app

E, [2016-07-19T21:14:51.579333 #7] ERROR -- : PG::ConnectionBad: could not translate host name "db" to address: Name or service not known
 (Sequel::DatabaseConnectionError)

docker-compose.yml

version: '2'
services:
  db:
    build: ./postgres
  bot:
    build: .
    command: /app/runbot.sh
    volumes:
      - .:/app
    links:
      - "db:database"
    depends_on:
      - db

Dockerfile

FROM ruby:2.3.1
COPY . /app/
RUN gem install bundler --no-ri --no-rdoc && \
        cd /app; bundle install --without development test
RUN apt-get update && apt-get -y install vim sqlite3
RUN chown -R nobody:nogroup /app
USER nobody
EXPOSE 9292
WORKDIR /app
RUN /app/runbot.sh

postgres-Dockerfile

FROM postgres
COPY init.sql /docker-entrypoint-initdb.d/
RUN /etc/init.d/postgresql start

from the docs

Containers for the linked service will be reachable at a hostname identical to the alias, or the service name if no alias was specified.

1. I use links only (no alias)
2. add expose or port 5432
3. you need to add startup loop to the app (depends_on means depends on service, not postgres being up and ready) https://gist.github.com/CzechJiri/29c9862393c6a9d4435a2bfd50cf546d