory = directory = os.path.abspath(path or os.getcwd())
+    while True:
+        config = load_config(directory)
+        if config is not None:
+            return directory, config
+
+        parent = os.path.dirname(directory)
+        if parent == directory:
+            raise ConfigError(
+                f"No configuration file found.\nLooked back from: {start_directory}"
+            )
+        directory = parent
+
+
 def load_config(directory: str) -> Config | None:
     towncrier_toml = os.path.join(directory, "towncrier.toml")
     pyproject_toml = os.path.join(directory, "pyproject.toml")
diff --git a/src/towncrier/newsfragments/432.doc.rst b/src/towncrier/newsfragments/432.doc.rst
new file mode 100644
index 00000000..92e5247f
--- /dev/null
+++ b/src/towncrier/newsfragments/432.doc.rst
@@ -0,0 +1 @@
+Clarify version discovery behavior.
diff --git a/src/towncrier/newsfragments/432.feature.rst b/src/towncrier/newsfragments/432.feature.rst
new file mode 100644
index 00000000..94f19ea4
--- /dev/null
+++ b/src/towncrier/newsfragments/432.feature.rst
@@ -0,0 +1 @@
+Inferring the version of a Python package now tries to use the metadata of the installed package before importing the package explicitly (which only looks for ``[package].__version__``).
diff --git a/src/towncrier/newsfragments/571.misc b/src/towncrier/newsfragments/571.misc
new file mode 100644
index 00000000..e69de29b
diff --git a/src/towncrier/newsfragments/601.feature.rst b/src/towncrier/newsfragments/601.feature.rst
new file mode 100644
index 00000000..ca209ca5
--- /dev/null
+++ b/src/towncrier/newsfragments/601.feature.rst
@@ -0,0 +1 @@
+Running ``towncrier`` will now traverse back up directories looking for the configuration file.
diff --git a/src/towncrier/newsfragments/602.doc.rst b/src/towncrier/newsfragments/602.doc.rst
new file mode 100644
index 00000000..92e5247f
--- /dev/null
+++ b/src/towncrier/newsfragments/602.doc.rst
@@ -0,0 +1 @@
+Clarify version discovery behavior.
diff --git a/src/towncrier/test/test_build.py b/src/towncrier/test/test_build.py
index 241425e9..17ffad49 100644
--- a/src/towncrier/test/test_build.py
+++ b/src/towncrier/test/test_build.py
@@ -121,11 +121,21 @@ def test_in_different_dir_dir_option(self, runner):
         self.assertEqual(0, result.exit_code)
         self.assertTrue((project_dir / "NEWS.rst").exists())
 
+    @with_project()
+    def test_traverse_up_to_find_config(self, runner):
+        """
+        When the current directory doesn't contain the configuration file, Towncrier
+        will traverse up the directory tree until it finds it.
+        """
+        os.chdir("foo")
+        result = runner.invoke(_main, ["--draft", "--date", "01-01-2001"])
+        self.assertEqual(0, result.exit_code, result.output)
+
     @with_project()
     def test_in_different_dir_config_option(self, runner):
         """
         The current working directory and the location of the configuration
-        don't matter as long as we pass corrct paths to the directory and the
+        don't matter as long as we pass correct paths to the directory and the
         config file.
         """
         project_dir = Path(".").resolve()
diff --git a/src/towncrier/test/test_project.py b/src/towncrier/test/test_project.py
index 45875683..62ec3d77 100644
--- a/src/towncrier/test/test_project.py
+++ b/src/towncrier/test/test_project.py
@@ -4,7 +4,8 @@
 import os
 import sys
 
-from unittest import skipIf
+from importlib.metadata import version as metadata_version
+from unittest import mock
 
 from click.testing import CliRunner
 from twisted.trial.unittest import TestCase
@@ -14,12 +15,6 @@
 from .helpers import write
 
 
-try:
-    from importlib.metadata import version as metadata_version
-except ImportError:
-    metadata_version = None
-
-
 towncrier_cli.name = "towncrier"
 
 
@@ -50,7 +45,6 @@ def test_tuple(self):
         version = get_version(temp, "mytestproja")
         self.assertEqual(version, "1.3.12")
 
-    @skipIf(metadata_version is None, "Needs importlib.metadata.")
     def test_incremental(self):
         """
         An incremental Version __version__  is picked up.
@@ -60,6 +54,14 @@ def test_incremental(self):
         with self.assertWarnsRegex(
             DeprecationWarning, "Accessing towncrier.__version__ is deprecated.*"
         ):
+            # Previously this triggered towncrier.__version__ but now the first version
+            # check is from the package metadata. Let's mock out that part to ensure we
+            # can get incremental versions from __version__ still.
+            with mock.patch(
+                "towncrier._project._get_metadata_version", return_value=None
+            ):
+                version = get_version(pkg, "towncrier")
+
             version = get_version(pkg, "towncrier")
 
         with self.assertWarnsRegex(
@@ -70,6 +72,13 @@ def test_incremental(self):
         self.assertEqual(metadata_version("towncrier"), version)
         self.assertEqual("towncrier", name)
 
+    def test_version_from_metadata(self):
+        """
+        A version from package metadata is picked up.
+        """
+        version = get_version(".", "towncrier")
+        self.assertEqual(metadata_version("towncrier"), version)
+
     def _setup_missing(self):
         """
         Create a minimalistic project with missing metadata in a temporary
@@ -91,10 +100,12 @@ def test_missing_version(self):
         tmp_dir = self._setup_missing()
 
         with self.assertRaises(Exception) as e:
+            # The 'missing' package has no __version__ string.
             get_version(tmp_dir, "missing")
 
         self.assertEqual(
-            ("No __version__, I don't know how else to look",), e.exception.args
+            ("No __version__ or metadata version info for the 'missing' package.",),
+            e.exception.args,
         )
 
     def test_missing_version_project_name(self):
diff --git a/src/towncrier/test/test_settings.py b/src/towncrier/test/test_settings.py
index 6d1f6041..b08384a5 100644
--- a/src/towncrier/test/test_settings.py
+++ b/src/towncrier/test/test_settings.py
@@ -207,10 +207,25 @@ def test_load_no_config(self, runner: CliRunner):
 
         self.assertEqual(
             result.output,
-            f"No configuration file found.\nLooked in: {os.path.abspath(temp)}\n",
+            f"No configuration file found.\nLooked back from: {os.path.abspath(temp)}\n",
         )
         self.assertEqual(result.exit_code, 1)
 
+    @with_isolated_runner
+    def test_load_explicit_missing_config(self, runner: CliRunner):
+        """
+        Calling the CLI with an incorrect explicit configuration file will exit with
+        code 1 and an informative message is sent to standard output.
+        """
+        config = "not-there.toml"
+        result = runner.invoke(cli, ("--config", config))
+
+        self.assertEqual(result.exit_code, 1)
+        self.assertEqual(
+            result.output,
+            f"Configuration file '{os.path.abspath(config)}' not found.\n",
+        )
+
     def test_missing_template(self):
         """
         Towncrier will raise an exception saying when it can't find a template.