diff --git a/.changeset/happy-ligers-think.md b/.changeset/happy-ligers-think.md
new file mode 100644
index 0000000000..69dd68ae6c
--- /dev/null
+++ b/.changeset/happy-ligers-think.md
@@ -0,0 +1,5 @@
+---
+'@backstage/app-defaults': patch
+---
+
+Updated the `bitbucket-server-auth` default API to set its environment based on the `auth.environment` config option instead of being hardcoded to `development`.
diff --git a/packages/app-defaults/src/defaults/apis.ts b/packages/app-defaults/src/defaults/apis.ts
index 4e9e1a492c..7fdbb78293 100644
--- a/packages/app-defaults/src/defaults/apis.ts
+++ b/packages/app-defaults/src/defaults/apis.ts
@@ -243,6 +243,7 @@ export const apis = [
         discoveryApi,
         oauthRequestApi,
         defaultScopes: ['REPO_READ'],
+        environment: configApi.getOptionalString('auth.environment'),
       }),
   }),
   createApiFactory({
diff --git a/plugins/app/src/defaultApis.ts b/plugins/app/src/defaultApis.ts
index fd46ecf596..85c89a6278 100644
--- a/plugins/app/src/defaultApis.ts
+++ b/plugins/app/src/defaultApis.ts
@@ -318,6 +318,7 @@ export const apis = [
             discoveryApi,
             oauthRequestApi,
             defaultScopes: ['REPO_READ'],
+            environment: configApi.getOptionalString('auth.environment'),
           }),
       }),
     },