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diff --git a/spec/frontend/ci/ci_variable_list/components/ci_environments_dropdown_spec.js b/spec/frontend/ci/ci_variable_list/components/ci_environments_dropdown_spec.js
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+++ b/spec/frontend/ci/ci_variable_list/components/ci_environments_dropdown_spec.js
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+import { GlListboxItem, GlCollapsibleListbox, GlDropdownItem, GlIcon } from '@gitlab/ui';
+import { mount } from '@vue/test-utils';
+import { allEnvironments } from '~/ci/ci_variable_list/constants';
+import CiEnvironmentsDropdown from '~/ci/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 findAllListboxItems = () => wrapper.findAllComponents(GlListboxItem);
+  const findListboxItemByIndex = (index) => wrapper.findAllComponents(GlListboxItem).at(index);
+  const findActiveIconByIndex = (index) => findListboxItemByIndex(index).findComponent(GlIcon);
+  const findListbox = () => wrapper.findComponent(GlCollapsibleListbox);
+  const findListboxText = () => findListbox().props('toggleText');
+  const findCreateWildcardButton = () => wrapper.findComponent(GlDropdownItem);
+
+  const createComponent = ({ props = {}, searchTerm = '' } = {}) => {
+    wrapper = mount(CiEnvironmentsDropdown, {
+      propsData: {
+        ...defaultProps,
+        ...props,
+      },
+    });
+
+    findListbox().vm.$emit('search', 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', () => {
+      const button = findCreateWildcardButton();
+      expect(button.exists()).toBe(true);
+      expect(button.text()).toBe('Create wildcard: stable');
+    });
+  });
+
+  describe('Search term is empty', () => {
+    beforeEach(() => {
+      createComponent({ props: { environments: envs } });
+    });
+
+    it('renders all environments when search term is empty', () => {
+      expect(findListboxItemByIndex(0).text()).toBe(envs[0]);
+      expect(findListboxItemByIndex(1).text()).toBe(envs[1]);
+      expect(findListboxItemByIndex(2).text()).toBe(envs[2]);
+    });
+
+    it('does 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(findListboxText()).toContain(allEnvironments.text);
+      expect(findListboxText()).not.toContain(wildcardScope);
+    });
+  });
+
+  describe('Environments found', () => {
+    const currentEnv = envs[2];
+
+    beforeEach(() => {
+      createComponent({ searchTerm: currentEnv });
+    });
+
+    it('renders only the environment searched for', () => {
+      expect(findAllListboxItems()).toHaveLength(1);
+      expect(findListboxItemByIndex(0).text()).toBe(currentEnv);
+    });
+
+    it('does not display create button', () => {
+      expect(findCreateWildcardButton().exists()).toBe(false);
+    });
+
+    describe('Custom events', () => {
+      describe('when selecting an environment', () => {
+        const itemIndex = 0;
+
+        beforeEach(() => {
+          createComponent();
+        });
+
+        it('emits `select-environment` when an environment is clicked', () => {
+          findListbox().vm.$emit('select', envs[itemIndex]);
+          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('emits create-environment-scope', () => {
+          findCreateWildcardButton().vm.$emit('click');
+          expect(wrapper.emitted('create-environment-scope')).toEqual([[search]]);
+        });
+      });
+    });
+  });
+});