diff --git a/tracer/src/Datadog.Trace/Activity/OtlpHelpers.cs b/tracer/src/Datadog.Trace/Activity/OtlpHelpers.cs
index 490a1f426e03..9a3a06187446 100644
--- a/tracer/src/Datadog.Trace/Activity/OtlpHelpers.cs
+++ b/tracer/src/Datadog.Trace/Activity/OtlpHelpers.cs
@@ -127,7 +127,7 @@ private static void AgentConvertSpan<TInner>(TInner activity, Span span, bool op
             // Fixup "env" tag
             if (traceContext is not null
              && traceContext.Environment is null
-             && span.GetTag("deployment.environment") is { Length: > 0 } otelServiceEnv)
+             && (span.GetTag("deployment.environment.name") ?? span.GetTag("deployment.environment")) is { Length: > 0 } otelServiceEnv)
             {
                 traceContext.Environment = otelServiceEnv;
             }
diff --git a/tracer/src/Datadog.Trace/Configuration/MutableSettings.cs b/tracer/src/Datadog.Trace/Configuration/MutableSettings.cs
index caf31e49e2d5..171dd9d40f75 100644
--- a/tracer/src/Datadog.Trace/Configuration/MutableSettings.cs
+++ b/tracer/src/Datadog.Trace/Configuration/MutableSettings.cs
@@ -1107,8 +1107,11 @@ private static ConfigurationBuilder.ClassConfigurationResultWithKey<IDictionary<
         if (original.ConfigurationResult is { IsValid: true, Result: { } values })
         {
             // Update well-known service information resources
-            if (values.TryGetValue("deployment.environment", out var envValue))
+            // an empty "deployment.environment.name" falls back to the legacy "deployment.environment"
+            if ((values.TryGetValue("deployment.environment.name", out var envValue) && !string.IsNullOrEmpty(envValue)) ||
+                values.TryGetValue("deployment.environment", out envValue))
             {
+                values.Remove("deployment.environment.name");
                 values.Remove("deployment.environment");
                 values[Tags.Env] = envValue;
             }
diff --git a/tracer/test/Datadog.Trace.Tests/Configuration/MutableSettingsTests.cs b/tracer/test/Datadog.Trace.Tests/Configuration/MutableSettingsTests.cs
index a594cebf28d0..1445d3ed8d9f 100644
--- a/tracer/test/Datadog.Trace.Tests/Configuration/MutableSettingsTests.cs
+++ b/tracer/test/Datadog.Trace.Tests/Configuration/MutableSettingsTests.cs
@@ -652,20 +652,75 @@ public void DDTagsSetsServiceInformation()
             mutable.GitCommitSha.Should().Be("42");
         }
 
-        [Fact]
-        public void OTELTagsSetsServiceInformation()
+        [Theory]
+        [InlineData("deployment.environment.name=stable_env", "stable_env")]
+        [InlineData("deployment.environment=legacy_env", "legacy_env")]
+        [InlineData("deployment.environment.name=stable_env,deployment.environment=legacy_env", "stable_env")]
+        [InlineData("deployment.environment=legacy_env,deployment.environment.name=stable_env", "stable_env")]
+        public void OTELTagsSetServiceInformation(string environmentAttributes, string expectedEnvironment)
         {
             var source = new NameValueConfigurationSource(new()
             {
-                { "OTEL_RESOURCE_ATTRIBUTES", "deployment.environment=datadog_env,service.name=datadog_service,service.version=datadog_version" },
+                { ConfigurationKeys.OpenTelemetry.ResourceAttributes, $"{environmentAttributes},service.name=datadog_service,service.version=datadog_version,custom.attribute=custom_value" },
             });
 
             var tracerSettings = new TracerSettings(source);
             var mutable = GetMutableSettings(source, tracerSettings);
 
