diff --git a/docs/stackit_ske_kubeconfig_create.md b/docs/stackit_ske_kubeconfig_create.md
index c0f95423b..476d50bab 100644
--- a/docs/stackit_ske_kubeconfig_create.md
+++ b/docs/stackit_ske_kubeconfig_create.md
@@ -7,7 +7,7 @@ Creates or update a kubeconfig for a SKE cluster
 Creates a kubeconfig for a STACKIT Kubernetes Engine (SKE) cluster, if the config exists in the kubeconfig file the information will be updated.
 
 By default, the kubeconfig information of the SKE cluster is merged into the default kubeconfig file of the current user. If the kubeconfig file doesn't exist, a new one will be created.
-You can override this behavior by specifying a custom filepath with the --filepath flag.
+You can override this behavior by specifying a custom filepath using the --filepath flag or by setting the KUBECONFIG env variable (fallback).
 
 An expiration time can be set for the kubeconfig. The expiration time is set in seconds(s), minutes(m), hours(h), days(d) or months(M). Default is 1h.
 
@@ -47,7 +47,7 @@ stackit ske kubeconfig create CLUSTER_NAME [flags]
 ```
       --disable-writing     Disable the writing of kubeconfig. Set the output format to json or yaml using the --output-format flag to display the kubeconfig.
   -e, --expiration string   Expiration time for the kubeconfig in seconds(s), minutes(m), hours(h), days(d) or months(M). Example: 30d. By default, expiration time is 1h
-      --filepath string     Path to create the kubeconfig file. By default, the kubeconfig is created as 'config' in the .kube folder, in the user's home directory.
+      --filepath string     Path to create the kubeconfig file. Will fall back to KUBECONFIG env variable if not set. In case both aren't set, the kubeconfig is created as file named 'config' in the .kube folder in the user's home directory.
   -h, --help                Help for "stackit ske kubeconfig create"
   -l, --login               Create a login kubeconfig that obtains valid credentials via the STACKIT CLI. This flag is mutually exclusive with the expiration flag.
       --overwrite           Overwrite the kubeconfig file.
diff --git a/internal/cmd/ske/kubeconfig/create/create.go b/internal/cmd/ske/kubeconfig/create/create.go
index 681b74db9..f420009f0 100644
--- a/internal/cmd/ske/kubeconfig/create/create.go
+++ b/internal/cmd/ske/kubeconfig/create/create.go
@@ -48,7 +48,7 @@ func NewCmd(params *params.CmdParams) *cobra.Command {
 		Long: fmt.Sprintf("%s\n\n%s\n%s\n%s\n%s",
 			"Creates a kubeconfig for a STACKIT Kubernetes Engine (SKE) cluster, if the config exists in the kubeconfig file the information will be updated.",
 			"By default, the kubeconfig information of the SKE cluster is merged into the default kubeconfig file of the current user. If the kubeconfig file doesn't exist, a new one will be created.",
-			"You can override this behavior by specifying a custom filepath with the --filepath flag.\n",
+			"You can override this behavior by specifying a custom filepath using the --filepath flag or by setting the KUBECONFIG env variable (fallback).\n",
 			"An expiration time can be set for the kubeconfig. The expiration time is set in seconds(s), minutes(m), hours(h), days(d) or months(M). Default is 1h.\n",
 			"Note that the format is <value><unit>, e.g. 30d for 30 days and you can't combine units."),
 		Args: args.SingleArg(clusterNameArg, nil),
@@ -170,7 +170,7 @@ func NewCmd(params *params.CmdParams) *cobra.Command {
 func configureFlags(cmd *cobra.Command) {
 	cmd.Flags().Bool(disableWritingFlag, false, fmt.Sprintf("Disable the writing of kubeconfig. Set the output format to json or yaml using the --%s flag to display the kubeconfig.", globalflags.OutputFormatFlag))
 	cmd.Flags().BoolP(loginFlag, "l", false, "Create a login kubeconfig that obtains valid credentials via the STACKIT CLI. This flag is mutually exclusive with the expiration flag.")
-	cmd.Flags().String(filepathFlag, "", "Path to create the kubeconfig file. By default, the kubeconfig is created as 'config' in the .kube folder, in the user's home directory.")
+	cmd.Flags().String(filepathFlag, "", "Path to create the kubeconfig file. Will fall back to KUBECONFIG env variable if not set. In case both aren't set, the kubeconfig is created as file named 'config' in the .kube folder in the user's home directory.")
 	cmd.Flags().StringP(expirationFlag, "e", "", "Expiration time for the kubeconfig in seconds(s), minutes(m), hours(h), days(d) or months(M). Example: 30d. By default, expiration time is 1h")
 	cmd.Flags().Bool(overwriteFlag, false, "Overwrite the kubeconfig file.")
 	cmd.MarkFlagsMutuallyExclusive(loginFlag, expirationFlag)
diff --git a/internal/pkg/services/ske/utils/utils.go b/internal/pkg/services/ske/utils/utils.go
index 4c5604fc4..605ca4158 100644
--- a/internal/pkg/services/ske/utils/utils.go
+++ b/internal/pkg/services/ske/utils/utils.go
@@ -284,8 +284,12 @@ func WriteConfigFile(configPath, data string) error {
 	return nil
 }
 
-// GetDefaultKubeconfigPath returns the default location for the kubeconfig file.
+// GetDefaultKubeconfigPath returns the default location for the kubeconfig file or the value of KUBECONFIG if set.
 func GetDefaultKubeconfigPath() (string, error) {
+	if kubeconfigEnv := os.Getenv("KUBECONFIG"); kubeconfigEnv != "" {
+		return kubeconfigEnv, nil
+	}
+
 	userHome, err := os.UserHomeDir()
 	if err != nil {
 		return "", fmt.Errorf("get user home directory: %w", err)
diff --git a/internal/pkg/services/ske/utils/utils_test.go b/internal/pkg/services/ske/utils/utils_test.go
index 27b9b8d6a..917d590ae 100644
--- a/internal/pkg/services/ske/utils/utils_test.go
+++ b/internal/pkg/services/ske/utils/utils_test.go
@@ -698,3 +698,48 @@ func TestGetDefaultKubeconfigPath(t *testing.T) {
 		})
 	}
 }
+
+func TestGetDefaultKubeconfigPathWithEnvVar(t *testing.T) {
+	tests := []struct {
+		description      string
+		kubeconfigEnvVar string
+		expected         string
+		userHome         string
+	}{
+		{
+			description:      "base",
+			kubeconfigEnvVar: "~/.kube/custom/config",
+			expected:         "~/.kube/custom/config",
+			userHome:         "/home/test-user",
+		},
+		{
+			description:      "return user home when environment var is empty",
+			kubeconfigEnvVar: "",
+			expected:         "/home/test-user/.kube/config",
+			userHome:         "/home/test-user",
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.description, func(t *testing.T) {
+			// Setup environment variables
+			err := os.Setenv("KUBECONFIG", tt.kubeconfigEnvVar)
+			if err != nil {
+				t.Errorf("could not set KUBECONFIG environment variable: %s", err)
+			}
+			err = os.Setenv("HOME", tt.userHome)
+			if err != nil {
+				t.Errorf("could not set HOME environment variable: %s", err)
+			}
+
+			output, err := GetDefaultKubeconfigPath()
+
+			if err != nil {
+				t.Errorf("failed on valid input")
+			}
+			if output != tt.expected {
+				t.Errorf("expected output to be %s, got %s", tt.expected, output)
+			}
+		})
+	}
+}