diff --git a/src/taskgraph/docker.py b/src/taskgraph/docker.py
index 649bc20c3..9f849525f 100644
--- a/src/taskgraph/docker.py
+++ b/src/taskgraph/docker.py
@@ -18,6 +18,22 @@
 from taskgraph.util import docker
 from taskgraph.util.taskcluster import get_artifact_url, get_session
 
+DEPLOY_WARNING = """
+*****************************************************************
+WARNING: Image is not suitable for deploying/pushing.
+
+To automatically tag the image the following files are required:
+- {image_dir}/REGISTRY
+- {image_dir}/VERSION
+
+The REGISTRY file contains the Docker registry hosting the image.
+A default REGISTRY file may also be defined in the parent docker
+directory.
+
+The VERSION file contains the version of the image.
+*****************************************************************
+"""
+
 
 def get_image_digest(image_name):
     from taskgraph.generator import load_tasks_for_kind
@@ -105,19 +121,18 @@ def build_image(name, tag, args=None):
 
     buf = BytesIO()
     docker.stream_context_tar(".", image_dir, buf, "", args)
-    subprocess.run(
-        ["docker", "image", "build", "--no-cache", "-t", tag, "-"], input=buf.getvalue()
-    )
+    cmdargs = ["docker", "image", "build", "--no-cache", "-"]
+    if tag:
+        cmdargs.insert(-1, f"-t={tag}")
+    subprocess.run(cmdargs, input=buf.getvalue())
 
-    print(f"Successfully built {name} and tagged with {tag}")
+    msg = f"Successfully built {name}"
+    if tag:
+        msg += f" and tagged with {tag}"
+    print(msg)
 
-    if tag.endswith(":latest"):
-        print("*" * 50)
-        print("WARNING: no VERSION file found in image directory.")
-        print("Image is not suitable for deploying/pushing.")
-        print("Create an image suitable for deploying/pushing by creating")
-        print("a VERSION file in the image directory.")
-        print("*" * 50)
+    if not tag or tag.endswith(":latest"):
+        print(DEPLOY_WARNING.format(image_dir=os.path.relpath(image_dir), image=name))
 
 
 def load_image(url, imageName=None, imageTag=None):
diff --git a/src/taskgraph/util/docker.py b/src/taskgraph/util/docker.py
index a50561a1f..13815381e 100644
--- a/src/taskgraph/util/docker.py
+++ b/src/taskgraph/util/docker.py
@@ -7,6 +7,7 @@
 import io
 import os
 import re
+from typing import Optional
 
 from taskgraph.util.archive import create_tar_gz_from_files
 from taskgraph.util.memoize import memoize
@@ -16,17 +17,27 @@
 from .yaml import load_yaml
 
 
-def docker_image(name, by_tag=False):
+def docker_image(name: str, by_tag: bool = False) -> Optional[str]:
     """
     Resolve in-tree prebuilt docker image to ``<registry>/<repository>@sha256:<digest>``,
     or ``<registry>/<repository>:<tag>`` if `by_tag` is `True`.
+
+    Args:
+        name (str): The image to build.
+        by_tag (bool): If True, will apply a tag based on VERSION file.
+            Otherwise will apply a hash based on HASH file.
+    Returns:
+        Optional[str]: Image if it can be resolved, otherwise None.
     """
     try:
         with open(os.path.join(IMAGE_DIR, name, "REGISTRY")) as f:
             registry = f.read().strip()
     except OSError:
-        with open(os.path.join(IMAGE_DIR, "REGISTRY")) as f:
-            registry = f.read().strip()
+        try:
+            with open(os.path.join(IMAGE_DIR, "REGISTRY")) as f:
+                registry = f.read().strip()
+        except OSError:
+            return None
 