-            mutable.Environment.Should().Be("datadog_env");
+            mutable.Environment.Should().Be(expectedEnvironment);
             mutable.ServiceVersion.Should().Be("datadog_version");
             mutable.ServiceName.Should().Be("datadog_service");
+            mutable.GlobalTags.Should().NotContainKey("deployment.environment.name");
+            mutable.GlobalTags.Should().NotContainKey("deployment.environment");
+            mutable.GlobalTags.Should().Contain("custom.attribute", "custom_value");
+        }
+
+        [Fact]
+        public void EmptyStableEnvironmentNameFallsBackToLegacyEnvironment()
+        {
+            var source = new NameValueConfigurationSource(new()
+            {
+                { ConfigurationKeys.OpenTelemetry.ResourceAttributes, "deployment.environment.name=,deployment.environment=legacy_env" },
+            });
+
+            var tracerSettings = new TracerSettings(source);
+            var mutable = GetMutableSettings(source, tracerSettings);
+
+            mutable.Environment.Should().Be("legacy_env");
+            mutable.GlobalTags.Should().NotContainKey("deployment.environment.name");
+            mutable.GlobalTags.Should().NotContainKey("deployment.environment");
+        }
+
+        [Fact]
+        public void EmptyStableEnvironmentNameWithNoLegacyEnvironmentIsUnset()
+        {
+            var source = new NameValueConfigurationSource(new()
+            {
+                { ConfigurationKeys.OpenTelemetry.ResourceAttributes, "deployment.environment.name=" },
+            });
+
+            var tracerSettings = new TracerSettings(source);
+            var mutable = GetMutableSettings(source, tracerSettings);
+
+            mutable.Environment.Should().BeNullOrEmpty();
+            mutable.GlobalTags.Should().NotContainKey("deployment.environment.name");
+        }
+
+        [Fact]
+        public void DDEnvTakesPrecedenceOverOTELTags()
+        {
+            var source = new NameValueConfigurationSource(new()
+            {
+                { ConfigurationKeys.Environment, "datadog_env" },
+                { ConfigurationKeys.OpenTelemetry.ResourceAttributes, "deployment.environment=legacy_env,deployment.environment.name=stable_env" },
+            });
+
+            var tracerSettings = new TracerSettings(source);
+            var mutable = GetMutableSettings(source, tracerSettings);
+
+            mutable.Environment.Should().Be("datadog_env");
+            mutable.GlobalTags.Should().NotContainKey("deployment.environment.name");
+            mutable.GlobalTags.Should().NotContainKey("deployment.environment");
         }
 
         [Fact]
diff --git a/tracer/test/Datadog.Trace.Tests/Tagging/ActivityTagsTests.cs b/tracer/test/Datadog.Trace.Tests/Tagging/ActivityTagsTests.cs
index 796710d17b22..aa8a11479ea5 100644
--- a/tracer/test/Datadog.Trace.Tests/Tagging/ActivityTagsTests.cs
+++ b/tracer/test/Datadog.Trace.Tests/Tagging/ActivityTagsTests.cs
@@ -160,4 +160,46 @@ public async Task ActivityLink_PreservesTraceStateWithoutParsingOtelTraceState()
         spanLinkContext.AdditionalW3CTraceState.Should().Be("ot=rv:ef284ace7a91e1;th:e6666666666668");
         spanLinkContext.OtelTraceState.Should().BeNull();
     }
+
+    [Theory]
+    [InlineData("deployment.environment.name", "stable_env")]
+    [InlineData("deployment.environment", "legacy_env")]
+    public async Task Environment_ShouldBe_FixedUpFromActivityTag(string tagKey, string tagValue)
+    {
+        var activityMock = new Mock<IActivity5>();
+        activityMock.Setup(x => x.Kind).Returns(ActivityKind.Producer);
+
+        var tagObjects = new Dictionary<string, object> { { tagKey, tagValue } };
+        activityMock.Setup(x => x.TagObjects).Returns(tagObjects);
+
+        // UpdateSpanFromActivity implicitly accesses Tracer.Instance if there's no associated Tracer in the span
+        await using var tracer = TracerHelper.CreateWithFakeAgent();
+        using var span = tracer.StartSpan("operation", new OpenTelemetryTags());
+
+        OtlpHelpers.UpdateSpanFromActivity(activityMock.Object, span);
+
+        span.Context.TraceContext!.Environment.Should().Be(tagValue);
+    }
+
+    [Fact]
+    public async Task Environment_StableTagName_ShouldTakePrecedenceOverLegacyTagName()
+    {
+        var activityMock = new Mock<IActivity5>();
+        activityMock.Setup(x => x.Kind).Returns(ActivityKind.Producer);
+
+        var tagObjects = new Dictionary<string, object>
+        {
+            { "deployment.environment", "legacy_env" },
+            { "deployment.environment.name", "stable_env" }
+        };
+        activityMock.Setup(x => x.TagObjects).Returns(tagObjects);
+
+        // UpdateSpanFromActivity implicitly accesses Tracer.Instance if there's no associated Tracer in the span
+        await using var tracer = TracerHelper.CreateWithFakeAgent();
+        using var span = tracer.StartSpan("operation", new OpenTelemetryTags());
+
+        OtlpHelpers.UpdateSpanFromActivity(activityMock.Object, span);
+
+        span.Context.TraceContext!.Environment.Should().Be("stable_env");
+    }
 }