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diff --git a/spec/frontend/ci_variable_list/components/ci_environments_dropdown_spec.js b/spec/frontend/ci_variable_list/components/ci_environments_dropdown_spec.js
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+++ b/spec/frontend/ci_variable_list/components/ci_environments_dropdown_spec.js
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+import { GlDropdown, GlDropdownItem, GlIcon, GlSearchBoxByType } from '@gitlab/ui';
+import { mount } from '@vue/test-utils';
+import { nextTick } from 'vue';
+import { allEnvironments } from '~/ci_variable_list/constants';
+import CiEnvironmentsDropdown from '~/ci_variable_list/components/ci_environments_dropdown.vue';
+
+describe('Ci environments dropdown', () => {
+  let wrapper;
+
+  const envs = ['dev', 'prod', 'staging'];
+  const defaultProps = { environments: envs, selectedEnvironmentScope: '' };
+
+  const findDropdownText = () => wrapper.findComponent(GlDropdown).text();
+  const findAllDropdownItems = () => wrapper.findAllComponents(GlDropdownItem);
+  const findDropdownItemByIndex = (index) => wrapper.findAllComponents(GlDropdownItem).at(index);
+  const findActiveIconByIndex = (index) => findDropdownItemByIndex(index).findComponent(GlIcon);
+  const findSearchBox = () => wrapper.findComponent(GlSearchBoxByType);
+
+  const createComponent = ({ props = {}, searchTerm = '' } = {}) => {
+    wrapper = mount(CiEnvironmentsDropdown, {
+      propsData: {
+        ...defaultProps,
+        ...props,
+      },
+    });
+
+    findSearchBox().vm.$emit('input', searchTerm);
+  };
+
+  afterEach(() => {
+    wrapper.destroy();
+  });
+
+  describe('No environments found', () => {
+    beforeEach(() => {
+      createComponent({ searchTerm: 'stable' });
+    });
+
+    it('renders create button with search term if environments do not contain search term', () => {
+      expect(findAllDropdownItems()).toHaveLength(2);
+      expect(findDropdownItemByIndex(1).text()).toBe('Create wildcard: stable');
+    });
+
+    it('renders empty results message', () => {
+      expect(findDropdownItemByIndex(0).text()).toBe('No matching results');
+    });
+  });
+
+  describe('Search term is empty', () => {
+    beforeEach(() => {
+      createComponent({ props: { environments: envs } });
+    });
+
+    it('renders all environments when search term is empty', () => {
+      expect(findAllDropdownItems()).toHaveLength(3);
+      expect(findDropdownItemByIndex(0).text()).toBe(envs[0]);
+      expect(findDropdownItemByIndex(1).text()).toBe(envs[1]);
+      expect(findDropdownItemByIndex(2).text()).toBe(envs[2]);
+    });
+
+    it('should not display active checkmark on the inactive stage', () => {
+      expect(findActiveIconByIndex(0).classes('gl-visibility-hidden')).toBe(true);
+    });
+  });
+
+  describe('when `*` is the value of selectedEnvironmentScope props', () => {
+    const wildcardScope = '*';
+
+    beforeEach(() => {
+      createComponent({ props: { selectedEnvironmentScope: wildcardScope } });
+    });
+
+    it('shows the `All environments` text and not the wildcard', () => {
+      expect(findDropdownText()).toContain(allEnvironments.text);
+      expect(findDropdownText()).not.toContain(wildcardScope);
+    });
+  });
+
+  describe('Environments found', () => {
+    const currentEnv = envs[2];
+
+    beforeEach(async () => {
+      createComponent({ searchTerm: currentEnv });
+      await nextTick();
+    });
+
+    it('renders only the environment searched for', () => {
+      expect(findAllDropdownItems()).toHaveLength(1);
+      expect(findDropdownItemByIndex(0).text()).toBe(currentEnv);
+    });
+
+    it('should not display create button', () => {
+      const environments = findAllDropdownItems().filter((env) => env.text().startsWith('Create'));
+      expect(environments).toHaveLength(0);
+      expect(findAllDropdownItems()).toHaveLength(1);
+    });
+
+    it('should not display empty results message', () => {
+      expect(wrapper.findComponent({ ref: 'noMatchingResults' }).exists()).toBe(false);
+    });
+
+    it('should clear the search term when showing the dropdown', () => {
+      wrapper.findComponent(GlDropdown).trigger('click');
+
+      expect(findSearchBox().text()).toBe('');
+    });
+
+    describe('Custom events', () => {
+      describe('when clicking on an environment', () => {
+        const itemIndex = 0;
+
+        beforeEach(() => {
+          createComponent();
+        });
+
+        it('should emit `select-environment` if an environment is clicked', async () => {
+          await nextTick();
+
+          await findDropdownItemByIndex(itemIndex).vm.$emit('click');
+
+          expect(wrapper.emitted('select-environment')).toEqual([[envs[itemIndex]]]);
+        });
+      });
+
+      describe('when creating a new environment from a search term', () => {
+        const search = 'new-env';
+        beforeEach(() => {
+          createComponent({ searchTerm: search });
+        });
+
+        it('should emit createClicked if an environment is clicked', async () => {
+          await nextTick();
+          findDropdownItemByIndex(1).vm.$emit('click');
+          expect(wrapper.emitted('create-environment-scope')).toEqual([[search]]);
+        });
+      });
+    });
+  });
+});