diff --git a/REFERENCE.md b/REFERENCE.md
index 01f75ca64..fca3e9b5c 100644
--- a/REFERENCE.md
+++ b/REFERENCE.md
@@ -30,6 +30,7 @@
 * [`peadm::file_or_content`](#peadm--file_or_content)
 * [`peadm::flatten_compact`](#peadm--flatten_compact)
 * [`peadm::generate_pe_conf`](#peadm--generate_pe_conf): Generate a pe.conf file in JSON format
+* [`peadm::get_node_group_environment`](#peadm--get_node_group_environment): check if a custom PE environment is set in pe.conf
 * [`peadm::get_pe_conf`](#peadm--get_pe_conf)
 * [`peadm::get_targets`](#peadm--get_targets): Accept undef or a SingleTargetSpec, and return an Array[Target, 1, 0]. This differs from get_target() in that:   - It returns an Array[Target
 * [`peadm::log_plan_parameters`](#peadm--log_plan_parameters)
@@ -740,6 +741,24 @@ Data type: `Hash`
 A hash of settings to set in the config file. Any keys that are set to
 undef will not be included in the config file.
 
+### <a name="peadm--get_node_group_environment"></a>`peadm::get_node_group_environment`
+
+Type: Puppet Language
+
+check if a custom PE environment is set in pe.conf
+
+#### `peadm::get_node_group_environment(Peadm::SingleTargetSpec $primary)`
+
+The peadm::get_node_group_environment function.
+
+Returns: `String` the desired environment for PE specific node groups
+
+##### `primary`
+
+Data type: `Peadm::SingleTargetSpec`
+
+the FQDN for the primary, here we will read the pe.conf from
+
 ### <a name="peadm--get_pe_conf"></a>`peadm::get_pe_conf`
 
 Type: Puppet Language
@@ -1832,12 +1851,21 @@ The peadm::add_database class.
 
 The following parameters are available in the `peadm::add_database` plan:
 
+* [`node_group_environment`](#-peadm--add_database--node_group_environment)
 * [`targets`](#-peadm--add_database--targets)
 * [`primary_host`](#-peadm--add_database--primary_host)
 * [`mode`](#-peadm--add_database--mode)
 * [`begin_at_step`](#-peadm--add_database--begin_at_step)
 * [`is_migration`](#-peadm--add_database--is_migration)
 
+##### <a name="-peadm--add_database--node_group_environment"></a>`node_group_environment`
+
+Data type: `String[1]`
+
+environment for the PEADM specific node groups, if not set it will be gathered from pe.conf or production
+
+Default value: `peadm::get_node_group_environment($primary_host)`
+
 ##### <a name="-peadm--add_database--targets"></a>`targets`
 
 Data type: `Peadm::SingleTargetSpec`
@@ -1899,6 +1927,7 @@ The following parameters are available in the `peadm::add_replica` plan:
 * [`replica_host`](#-peadm--add_replica--replica_host)
 * [`replica_postgresql_host`](#-peadm--add_replica--replica_postgresql_host)
 * [`token_file`](#-peadm--add_replica--token_file)
+* [`node_group_environment`](#-peadm--add_replica--node_group_environment)
 
 ##### <a name="-peadm--add_replica--primary_host"></a>`primary_host`
 
@@ -1929,6 +1958,14 @@ Data type: `Optional[String]`
 
 Default value: `undef`
 
+##### <a name="-peadm--add_replica--node_group_environment"></a>`node_group_environment`
+
+Data type: `String[1]`
+
+environment for the PEADM specific node groups, if not set it will be gathered from pe.conf or production
+
+Default value: `peadm::get_node_group_environment($primary_host)`
+
 ### <a name="peadm--backup"></a>`peadm::backup`
 
 Backup puppet primary configuration
@@ -2016,6 +2053,7 @@ management using PEAdm.
 The following parameters are available in the `peadm::convert` plan:
 
