diff --git a/CHANGELOG.md b/CHANGELOG.md
index 0b20896c7..b1f497518 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -7,6 +7,7 @@
 ### Fixes
 
 - Fix `hard_deletes: invalidate` incorrectly invalidating active records in snapshots (thanks @Zurbste!) ([#1281](https://github.com/databricks/dbt-databricks/issues/1281))
+- Fix serverless Python model environment configuration: use `environment_version` instead of deprecated `client` field. Users can now specify custom environment versions via `python_job_config.environments`. ([#1286](https://github.com/databricks/dbt-databricks/pull/1286))
 
 ### Under the Hood
 
diff --git a/dbt/adapters/databricks/api_client.py b/dbt/adapters/databricks/api_client.py
index b7c9ba638..1ccdcba6e 100644
--- a/dbt/adapters/databricks/api_client.py
+++ b/dbt/adapters/databricks/api_client.py
@@ -18,6 +18,7 @@
 from databricks.sdk.service.iam import AccessControlRequest
 from databricks.sdk.service.jobs import (
     JobAccessControlRequest,
+    JobEnvironment,
     JobSettings,
     QueueSettings,
     Run,
@@ -530,6 +531,12 @@ def _submit_job_to_databricks(
         # Add any additional job settings
         submission_params.update(additional_job_settings)
 
+        # Handle environments - convert dicts to JobEnvironment objects
+        if "environments" in submission_params:
+            submission_params["environments"] = [
+                JobEnvironment.from_dict(env) for env in submission_params["environments"]
+            ]
+
         # Filter out parameters that the Databricks SDK doesn't expect
         # The SDK submit() method doesn't accept 'name' or 'run_name' in the request body
         filtered_params = {
diff --git a/dbt/adapters/databricks/python_models/python_submissions.py b/dbt/adapters/databricks/python_models/python_submissions.py
index b4c502820..23c2a27c1 100644
--- a/dbt/adapters/databricks/python_models/python_submissions.py
+++ b/dbt/adapters/databricks/python_models/python_submissions.py
@@ -309,7 +309,7 @@ def compile(self, path: str) -> PythonJobDetails:
                 additional_job_config["environments"] = [
                     {
                         "environment_key": self.environment_key,
-                        "spec": {"client": "2", "dependencies": self.environment_deps},
+                        "spec": {"environment_version": "4", "dependencies": self.environment_deps},
                     }
                 ]
         job_spec.update(self.cluster_spec)
diff --git a/tests/functional/adapter/python_model/test_python_model.py b/tests/functional/adapter/python_model/test_python_model.py
index 72c2d4c91..acc479744 100644
--- a/tests/functional/adapter/python_model/test_python_model.py
+++ b/tests/functional/adapter/python_model/test_python_model.py
@@ -181,8 +181,7 @@ def models(self):
 
