diff --git a/dvc/config.py b/dvc/config.py
index 13965264b..cb0fd8e70 100644
--- a/dvc/config.py
+++ b/dvc/config.py
@@ -424,10 +424,13 @@ class Config(object):  # pylint: disable=too-many-instance-attributes
         config.write()
 
     def validate(self, config=None):
-        d = (config or self.config).dict()
+        ret = copy.deepcopy(self.config)
+
+        if config:
+            ret.merge(config)
 
         try:
-            return self.COMPILED_SCHEMA(d)
+            return self.COMPILED_SCHEMA(ret.dict())
         except Invalid as exc:
             raise ConfigError(str(exc)) from exc
 
diff --git a/tests/func/test_remote.py b/tests/func/test_remote.py
index 2bbe5088f..78730d6da 100644
--- a/tests/func/test_remote.py
+++ b/tests/func/test_remote.py
@@ -265,3 +265,10 @@ def test_modify_invalid_key(dvc):
 
     with pytest.raises(ConfigError, match=r"extra keys not allowed"):
         remote_config.modify("example", "random_key", "value")
+
+
+def test_merging_two_levels(tmp_dir, dvc):
+    assert 0 == main(["remote", "add", "test", "https://example.com"])
+    assert 0 == main(["remote", "modify", "--local", "test", "password", "1"])
+    assert "example.com" in (tmp_dir / ".dvc" / "config").read_text()
+    assert "password" in (tmp_dir / ".dvc" / "config.local").read_text()