 * [`begin_at_step`](#-peadm--convert--begin_at_step)
+* [`node_group_environment`](#-peadm--convert--node_group_environment)
 * [`primary_host`](#-peadm--convert--primary_host)
 * [`replica_host`](#-peadm--convert--replica_host)
 * [`compiler_hosts`](#-peadm--convert--compiler_hosts)
@@ -2035,6 +2073,14 @@ The step where the plan should start. If not set, it will start at the beginning
 
 Default value: `undef`
 
+##### <a name="-peadm--convert--node_group_environment"></a>`node_group_environment`
+
+Data type: `String[1]`
+
+environment for the PEADM specific node groups, if not set it will be gathered from pe.conf or production
+
+Default value: `peadm::get_node_group_environment($primary_host)`
+
 ##### <a name="-peadm--convert--primary_host"></a>`primary_host`
 
 Data type: `Peadm::SingleTargetSpec`
@@ -2723,6 +2769,7 @@ The following parameters are available in the `peadm::upgrade` plan:
 * [`stagingdir`](#-peadm--upgrade--stagingdir)
 * [`uploaddir`](#-peadm--upgrade--uploaddir)
 * [`begin_at_step`](#-peadm--upgrade--begin_at_step)
+* [`node_group_environment`](#-peadm--upgrade--node_group_environment)
 * [`primary_host`](#-peadm--upgrade--primary_host)
 * [`replica_host`](#-peadm--upgrade--replica_host)
 * [`compiler_hosts`](#-peadm--upgrade--compiler_hosts)
@@ -2819,6 +2866,14 @@ The step where the plan should start. If not set, it will start at the beginning
 
 Default value: `undef`
 
+##### <a name="-peadm--upgrade--node_group_environment"></a>`node_group_environment`
+
+Data type: `String[1]`
+
+environment for the PEADM specific node groups, if not set it will be gathered from pe.conf or production
+
+Default value: `peadm::get_node_group_environment($primary_host)`
+
 ##### <a name="-peadm--upgrade--primary_host"></a>`primary_host`
 
 Data type: `Peadm::SingleTargetSpec`
diff --git a/functions/get_node_group_environment.pp b/functions/get_node_group_environment.pp
new file mode 100644
index 000000000..2daf3b2e2
--- /dev/null
+++ b/functions/get_node_group_environment.pp
@@ -0,0 +1,33 @@
+#
+# @summary check if a custom PE environment is set in pe.conf
+#
+# @param primary the FQDN for the primary, here we will read the pe.conf from
+#
+# @return [String] the desired environment for PE specific node groups
+#
+# @see https://www.puppet.com/docs/pe/latest/upgrade_pe#update_environment
+#
+# @author Tim Meusel <tim@bastelfreak.de>
+#
+function peadm::get_node_group_environment(Peadm::SingleTargetSpec $primary) {
+  $peconf = peadm::get_pe_conf(get_target($primary))
+  # if both are set, they need to be set to the same value
+  # if they are not set, we assume that the user runs their infra in production
+  $pe_install = $peconf['pe_install::install::classification::pe_node_group_environment']
+  $puppet_enterprise = $peconf['puppet_enterprise::master::recover_configuration::pe_environment']
+
+  # check if both are equal
+  # This also evaluates to true if both are undef
+  if $pe_install == $puppet_enterprise {
+    # check if the option isn't undef
+    # ToDo: A proper regex for allowed characters in an environment would be nice
+    # https://github.com/puppetlabs/puppet-docs/issues/1158
+    if $pe_install =~ String[1] {
+      return $pe_install
+    } else {
+      return 'production'
+    }
+  } else {
+    fail("pe_install::install::classification::pe_node_group_environment and puppet_enterprise::master::recover_configuration::pe_environment need to be set to the same value, not '${pe_install}' and '${puppet_enterprise}'")
+  }
+}
diff --git a/manifests/setup/legacy_compiler_group.pp b/manifests/setup/legacy_compiler_group.pp
index 4eff95b6a..d2d9e69d5 100644
--- a/manifests/setup/legacy_compiler_group.pp
+++ b/manifests/setup/legacy_compiler_group.pp
@@ -3,9 +3,11 @@
   String[1] $primary_host,
   Optional[String] $internal_compiler_a_pool_address = undef,
   Optional[String] $internal_compiler_b_pool_address = undef,
+  String[1] $node_group_environment = 'production',
 ) {
   Node_group {
     purge_behavior => none,
+    environment    => $node_group_environment,
   }
 
