diff --git a/crates/build/src/manifest.rs b/crates/build/src/manifest.rs
index a4c295b0e..b28d6547e 100644
--- a/crates/build/src/manifest.rs
+++ b/crates/build/src/manifest.rs
@@ -7,7 +7,7 @@ use spin_manifest::{schema::v2, ManifestVersion};
 pub enum ManifestBuildInfo {
     Loadable {
         components: Vec<ComponentBuildInfo>,
-        deployment_targets: Vec<String>,
+        deployment_targets: Vec<spin_manifest::schema::v2::TargetEnvironmentRef>,
         manifest: spin_manifest::schema::v2::AppManifest,
     },
     Unloadable {
@@ -32,7 +32,7 @@ impl ManifestBuildInfo {
         }
     }
 
-    pub fn deployment_targets(&self) -> &[String] {
+    pub fn deployment_targets(&self) -> &[spin_manifest::schema::v2::TargetEnvironmentRef] {
         match self {
             Self::Loadable {
                 deployment_targets, ..
@@ -113,7 +113,7 @@ fn build_configs_from_manifest(
 
 fn deployment_targets_from_manifest(
     manifest: &spin_manifest::schema::v2::AppManifest,
-) -> Vec<String> {
+) -> Vec<spin_manifest::schema::v2::TargetEnvironmentRef> {
     manifest.application.targets.clone()
 }
 
diff --git a/crates/environments/src/environment_definition.rs b/crates/environments/src/environment_definition.rs
index 60915ee22..613d7a684 100644
--- a/crates/environments/src/environment_definition.rs
+++ b/crates/environments/src/environment_definition.rs
@@ -1,17 +1,46 @@
+use std::path::Path;
+
 use anyhow::Context;
+use spin_common::ui::quoted_path;
+use spin_manifest::schema::v2::TargetEnvironmentRef;
+
+const DEFAULT_REGISTRY: &str = "fermyon.com";
 
 /// Loads the given `TargetEnvironment` from a registry.
-pub async fn load_environment(env_id: impl AsRef<str>) -> anyhow::Result<TargetEnvironment> {
-    use futures_util::TryStreamExt;
+pub async fn load_environment(env_id: &TargetEnvironmentRef) -> anyhow::Result<TargetEnvironment> {
+    match env_id {
+        TargetEnvironmentRef::DefaultRegistry(package) => {
+            load_environment_from_registry(DEFAULT_REGISTRY, package).await
+        }
+        TargetEnvironmentRef::Registry { registry, package } => {
+            load_environment_from_registry(registry, package).await
+        }
+        TargetEnvironmentRef::WitDirectory { path } => load_environment_from_dir(path),
+    }
+}
 
-    let env_id = env_id.as_ref();
+async fn load_environment_from_registry(
+    registry: &str,
+    env_id: &str,
+) -> anyhow::Result<TargetEnvironment> {
+    use futures_util::TryStreamExt;
 
     let (pkg_name, pkg_ver) = env_id.split_once('@').with_context(|| format!("Failed to parse target environment {env_id} as package reference - is the target correct?"))?;
+    let env_pkg_ref: wasm_pkg_loader::PackageRef = pkg_name
+        .parse()
+        .with_context(|| format!("Environment {pkg_name} is not a valid package name"))?;
+
+    let registry: wasm_pkg_loader::Registry = registry
+        .parse()
+        .with_context(|| format!("Registry {registry} is not a valid registry name"))?;
 
     // TODO: this requires wkg configuration which shouldn't be on users:
     // is there a better way to handle it?
-    let mut client = wasm_pkg_loader::Client::with_global_defaults()
-        .context("Failed to create a package loader from your global settings")?;
+    let mut wkg_config = wasm_pkg_loader::Config::global_defaults()
+        .unwrap_or_else(|_| wasm_pkg_loader::Config::empty());
+    wkg_config.set_package_registry_override(env_pkg_ref, registry);
+
+    let mut client = wasm_pkg_loader::Client::new(wkg_config);
 
     let package = pkg_name
         .to_owned()
@@ -35,7 +64,14 @@ pub async fn load_environment(env_id: impl AsRef<str>) -> anyhow::Result<TargetE
         .with_context(|| format!("Failed to get {env_id} package data from registry"))?
         .to_vec();
 
-    TargetEnvironment::new(env_id.to_owned(), bytes)
+    TargetEnvironment::from_package_bytes(env_id.to_owned(), bytes)
+}
+
+fn load_environment_from_dir(path: &Path) -> anyhow::Result<TargetEnvironment> {
+    let mut resolve = wit_parser::Resolve::default();
+    let (pkg_id, _) = resolve.push_dir(path)?;
+    let decoded = wit_parser::decoding::DecodedWasm::WitPackage(resolve, pkg_id);
+    TargetEnvironment::from_decoded_wasm(path, decoded)
 }
 
