diff --git a/apps/rush/src/RushVersionSelector.ts b/apps/rush/src/RushVersionSelector.ts
index 1b87e66e5f..615aaa0e35 100644
--- a/apps/rush/src/RushVersionSelector.ts
+++ b/apps/rush/src/RushVersionSelector.ts
@@ -62,7 +62,10 @@ export class RushVersionSelector {
           // different implementations of the same version of the same package.
           // This was needed for: https://github.com/microsoft/rushstack/issues/691
           commonRushConfigFolder: configuration ? configuration.commonRushConfigFolder : undefined,
-          suppressOutput: true
+          suppressOutput: true,
+          // Filter out npm-incompatible properties (e.g. pnpm-specific settings) from .npmrc
+          // since this installation always uses npm regardless of the repo's package manager.
+          filterNpmIncompatibleProperties: true
         });
 
         console.log(`Successfully installed Rush version ${version} in ${expectedRushPath}.`);
diff --git a/common/changes/@microsoft/rush/fix-rush-pnpm-npm-config-warnings_2026-03-23-18-16.json b/common/changes/@microsoft/rush/fix-rush-pnpm-npm-config-warnings_2026-03-23-18-16.json
new file mode 100644
index 0000000000..c34b0155c3
--- /dev/null
+++ b/common/changes/@microsoft/rush/fix-rush-pnpm-npm-config-warnings_2026-03-23-18-16.json
@@ -0,0 +1,10 @@
+{
+  "changes": [
+    {
+      "packageName": "@microsoft/rush",
+      "comment": "Filter npm-incompatible properties from .npmrc when installing rush-lib via npm, to eliminate spurious \"Unknown env config\" and \"Unknown project config\" warnings.",
+      "type": "none"
+    }
+  ],
+  "packageName": "@microsoft/rush"
+}