   node_group { 'PE Legacy Compiler':
diff --git a/manifests/setup/node_manager.pp b/manifests/setup/node_manager.pp
index 9fcc336ba..ef28226a2 100644
--- a/manifests/setup/node_manager.pp
+++ b/manifests/setup/node_manager.pp
@@ -23,6 +23,7 @@
 #   A load balancer address directing traffic to any of the "B" pool
 #   compilers. This is used for DR configuration in large and extra large
 #   architectures.
+# @param node_group_environment the environment that will be assigned to all the PE Infra node groups
 #
 class peadm::setup::node_manager (
   String[1] $primary_host,
@@ -36,6 +37,7 @@
   Optional[String[1]] $compiler_pool_address            = undef,
   Optional[String[1]] $internal_compiler_a_pool_address = $server_a_host,
   Optional[String[1]] $internal_compiler_b_pool_address = $server_b_host,
+  String[1]           $node_group_environment           = 'production',
 ) {
   # "Not-configured" placeholder string. This will be used in places where we
   # cannot set an explicit null, and need to supply some kind of value.
@@ -46,6 +48,7 @@
   # else.
   Node_group {
     purge_behavior => none,
+    environment    => $node_group_environment,
   }
 
   ##################################################
diff --git a/plans/add_database.pp b/plans/add_database.pp
index 8ee62749f..ba1c32c82 100644
--- a/plans/add_database.pp
+++ b/plans/add_database.pp
@@ -1,3 +1,6 @@
+#
+# @param node_group_environment environment for the PEADM specific node groups, if not set it will be gathered from pe.conf or production
+#
 plan peadm::add_database(
   Peadm::SingleTargetSpec $targets,
   Peadm::SingleTargetSpec $primary_host,
@@ -10,6 +13,7 @@
       'cleanup-db',
   'finalize']] $begin_at_step = undef,
   Optional[Boolean] $is_migration = false,
+  String[1] $node_group_environment = peadm::get_node_group_environment($primary_host),
 ) {
   $primary_target = peadm::get_targets($primary_host, 1)
   $postgresql_target = peadm::get_targets($targets, 1)
@@ -135,15 +139,17 @@
       $host = pick($a_host, $b_host)
       out::verbose("In transitive state, setting classification to ${host}")
       run_plan('peadm::util::update_classification', $primary_target,
-        postgresql_a_host => $host,
-        postgresql_b_host => $host,
-        peadm_config      => $peadm_config
+        postgresql_a_host      => $host,
+        postgresql_b_host      => $host,
+        peadm_config           => $peadm_config,
+        node_group_environment => $node_group_environment,
       )
     } else {
       run_plan('peadm::util::update_classification', $primary_target,
-        postgresql_a_host => $avail_group_letter ? { 'A' => $postgresql_host, default => undef },
-        postgresql_b_host => $avail_group_letter ? { 'B' => $postgresql_host, default => undef },
-        peadm_config      => $peadm_config
+        postgresql_a_host      => $avail_group_letter ? { 'A' => $postgresql_host, default => undef },
+        postgresql_b_host      => $avail_group_letter ? { 'B' => $postgresql_host, default => undef },
+        peadm_config           => $peadm_config,
+        node_group_environment => $node_group_environment,
       )
     }
   }
diff --git a/plans/add_replica.pp b/plans/add_replica.pp
index c21d536fc..cef188188 100644
--- a/plans/add_replica.pp
+++ b/plans/add_replica.pp
@@ -7,6 +7,7 @@
 # @param replica_postgresql_host - The hostname and certname of the host with the replica PE-PosgreSQL database.
 #   Can be a separate host in an XL architecture, or undef in Standard or Large.
 # @param token_file - (optional) the token file in a different location than the default.
+# @param node_group_environment environment for the PEADM specific node groups, if not set it will be gathered from pe.conf or production
 plan peadm::add_replica(
   # Standard or Large
   Peadm::SingleTargetSpec           $primary_host,
@@ -17,6 +18,7 @@
 
