diff --git a/integration-tests/variable_write_test.go b/integration-tests/variable_write_test.go
index faf469d1..c6c9f6ea 100644
--- a/integration-tests/variable_write_test.go
+++ b/integration-tests/variable_write_test.go
@@ -98,6 +98,31 @@ func TestVariableCreate(t *testing.T) {
 	assertTrimmed(t, "false", f.Run("var:get", "-p", p, "env:TEST", "-l", "p", "-P", "visible_runtime"))
 }
 
+func TestVariableCreateUpdateWithLevel(t *testing.T) {
+	// Regression test: var:create --update must forward --level to var:update
+	// when the variable exists at both levels.
+	s := setupVariableTest(t)
+	s.apiHandler.SetEnvironments([]*mockapi.Environment{s.mainEnv})
+
+	f, p := s.factory, s.projectID
+
+	f.Run("var:create", "-p", p, "-l", "p", "env:FOO", "--value", "project-value")
+	f.Run("var:create", "-p", p, "-e", "main", "-l", "e", "env:FOO", "--value", "env-value")
+
+	_, stdErr, err := f.RunCombinedOutput("var:create", "-p", p, "-e", "main", "-u", "-l", "e",
+		"--name", "env:FOO", "--value", "env-value2")
+	assert.NoError(t, err)
+	assert.NotContains(t, stdErr, "Variable found at both project and environment levels")
+
+	_, stdErr, err = f.RunCombinedOutput("var:create", "-p", p, "-e", "main", "-u", "-l", "p",
+		"--name", "env:FOO", "--value", "project-value2")
+	assert.NoError(t, err)
+	assert.NotContains(t, stdErr, "Variable found at both project and environment levels")
+
+	assertTrimmed(t, "env-value2", f.Run("var:get", "-p", p, "-e", "main", "env:FOO", "-l", "e", "-P", "value"))
+	assertTrimmed(t, "project-value2", f.Run("var:get", "-p", p, "-e", "main", "env:FOO", "-l", "p", "-P", "value"))
+}
+
 func TestVariableCreateDefaultEnvironment(t *testing.T) {
 	// Regression test for CLI-164: using "-e ." (the default-environment code)
 	// must not fail form validation of the --environment option.
diff --git a/legacy/src/Command/Variable/VariableCreateCommand.php b/legacy/src/Command/Variable/VariableCreateCommand.php
index 7be070ca..82d238ad 100644
--- a/legacy/src/Command/Variable/VariableCreateCommand.php
+++ b/legacy/src/Command/Variable/VariableCreateCommand.php
@@ -89,7 +89,8 @@ protected function execute(InputInterface $input, OutputInterface $output): int
             if (($prefix = Option::stringOrNull($input, 'prefix')) && $prefix !== 'none') {
                 $name = rtrim($prefix, ':') . ':' . $name;
             }
-            $existing = $this->variableCommandUtil->getExistingVariable($name, $selection, $this->variableCommandUtil->getRequestedLevel($input), false);
+            $level = $this->variableCommandUtil->getRequestedLevel($input);
+            $existing = $this->variableCommandUtil->getExistingVariable($name, $selection, $level, false);
             if ($existing) {
                 if (!Option::bool($input, 'update')) {
                     $this->stdErr->writeln('The variable already exists: <error>' . $name . '</error>');
@@ -115,6 +116,9 @@ protected function execute(InputInterface $input, OutputInterface $output): int
                 if ($selection->hasEnvironment()) {
                     $arguments['--environment'] = $selection->getEnvironment()->id;
                 }
+                if ($level !== null) {
+                    $arguments['--level'] = $level;
+                }
                 foreach ($this->form->getFields() as $field) {
                     $argName = '--' . $field->getOptionName();
                     $value = $field->getValueFromInput($input, false);