diff --git a/CHANGELOG.rst b/CHANGELOG.rst
index e7adfff214..f1082a419d 100644
--- a/CHANGELOG.rst
+++ b/CHANGELOG.rst
@@ -4,6 +4,14 @@ Changelog
 Changelog
 =========
 
+1.11.3 (2025-12-16)
+-------------------
+
+Bug Fixes
+
+* (back-ported) Fix resolution of ``packages-install-path`` when it uses ``env_var`` by @tatiana in #2194
+
+
 1.11.2 (2025-11-24)
 --------------------
 
diff --git a/cosmos/__init__.py b/cosmos/__init__.py
index 21c6434366..2386267cb5 100644
--- a/cosmos/__init__.py
+++ b/cosmos/__init__.py
@@ -9,7 +9,7 @@
 
 from cosmos import settings
 
-__version__ = "1.11.2"
+__version__ = "1.11.3"
 
 if not settings.enable_memory_optimised_imports:
     from cosmos.airflow.dag import DbtDag
diff --git a/cosmos/dbt/project.py b/cosmos/dbt/project.py
index 8da6eeb8d1..9f5504eeba 100644
--- a/cosmos/dbt/project.py
+++ b/cosmos/dbt/project.py
@@ -7,6 +7,7 @@
 from typing import Generator
 
 import yaml
+from jinja2 import Template
 
 from cosmos.constants import (
     DBT_DEFAULT_PACKAGES_FOLDER,
@@ -40,6 +41,27 @@ def has_non_empty_dependencies_file(project_path: Path) -> bool:
     return False
 
 
+def _resolve_env_var(template_str: str) -> str:
+    """
+    Given a Jinja template string, resolve the environment variables, declared using the dbt syntax,
+    and return the rendered string.
+
+    Example:
+    - template_str = '/usr/local/airflow/dags/dbt/dbt_packages{{ "_" + env_var("env","") if env_var("env","")!="" }}'
+    - environment variable `env` is set to "test"
+
+    Then, the rendered string will be:
+    '/usr/local/airflow/dags/dbt/dbt_packages_test'
+    """
+
+    def env_var(name: str, default: str = "") -> str:
+        return os.getenv(name, default)
+
+    template = Template(template_str)
+    rendered = template.render(env_var=env_var)
+    return rendered
+
+
 def get_dbt_packages_subpath(source_folder: Path) -> str:
     """
     Return the dbt project's package installation sub path.
@@ -64,7 +86,7 @@ def get_dbt_packages_subpath(source_folder: Path) -> str:
                 logger.info(f"Unable to read the {DBT_PROJECT_FILENAME} file")
             else:
                 subpath = dbt_project_file_content.get("packages-install-path", DBT_DEFAULT_PACKAGES_FOLDER)
-    return subpath
+    return _resolve_env_var(subpath)
 
 
 def copy_dbt_packages(source_folder: Path, target_folder: Path) -> None:
diff --git a/tests/dbt/test_project.py b/tests/dbt/test_project.py
index 7038d3b75d..2d323f0018 100644
--- a/tests/dbt/test_project.py
+++ b/tests/dbt/test_project.py
@@ -7,6 +7,7 @@
 
 from cosmos.constants import DBT_DEFAULT_PACKAGES_FOLDER, DBT_PROJECT_FILENAME, PACKAGE_LOCKFILE_YML
 from cosmos.dbt.project import (
+    _resolve_env_var,
     change_working_directory,
     copy_dbt_packages,
     copy_manifest_file_if_exists,
@@ -78,6 +79,57 @@ def test_returns_custom_path_when_defined(tmpdir):
     assert result == "custom_dbt_packages"
 
 
+@patch.dict(os.environ, {"MY_PATH": "custom_packages"})
+def test_resolve_env_var_with_simple_env_var():
+    """Test _resolve_env_var with and without a simple env_var reference."""
+
+    result = _resolve_env_var("dbt_packages")
+    assert result == "dbt_packages"
+
+    result = _resolve_env_var('{{ env_var("MY_PATH") }}')
+    assert result == "custom_packages"
+
+
+@patch.dict(os.environ, {}, clear=False)
+def test_resolve_env_var_with_default_value():
+    """Test _resolve_env_var with env_var default when variable is not set."""
+    # Ensure the variable is not set
+    os.environ.pop("NONEXISTENT_VAR", None)
+    result = _resolve_env_var('{{ env_var("NONEXISTENT_VAR", "default_path") }}')
+    assert result == "default_path"
+
+
+@patch.dict(os.environ, {"dbt_packages_suffix": "test"})
+def test_resolve_env_var_with_complex_template():
+    """Test _resolve_env_var with complex conditional templates."""
+    template = 'dbt_packages{{ "_" + env_var("dbt_packages_suffix","") if env_var("dbt_packages_suffix","")!="" }}'
+    result = _resolve_env_var(template)
+    assert result == "dbt_packages_test"
+
+    os.environ.pop("dbt_packages_suffix", None)
+    template = 'dbt_packages{{ "_" + env_var("dbt_packages_suffix","") if env_var("dbt_packages_suffix","")!="" }}'
+    result = _resolve_env_var(template)
+    assert result == "dbt_packages"
+
+
+@patch.dict(os.environ, {}, clear=False)
+def test_resolve_env_var_with_complex_template_unset_var():
+    """Test _resolve_env_var with a complex conditional template when variable is not set."""
+    if "dbt_packages_suffix" in os.environ:
+        del os.environ["dbt_packages_suffix"]
+    template = 'dbt_packages{{ "_" + env_var("dbt_packages_suffix","") if env_var("dbt_packages_suffix","")!="" }}'
+    result = _resolve_env_var(template)
+    assert result == "dbt_packages"
+
+
+@patch.dict(os.environ, {"ENV_SUFFIX": "prod"})
+def test_get_dbt_packages_subpath_with_env_var_template(tmpdir):
+    """Test get_dbt_packages_subpath with env_var in packages-install-path."""
+    write_dbt_project_yml(tmpdir, {"packages-install-path": 'dbt_packages_{{ env_var("ENV_SUFFIX") }}'})
+    result = get_dbt_packages_subpath(tmpdir)
+    assert result == "dbt_packages_prod"
+
+
 def test_create_symlinks(tmp_path):
     """Tests that symlinks are created for expected files in the dbt project directory."""
     tmp_dir = tmp_path / "dbt-project"