   # Common Configuration
   Optional[String] $token_file = undef,
+  String[1] $node_group_environment = peadm::get_node_group_environment($primary_host),
 ) {
   $primary_target             = peadm::get_targets($primary_host, 1)
   $replica_target             = peadm::get_targets($replica_host, 1)
@@ -96,7 +98,8 @@
     server_b_host                    => $replica_avail_group_letter ? { 'B' => $replica_target.peadm::certname(), default => undef },
     internal_compiler_a_pool_address => $replica_avail_group_letter ? { 'A' => $replica_target.peadm::certname(), default => undef },
     internal_compiler_b_pool_address => $replica_avail_group_letter ? { 'B' => $replica_target.peadm::certname(), default => undef },
-    peadm_config                     => $peadm_config
+    peadm_config                     => $peadm_config,
+    node_group_environment           => $node_group_environment,
   )
 
   # Source list of files on Primary and synchronize to new Replica
diff --git a/plans/convert.pp b/plans/convert.pp
index a18928937..051f89492 100644
--- a/plans/convert.pp
+++ b/plans/convert.pp
@@ -5,6 +5,7 @@
 # management using PEAdm.
 #
 # @param begin_at_step The step where the plan should start. If not set, it will start at the beginning
+# @param node_group_environment environment for the PEADM specific node groups, if not set it will be gathered from pe.conf or production
 #
 plan peadm::convert (
   # Standard
@@ -26,6 +27,7 @@
   Array[String]                     $dns_alt_names                    = [],
 
   Optional[Peadm::ConvertSteps] $begin_at_step = undef,
+  String[1] $node_group_environment = peadm::get_node_group_environment($primary_host),
 ) {
   peadm::assert_supported_bolt_version()
 
@@ -316,6 +318,7 @@
           compiler_pool_address            => $compiler_pool_address,
           internal_compiler_a_pool_address => $internal_compiler_a_pool_address,
           internal_compiler_b_pool_address => $internal_compiler_b_pool_address,
+          node_group_environment           => $node_group_environment,
           require                          => Class['peadm::setup::node_manager_yaml'],
         }
 
diff --git a/plans/convert_compiler_to_legacy.pp b/plans/convert_compiler_to_legacy.pp
index c612684b9..6adbbd292 100644
--- a/plans/convert_compiler_to_legacy.pp
+++ b/plans/convert_compiler_to_legacy.pp
@@ -3,6 +3,7 @@
   Peadm::SingleTargetSpec $primary_host,
   TargetSpec              $legacy_hosts,
   Optional[Boolean]       $remove_pdb = true,
+  String[1] $node_group_environment = peadm::get_node_group_environment($primary_host),
 ) {
   $primary_target            = peadm::get_targets($primary_host, 1)
   $convert_legacy_compiler_targets   = peadm::get_targets($legacy_hosts)
@@ -34,6 +35,7 @@
       },
       internal_compiler_a_pool_address => getvar('cluster.params.internal_compiler_a_pool_address'),
       internal_compiler_b_pool_address => getvar('cluster.params.internal_compiler_b_pool_address'),
+      node_group_environment           => $node_group_environment,
       require                          => Class['peadm::setup::node_manager_yaml'],
     }
   }
diff --git a/plans/upgrade.pp b/plans/upgrade.pp
index 00236eb47..d20f1a1c5 100644
--- a/plans/upgrade.pp
+++ b/plans/upgrade.pp
@@ -32,6 +32,8 @@
 #   for offline usage.
 # @param begin_at_step The step where the plan should start. If not set, it will start at the beginning
 #
+# @param node_group_environment environment for the PEADM specific node groups, if not set it will be gathered from pe.conf or production
+#
 plan peadm::upgrade (
   # Standard
   Peadm::SingleTargetSpec           $primary_host,
@@ -61,6 +63,7 @@
   Boolean                    $permit_unsafe_versions = false,
 
