diff --git a/docker-compose.yml b/docker-compose.yml
index 6cd25afb638ea..8b90b678a00a2 100644
--- a/docker-compose.yml
+++ b/docker-compose.yml
@@ -79,7 +79,7 @@ services:
       - mysql:/var/lib/mysql
 
     # For compatibility with PHP versions that don't support the caching_sha2_password auth plugin used in MySQL 8.0.
-    command: --default-authentication-plugin=mysql_native_password
+    command: ${LOCAL_DB_AUTH_OPTION-}
 
     healthcheck:
       test: [ "CMD-SHELL", "if [ \"$LOCAL_DB_TYPE\" = \"mariadb\" ]; then mariadb-admin ping -h localhost; else mysqladmin ping -h localhost; fi" ]
diff --git a/tools/local-env/mysql-old-php.conf b/tools/local-env/mysql-old-php.conf
new file mode 100644
index 0000000000000..ae1cb9b72a7f5
--- /dev/null
+++ b/tools/local-env/mysql-old-php.conf
@@ -0,0 +1,20 @@
+##
+# The local Docker environment will try to use the database software's default authentication plugin whenever possible.
+#
+# One exception to this is using PHP 7.2 & 7.3 in combination with MySQL >= 8.0. These versions of PHP lack support for
+# MySQL's caching_sha2_password plugin, which was made the new default in MySQL 8.0.
+#
+# Until MySQL 8.4, this could easily be changed using the --default-authentication-plugin with the old value of
+# mysql_native_password.
+#
+# In MySQL 8.4, the  --default-authentication-plugin option was removed in favor of --authentication-policy and
+# mysql_native_password was disabled by default.
+#
+# When mounted to the database container in the local Docker environment, this file turns the old authentication plugin
+# back on so that PHP 7.2 & 7.3 can be used in combination with MySQL 8.4.
+#
+# MySQL 9.0 will remove mysql_native_password.
+##
+
+[mysqld]
+mysql-native-password=ON
diff --git a/tools/local-env/old-php-mysql-84.override.yml b/tools/local-env/old-php-mysql-84.override.yml
new file mode 100644
index 0000000000000..3eca65f3c1c0e
--- /dev/null
+++ b/tools/local-env/old-php-mysql-84.override.yml
@@ -0,0 +1,5 @@
+services:
+
+  mysql:
+    volumes:
+      - ./tools/local-env/mysql-old-php.conf:/etc/mysql/conf.d/config-file.cnf
diff --git a/tools/local-env/scripts/docker.js b/tools/local-env/scripts/docker.js
index b33fc2b3ed0e3..078ce89f916a6 100644
--- a/tools/local-env/scripts/docker.js
+++ b/tools/local-env/scripts/docker.js
@@ -1,8 +1,11 @@
 const dotenv       = require( 'dotenv' );
 const dotenvExpand = require( 'dotenv-expand' );
 const { execSync } = require( 'child_process' );
+const local_env_utils = require( './utils' );
 
 dotenvExpand.expand( dotenv.config() );
 
+const composeFiles = local_env_utils.get_compose_files();
+
 // Execute any docker compose command passed to this script.
-execSync( 'docker compose ' + process.argv.slice( 2 ).join( ' ' ), { stdio: 'inherit' } );
+execSync( 'docker compose ' + composeFiles + ' ' + process.argv.slice( 2 ).join( ' ' ), { stdio: 'inherit' } );
diff --git a/tools/local-env/scripts/install.js b/tools/local-env/scripts/install.js
index 7bc2915fd44b7..519fc37a0d258 100644
--- a/tools/local-env/scripts/install.js
+++ b/tools/local-env/scripts/install.js
@@ -3,9 +3,14 @@ const dotenvExpand = require( 'dotenv-expand' );
 const wait_on = require( 'wait-on' );
 const { execSync } = require( 'child_process' );
 const { renameSync, readFileSync, writeFileSync } = require( 'fs' );
+const { utils } = require( './utils.js' );
+const local_env_utils = require( './utils' );
 
 dotenvExpand.expand( dotenv.config() );
 
+// Determine if a non-default database authentication plugin needs to be used.
+local_env_utils.determine_auth_option();
+
 // Create wp-config.php.
 wp_cli( 'config create --dbname=wordpress_develop --dbuser=root --dbpass=password --dbhost=mysql --path=/var/www/src --force' );
 
