diff --git a/sdk/azidentity/README.md b/sdk/azidentity/README.md
index 68b35a545c3b..a97f87961eba 100644
--- a/sdk/azidentity/README.md
+++ b/sdk/azidentity/README.md
@@ -168,7 +168,8 @@ client := armresources.NewResourceGroupsClient("subscription ID", chain, nil)
 |-|-
 |`AZURE_CLIENT_ID`|ID of an Azure Active Directory application
 |`AZURE_TENANT_ID`|ID of the application's Azure Active Directory tenant
-|`AZURE_CLIENT_CERTIFICATE_PATH`|path to a certificate file including private key (without password protection)
+|`AZURE_CLIENT_CERTIFICATE_PATH`|path to a certificate file including private key
+|`AZURE_CLIENT_CERTIFICATE_PASSWORD`|password of the certificate file, if any
 
 #### Username and password
 
diff --git a/sdk/azidentity/environment_credential.go b/sdk/azidentity/environment_credential.go
index 16c595d1d375..6b2a9bab6e33 100644
--- a/sdk/azidentity/environment_credential.go
+++ b/sdk/azidentity/environment_credential.go
@@ -42,7 +42,9 @@ type EnvironmentCredentialOptions struct {
 //
 // AZURE_CLIENT_ID: the service principal's client ID
 //
-// AZURE_CLIENT_CERTIFICATE_PATH: path to a PEM or PKCS12 certificate file including the unencrypted private key.
+// AZURE_CLIENT_CERTIFICATE_PATH: path to a PEM or PKCS12 certificate file including the private key.
+//
+// AZURE_CLIENT_CERTIFICATE_PASSWORD: (optional) password for the certificate file.
 //
 // User with username and password
 //
@@ -85,7 +87,11 @@ func NewEnvironmentCredential(options *EnvironmentCredentialOptions) (*Environme
 		if err != nil {
 			return nil, fmt.Errorf(`failed to read certificate file "%s": %v`, certPath, err)
 		}
-		certs, key, err := ParseCertificates(certData, nil)
+		var password []byte
+		if v := os.Getenv("AZURE_CLIENT_CERTIFICATE_PASSWORD"); v != "" {
+			password = []byte(v)
+		}
+		certs, key, err := ParseCertificates(certData, password)
 		if err != nil {
 			return nil, fmt.Errorf(`failed to load certificate from "%s": %v`, certPath, err)
 		}
diff --git a/sdk/azidentity/environment_credential_test.go b/sdk/azidentity/environment_credential_test.go
index 85f67a40572d..4d3b475a03e0 100644
--- a/sdk/azidentity/environment_credential_test.go
+++ b/sdk/azidentity/environment_credential_test.go
@@ -9,8 +9,10 @@ package azidentity
 import (
 	"context"
 	"errors"
+	"fmt"
 	"os"
 	"reflect"
+	"strings"
 	"testing"
 
 	"github.com/Azure/azure-sdk-for-go/sdk/azcore"
@@ -116,6 +118,36 @@ func TestEnvironmentCredential_ClientCertificatePathSet(t *testing.T) {
 	}
 }
 
+func TestEnvironmentCredential_ClientCertificatePassword(t *testing.T) {
+	for key, value := range map[string]string{
+		"AZURE_TENANT_ID":               fakeTenantID,
+		azureClientID:                   fakeClientID,
+		"AZURE_CLIENT_CERTIFICATE_PATH": "testdata/certificate_encrypted_key.pfx",
+	} {
+		t.Setenv(key, value)
+	}
+	for _, correctPassword := range []bool{true, false} {
+		t.Run(fmt.Sprintf("%v", correctPassword), func(t *testing.T) {
+			password := "wrong password"
+			if correctPassword {
+				password = "password"
+			}
+			t.Setenv("AZURE_CLIENT_CERTIFICATE_PASSWORD", password)
+			cred, err := NewEnvironmentCredential(nil)
+			if correctPassword {
+				if err != nil {
+					t.Fatal(err)
+				}
+				if _, ok := cred.cred.(*ClientCertificateCredential); !ok {
+					t.Fatalf("expected *azidentity.ClientCertificateCredential, got %t", cred)
+				}
+			} else if err == nil || !strings.Contains(err.Error(), "password") {
+				t.Fatal("expected an error about the password")
+			}
+		})
+	}
+}
+
 func TestEnvironmentCredential_UsernameOnlySet(t *testing.T) {
 	resetEnvironmentVarsForTest()
 	err := os.Setenv("AZURE_TENANT_ID", fakeTenantID)