   Optional[Peadm::UpgradeSteps] $begin_at_step = undef,
+  String[1] $node_group_environment = peadm::get_node_group_environment($primary_host),
 ) {
   # Log parameters for debugging
   peadm::log_plan_parameters({
@@ -69,6 +72,7 @@
     'compiler_hosts' => $compiler_hosts,
     'primary_postgresql_host' => $primary_postgresql_host,
     'replica_postgresql_host' => $replica_postgresql_host,
+    'node_group_environment' => $node_group_environment,
     'version' => $version,
   })
 
@@ -361,6 +365,7 @@
         compiler_pool_address            => $compiler_pool_address,
         internal_compiler_a_pool_address => $internal_compiler_a_pool_address,
         internal_compiler_b_pool_address => $internal_compiler_b_pool_address,
+        node_group_environment           => $node_group_environment,
         require                          => Class['peadm::setup::node_manager_yaml'],
       }
     }
diff --git a/plans/util/update_classification.pp b/plans/util/update_classification.pp
index 247a96321..a5018e60c 100644
--- a/plans/util/update_classification.pp
+++ b/plans/util/update_classification.pp
@@ -2,9 +2,12 @@
 #
 # @summary Configure classification
 #
+# @param node_group_environment environment for the PEADM specific node groups, if not set it will be gathered from pe.conf or production
+#
 plan peadm::util::update_classification (
   # Standard
   Peadm::SingleTargetSpec           $targets,
+  String[1]                         $node_group_environment,
   Optional[Hash]                    $peadm_config = undef,
   Optional[Peadm::SingleTargetSpec] $server_a_host = undef,
   Optional[Peadm::SingleTargetSpec] $server_b_host = undef,
@@ -76,6 +79,7 @@
       compiler_pool_address            => $new['params']['compiler_pool_address'],
       internal_compiler_a_pool_address => $new['params']['internal_compiler_a_pool_address'],
       internal_compiler_b_pool_address => $new['params']['internal_compiler_b_pool_address'],
+      node_group_environment           => $node_group_environment,
       require                          => Class['peadm::setup::node_manager_yaml'],
     }
   }
diff --git a/spec/functions/get_node_group_environment_spec.rb b/spec/functions/get_node_group_environment_spec.rb
new file mode 100644
index 000000000..bdc446c3b
--- /dev/null
+++ b/spec/functions/get_node_group_environment_spec.rb
@@ -0,0 +1,44 @@
+# frozen_string_literal: true
+
+require 'spec_helper'
+
+describe 'peadm::get_node_group_environment' do
+  include BoltSpec::BoltContext
+  around(:each) do |example|
+    in_bolt_context do
+      example.run
+    end
+  end
+  let(:primary) do
+    ['test-vm.puppet.vm']
+  end
+
+  context 'returns production on empty pe.conf' do
+    it do
+      expect_task('peadm::read_file').with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf').always_return({ 'content' => '{}' })
+      is_expected.to run.with_params(primary).and_return('production')
+    end
+  end
+
+  context 'returns production on non-empty pe.conf with unrelated settings' do
+    it do
+      expect_task('peadm::read_file').with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf').always_return({ 'content' => '{"foo": true}' })
+      is_expected.to run.with_params(primary).and_return('production')
+    end
+  end
+  context 'returns environment from pe.conf when set twice correctly' do
+    it do
+      pe = '{"pe_install::install::classification::pe_node_group_environment": "foo", "puppet_enterprise::master::recover_configuration::pe_environment": "foo"}'
+      expect_task('peadm::read_file').with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf').always_return({ 'content' => pe })
+      is_expected.to run.with_params(primary).and_return('foo')
+    end
+  end
+  context 'fails when both PE options are different' do
+    it do
+      pe = '{"pe_install::install::classification::pe_node_group_environment": "foo", "puppet_enterprise::master::recover_configuration::pe_environment": "bar"}'
+      expect_task('peadm::read_file').with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf').always_return({ 'content' => pe })
+      is_expected.to run.with_params(primary).and_raise_error(Puppet::PreformattedError,
+%r{pe_install::install::classification::pe_node_group_environment and puppet_enterprise::master::recover_configuration::pe_environment})
+    end
+  end
+end
diff --git a/spec/plans/convert_spec.rb b/spec/plans/convert_spec.rb
index 99e453a4c..89c4aa09f 100644
--- a/spec/plans/convert_spec.rb
+++ b/spec/plans/convert_spec.rb
@@ -19,7 +19,8 @@
     allow_apply
 