 /// A parsed document representing a deployment environment, e.g. Spin 2.7,
@@ -57,7 +93,7 @@ pub struct TargetEnvironment {
 }
 
 impl TargetEnvironment {
-    fn new(name: String, bytes: Vec<u8>) -> anyhow::Result<Self> {
+    fn from_package_bytes(name: String, bytes: Vec<u8>) -> anyhow::Result<Self> {
         let decoded = wit_component::decode(&bytes)
             .with_context(|| format!("Failed to decode package for environment {name}"))?;
         let package_id = decoded.package();
@@ -79,6 +115,38 @@ impl TargetEnvironment {
         })
     }
 
+    fn from_decoded_wasm(
+        source: &Path,
+        decoded: wit_parser::decoding::DecodedWasm,
+    ) -> anyhow::Result<Self> {
+        let package_id = decoded.package();
+        let package = decoded
+            .resolve()
+            .packages
+            .get(package_id)
+            .with_context(|| {
+                format!(
+                    "The {} environment is invalid (no package for decoded package ID)",
+                    quoted_path(source)
+                )
+            })?
+            .clone();
+        let name = package.name.to_string();
+
+        // This versionm of wit_component requires a flag for v2 encoding.
+        // v1 encoding is retired in wit_component main. You can remove the
+        // flag when this breaks next time we upgrade the crate!
+        let bytes = wit_component::encode(Some(true), decoded.resolve(), package_id)?;
+
+        Ok(Self {
+            name,
+            decoded,
+            package,
+            package_id,
+            package_bytes: bytes,
+        })
+    }
+
     /// Returns true if the given trigger type provides the world identified by
     /// `world` in this environment.
     pub fn is_world_for(&self, trigger_type: &TriggerType, world: &wit_parser::World) -> bool {
diff --git a/crates/environments/src/lib.rs b/crates/environments/src/lib.rs
index 657bf94c0..0afb033cc 100644
--- a/crates/environments/src/lib.rs
+++ b/crates/environments/src/lib.rs
@@ -7,10 +7,11 @@ use environment_definition::{load_environment, TargetEnvironment, TriggerType};
 use futures::future::try_join_all;
 pub use loader::ApplicationToValidate;
 use loader::ComponentToValidate;
+use spin_manifest::schema::v2::TargetEnvironmentRef;
 
 pub async fn validate_application_against_environment_ids(
     application: &ApplicationToValidate,
-    env_ids: &[impl AsRef<str>],
+    env_ids: &[TargetEnvironmentRef],
 ) -> anyhow::Result<Vec<anyhow::Error>> {
     if env_ids.is_empty() {
         return Ok(Default::default());
diff --git a/crates/manifest/src/schema/v2.rs b/crates/manifest/src/schema/v2.rs
index ffe510fd3..f7fbdb8b2 100644
--- a/crates/manifest/src/schema/v2.rs
+++ b/crates/manifest/src/schema/v2.rs
@@ -58,7 +58,7 @@ pub struct AppDetails {
     pub authors: Vec<String>,
     /// `targets = ["spin-2.5", "fermyon-cloud", "spinkube-0.4"]`
     #[serde(default, skip_serializing_if = "Vec::is_empty")]
-    pub targets: Vec<String>,
+    pub targets: Vec<TargetEnvironmentRef>,
     /// `[application.triggers.<type>]`
     #[serde(rename = "trigger", default, skip_serializing_if = "Map::is_empty")]
     pub trigger_global_configs: Map<String, toml::Table>,
@@ -340,6 +340,27 @@ impl ComponentDependencies {
     }
 }
 
+/// Identifies a deployment target.
+#[derive(Clone, Debug, Serialize, Deserialize)]
+#[serde(untagged, deny_unknown_fields)]
+pub enum TargetEnvironmentRef {
+    /// Environment package reference e.g. `spin:cli@3.0`. This is looked up
+    /// in the default environment registry.
+    DefaultRegistry(String),
+    /// A target package in a registry other than the default
+    Registry {
+        /// Registry hosting the environment package e.g. `fermyon.com``.
+        registry: String,
+        /// Environment package reference e.g. `my:spin-env@1.2`.
+        package: String,
+    },
+    /// A filesystem directory. This is expected to contain a WIT package.
+    WitDirectory {
+        /// The directory containing the environment WIT.
+        path: PathBuf,
+    },
+}
+
 mod kebab_or_snake_case {
     use serde::{Deserialize, Serialize};
     pub use spin_serde::{KebabId, SnakeId};