diff --git a/news/changelog-1.2.md b/news/changelog-1.2.md
index f3dc4085f79..bb6e7e32c3e 100644
--- a/news/changelog-1.2.md
+++ b/news/changelog-1.2.md
@@ -1,6 +1,9 @@
 ## New In This Patch Release
 
 - Fixes an issue using Quarto with the most recent version of jupyter_client (version 8.0.0 and later)
+- Fix QUARTO_PANDOC variable not being respected in update-pandoc process. This
+  would cause errors where pandoc is not bundled with Quarto, such as in the
+conda package.
 
 ## Fixed In Previous Patch Releases
 
diff --git a/package/src/common/update-pandoc.ts b/package/src/common/update-pandoc.ts
index 75a0fbf436c..da96608ff65 100644
--- a/package/src/common/update-pandoc.ts
+++ b/package/src/common/update-pandoc.ts
@@ -102,8 +102,10 @@ async function writePandocTemplates(config: Configuration) {
 }
 
 async function readTemplate(format: string, bin: string): Promise<string> {
+  const pandoc = Deno.env.get("QUARTO_PANDOC") ||
+    join(bin, "tools", "pandoc");
   const result = await execProcess({
-    cmd: [join(bin, "tools", "pandoc"), "--print-default-template", format],
+    cmd: [pandoc, "--print-default-template", format],
     stdout: "piped",
     stderr: "piped",
   });