     expect_task('peadm::cert_data').return_for_targets('primary' => trustedjson).be_called_times(2)
-    expect_task('peadm::read_file').always_return({ 'content' => '2021.7.9' })
+    expect_task('peadm::read_file').with_params('path' => '/opt/puppetlabs/server/pe_version').always_return({ 'content' => '2021.7.9' })
+    expect_task('peadm::read_file').with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf').always_return({ 'content' => '{}' })
     expect_task('peadm::get_group_rules').return_for_targets('primary' => { '_output' => '{"rules": []}' })
     expect_task('peadm::node_group_unpin').with_targets('primary').with_params({ 'node_certnames' => ['pe_compiler_legacy'], 'group_name' => 'PE Master' })
     expect_task('peadm::check_legacy_compilers').with_targets('primary').with_params({ 'legacy_compilers' => 'pe_compiler_legacy' }).return_for_targets('primary' => { '_output' => '' })
diff --git a/spec/plans/upgrade_spec.rb b/spec/plans/upgrade_spec.rb
index b92b828fa..5291906cd 100644
--- a/spec/plans/upgrade_spec.rb
+++ b/spec/plans/upgrade_spec.rb
@@ -37,6 +37,7 @@ def allow_standard_non_returning_calls
 
     expect_task('peadm::cert_data').return_for_targets('primary' => trusted_primary).be_called_times(1)
     expect_task('peadm::check_pe_master_rules').always_return(pe_rule_check)
+    expect_task('peadm::read_file').with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf').always_return({ 'content' => '{}' })
 
     expect(run_plan('peadm::upgrade',
                     'primary_host' => 'primary',
@@ -50,7 +51,7 @@ def allow_standard_non_returning_calls
     expect_task('peadm::read_file')
       .with_params('path' => '/opt/puppetlabs/server/pe_build')
       .always_return({ 'content' => '2021.7.3' })
-
+    expect_task('peadm::read_file').with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf').always_return({ 'content' => '{}' })
     expect_task('peadm::cert_data').return_for_targets('primary' => trusted_primary,
                                                        'compiler' => trusted_compiler).be_called_times(1)
     expect_task('peadm::check_pe_master_rules').always_return(pe_rule_check).be_called_times(1)
@@ -109,7 +110,7 @@ def allow_standard_non_returning_calls
     it 'updates pe.conf if r10k_known_hosts is set' do
       expect_task('peadm::read_file')
         .with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf')
-        .always_return({ 'content' => <<~PECONF })
+        .always_return({ 'content' => <<~PECONF }).be_called_times(2)
           # spec pe.conf
           "puppet_enterprise::puppet_master_host": "%{::trusted.certname}"
         PECONF
@@ -132,6 +133,8 @@ def allow_standard_non_returning_calls
       expect_out_message.with_params(r10k_warning)
       expect_task('peadm::check_pe_master_rules').always_return(pe_rule_check)
 
+      expect_task('peadm::read_file').with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf').always_return({ 'content' => '{}' })
+
       expect(run_plan('peadm::upgrade',
                        'primary_host'     => 'primary',
                        'version'          => '2023.3.0',
@@ -145,6 +148,8 @@ def allow_standard_non_returning_calls
         expect_out_message.with_params(r10k_warning).not_be_called
         expect_task('peadm::check_pe_master_rules').always_return(pe_rule_check)
 
+        expect_task('peadm::read_file').with_params('path' => '/etc/puppetlabs/enterprise/conf.d/pe.conf').always_return({ 'content' => '{}' })
+
         expect(run_plan('peadm::upgrade',
                          'primary_host'     => 'primary',
                          'version'          => '2023.4.0',