     if not by_tag:
         hashfile = os.path.join(IMAGE_DIR, name, "HASH")
@@ -34,7 +45,7 @@ def docker_image(name, by_tag=False):
             with open(hashfile) as f:
                 return f"{registry}/{name}@{f.read().strip()}"
         except OSError:
-            raise Exception(f"Failed to read HASH file {hashfile}")
+            return None
 
     try:
         with open(os.path.join(IMAGE_DIR, name, "VERSION")) as f:
diff --git a/test/data/taskcluster/docker/hello-world-tag/Dockerfile b/test/data/taskcluster/docker/hello-world-tag/Dockerfile
new file mode 100644
index 000000000..5aaf0a281
--- /dev/null
+++ b/test/data/taskcluster/docker/hello-world-tag/Dockerfile
@@ -0,0 +1 @@
+FROM hello-world
diff --git a/test/data/taskcluster/docker/hello-world-tag/REGISTRY b/test/data/taskcluster/docker/hello-world-tag/REGISTRY
new file mode 100644
index 000000000..9daeafb98
--- /dev/null
+++ b/test/data/taskcluster/docker/hello-world-tag/REGISTRY
@@ -0,0 +1 @@
+test
diff --git a/test/data/taskcluster/docker/hello-world-tag/VERSION b/test/data/taskcluster/docker/hello-world-tag/VERSION
new file mode 100644
index 000000000..d3827e75a
--- /dev/null
+++ b/test/data/taskcluster/docker/hello-world-tag/VERSION
@@ -0,0 +1 @@
+1.0
diff --git a/test/data/taskcluster/docker/hello-world/Dockerfile b/test/data/taskcluster/docker/hello-world/Dockerfile
new file mode 100644
index 000000000..5aaf0a281
--- /dev/null
+++ b/test/data/taskcluster/docker/hello-world/Dockerfile
@@ -0,0 +1 @@
+FROM hello-world
diff --git a/test/test_docker.py b/test/test_docker.py
new file mode 100644
index 000000000..b4f66aad0
--- /dev/null
+++ b/test/test_docker.py
@@ -0,0 +1,55 @@
+import pytest
+
+from taskgraph import docker
+
+
+@pytest.fixture(autouse=True, scope="module")
+def mock_docker_path(module_mocker, datadir):
+    module_mocker.patch(
+        "taskgraph.util.docker.IMAGE_DIR", str(datadir / "taskcluster" / "docker")
+    )
+
+
+@pytest.fixture
+def mock_docker_build(mocker):
+    def side_effect(topsrcdir, context_dir, out_file, image_name=None, args=None):
+        out_file.write(b"xyz")
+
+    m_stream = mocker.patch.object(docker.docker, "stream_context_tar")
+    m_stream.side_effect = side_effect
+
+    m_run = mocker.patch.object(docker.subprocess, "run")
+    return (m_stream, m_run)
+
+
+def test_build_image(capsys, mock_docker_build):
+    m_stream, m_run = mock_docker_build
+    image = "hello-world-tag"
+    tag = f"test/{image}:1.0"
+
+    assert docker.build_image(image, None) is None
+    m_stream.assert_called_once()
+    m_run.assert_called_once_with(
+        ["docker", "image", "build", "--no-cache", f"-t={tag}", "-"],
+        input=b"xyz",
+    )
+
+    out, _ = capsys.readouterr()
+    assert f"Successfully built {image} and tagged with {tag}" in out
+    assert "Image is not suitable for deploying/pushing" not in out
+
+
+def test_build_image_no_tag(capsys, mock_docker_build):
+    m_stream, m_run = mock_docker_build
+    image = "hello-world"
+
+    assert docker.build_image(image, None) is None
+    m_stream.assert_called_once()
+    m_run.assert_called_once_with(
+        ["docker", "image", "build", "--no-cache", "-"],
+        input=b"xyz",
+    )
+
+    out, _ = capsys.readouterr()
+    assert f"Successfully built {image}" in out
+    assert "Image is not suitable for deploying/pushing" in out