 
 @pytest.mark.python
-# @pytest.mark.skip_profile("databricks_cluster", "databricks_uc_cluster")
-@pytest.mark.skip("Not available in Databricks yet")
+@pytest.mark.skip_profile("databricks_cluster", "databricks_uc_cluster")
 class TestServerlessClusterWithEnvironment(BasePythonModelTests):
     @pytest.fixture(scope="class")
     def models(self):
diff --git a/tests/unit/python/test_python_config.py b/tests/unit/python/test_python_config.py
index 7c9923c1b..abda6587a 100644
--- a/tests/unit/python/test_python_config.py
+++ b/tests/unit/python/test_python_config.py
@@ -212,3 +212,45 @@ def test_python_job_config__extra_values(self):
         }
         job_config = PythonJobConfig(**config).dict()
         assert job_config == {"name": "name", "foo": "bar"}
+
+    def test_python_job_config__environments_passed_through(self):
+        """Test that environments field is properly passed through to dict().
+
+        See GitHub issue #1277: Users need to be able to specify environments
+        to control serverless version.
+        """
+        environments = [
+            {
+                "environment_key": "default",
+                "spec": {"environment_version": "3"},
+            }
+        ]
+        config = {
+            "name": "test_job",
+            "environments": environments,
+        }
+        job_config = PythonJobConfig(**config).dict()
+        assert job_config == {"name": "test_job", "environments": environments}
+
+    def test_python_job_config__environments_with_dependencies(self):
+        """Test environments with dependencies are properly passed through.
+
+        See GitHub issue #1277: Users should be able to specify full environment
+        configuration including version and dependencies.
+        """
+        environments = [
+            {
+                "environment_key": "custom_env",
+                "spec": {
+                    "environment_version": "3",
+                    "dependencies": ["pandas", "numpy"],
+                },
+            }
+        ]
+        config = {
+            "name": "test_job",
+            "environments": environments,
+        }
+        job_config = PythonJobConfig(**config).dict()
+        assert job_config["environments"] == environments
+        assert job_config["environments"][0]["spec"]["environment_version"] == "3"
diff --git a/tests/unit/python/test_python_job_support.py b/tests/unit/python/test_python_job_support.py
index f2009afc4..50536589a 100644
--- a/tests/unit/python/test_python_job_support.py
+++ b/tests/unit/python/test_python_job_support.py
@@ -289,7 +289,98 @@ def test_compile__nonempty_configs(
             "environments": [
                 {
                     "environment_key": environment_key,
-                    "spec": {"client": "2", "dependencies": ["requests"]},
+                    "spec": {"environment_version": "4", "dependencies": ["requests"]},
                 }
             ],
         }
+
+    def test_compile__uses_environment_version_not_deprecated_client(
+        self, client, permission_builder, parsed_model, run_name, environment_key
+    ):
+        """Test that environment_version is used instead of deprecated 'client' field.
+
+        See GitHub issue #1277: The Databricks API deprecated the 'client' field
+        in favor of 'environment_version'.
+        """
+        parsed_model.config.packages = []
+        parsed_model.config.index_url = None
+        parsed_model.config.python_job_config.dict.return_value = {}
+
+        permission_builder.build_job_permissions.return_value = []
+        compiler = PythonJobConfigCompiler(client, permission_builder, parsed_model, {})
+        details = compiler.compile("path")
+
+        # Verify environment_version is used, not client
+        env_spec = details.additional_job_config["environments"][0]["spec"]
+        assert "environment_version" in env_spec, (
+            "Should use 'environment_version' not deprecated 'client'"
+        )
+        assert "client" not in env_spec, "Should not use deprecated 'client' field"
+
+    def test_compile__respects_user_provided_environments(
+        self, client, permission_builder, parsed_model, run_name
+    ):
+        """Test that user-provided environments in python_job_config are respected.
+
+        See GitHub issue #1277: Users should be able to specify their own
+        environments configuration to control serverless version.
+        """
+        parsed_model.config.packages = []
+        parsed_model.config.index_url = None
+        parsed_model.config.environment_key = "custom_env"
+        parsed_model.config.environment_dependencies = []  # No auto-generated deps
+
+        # User provides their own environments configuration
+        user_environments = [
+            {
+                "environment_key": "custom_env",
+                "spec": {"environment_version": "3"},
+            }
+        ]
+        parsed_model.config.python_job_config.dict.return_value = {
+            "environments": user_environments
+        }
+
+        permission_builder.build_job_permissions.return_value = []
+        compiler = PythonJobConfigCompiler(client, permission_builder, parsed_model, {})
+        details = compiler.compile("path")
+
+        # User-provided environments should be preserved
+        assert details.additional_job_config["environments"] == user_environments
+        # The environment_key should still be set in job_spec
+        assert details.job_spec["environment_key"] == "custom_env"
+
+    def test_compile__user_environments_override_auto_generated(
+        self, client, permission_builder, parsed_model, run_name
+    ):
+        """Test that user-provided environments override auto-generated ones.
+
+        See GitHub issue #1277: Even when environment_dependencies are set,
+        user-provided environments should take precedence.
+        """
+        parsed_model.config.packages = []
+        parsed_model.config.index_url = None
+        parsed_model.config.environment_key = "my_env"
+        parsed_model.config.environment_dependencies = ["pandas", "numpy"]  # Would trigger auto-gen
+
+        # User provides their own environments with specific version
+        user_environments = [
+            {
+                "environment_key": "my_env",
+                "spec": {"environment_version": "3", "dependencies": ["requests"]},
+            }
+        ]
+        parsed_model.config.python_job_config.dict.return_value = {
+            "environments": user_environments
+        }
+
+        permission_builder.build_job_permissions.return_value = []
+        compiler = PythonJobConfigCompiler(client, permission_builder, parsed_model, {})
+        details = compiler.compile("path")
+
+        # User-provided environments should override, not be merged
+        assert details.additional_job_config["environments"] == user_environments
+        # Should have user's dependencies, not auto-generated ones
+        assert details.additional_job_config["environments"][0]["spec"]["dependencies"] == [
+            "requests"
+        ]