@@ -48,7 +53,9 @@ wait_on( { resources: [ `tcp:localhost:${process.env.LOCAL_PORT}`] } )
  * @param {string} cmd The WP-CLI command to run.
  */
 function wp_cli( cmd ) {
-	execSync( `docker compose run --rm cli ${cmd}`, { stdio: 'inherit' } );
+	const composeFiles = local_env_utils.get_compose_files();
+
+	execSync( `docker compose ${composeFiles} run --rm cli ${cmd}`, { stdio: 'inherit' } );
 }
 
 /**
@@ -56,7 +63,8 @@ function wp_cli( cmd ) {
  */
 function install_wp_importer() {
 	const testPluginDirectory = 'tests/phpunit/data/plugins/wordpress-importer';
+	const composeFiles = local_env_utils.get_compose_files();
 
-	execSync( `docker compose exec -T php rm -rf ${testPluginDirectory}`, { stdio: 'inherit' } );
-	execSync( `docker compose exec -T php git clone https://github.com/WordPress/wordpress-importer.git ${testPluginDirectory} --depth=1`, { stdio: 'inherit' } );
+	execSync( `docker compose ${composeFiles} exec -T php rm -rf ${testPluginDirectory}`, { stdio: 'inherit' } );
+	execSync( `docker compose ${composeFiles} exec -T php git clone https://github.com/WordPress/wordpress-importer.git ${testPluginDirectory} --depth=1`, { stdio: 'inherit' } );
 }
diff --git a/tools/local-env/scripts/start.js b/tools/local-env/scripts/start.js
index 92fa3601499c8..ef7fb7b7d4360 100644
--- a/tools/local-env/scripts/start.js
+++ b/tools/local-env/scripts/start.js
@@ -1,6 +1,7 @@
 const dotenv       = require( 'dotenv' );
 const dotenvExpand = require( 'dotenv-expand' );
 const { execSync } = require( 'child_process' );
+const local_env_utils = require( './utils' );
 const { constants, copyFile } = require( 'node:fs' );
 
 // Copy the default .env file when one is not present.
@@ -10,6 +11,11 @@ copyFile( '.env.example', '.env', constants.COPYFILE_EXCL, (e) => {
 
 dotenvExpand.expand( dotenv.config() );
 
+const composeFiles = local_env_utils.get_compose_files();
+
+// Determine if a non-default database authentication plugin needs to be used.
+local_env_utils.determine_auth_option();
+
 // Check if the Docker service is running.
 try {
 	execSync( 'docker info' );
@@ -25,7 +31,7 @@ try {
 const containers = ( process.env.LOCAL_PHP_MEMCACHED === 'true' )
 	? 'wordpress-develop memcached'
 	: 'wordpress-develop';
-execSync( `docker compose up -d ${containers}`, { stdio: 'inherit' } );
+execSync( `docker compose ${composeFiles} up -d ${containers}`, { stdio: 'inherit' } );
 
 // If Docker Toolbox is being used, we need to manually forward LOCAL_PORT to the Docker VM.
 if ( process.env.DOCKER_TOOLBOX_INSTALL_PATH ) {
diff --git a/tools/local-env/scripts/utils.js b/tools/local-env/scripts/utils.js
new file mode 100644
index 0000000000000..88243b3413268
--- /dev/null
+++ b/tools/local-env/scripts/utils.js
@@ -0,0 +1,53 @@
+const local_env_utils = {
+
+	/**
+	 * Determines which Docker compose files are required to properly configure the local environment given the
+	 * specified PHP version, database type, and database version.
+	 *
+	 * By default, only the standard docker-compose.yml file will be used.
+	 *
+	 * When PHP 7.2 or 7.3 is used in combination with MySQL 8.4, an override file will also be returned to ensure
+	 * that the mysql_native_password plugin authentication plugin is on and available for use.
+	 */
+	get_compose_files: function() {
+		var composeFiles = '-f docker-compose.yml';
+
+		if ( process.env.LOCAL_DB_TYPE !== 'mysql' ) {
+			return composeFiles;
+		}
+
+		if ( process.env.LOCAL_PHP !== '7.2-fpm' && process.env.LOCAL_PHP !== '7.3-fpm' ) {
+			return composeFiles;
+		}
+
+		// PHP 7.2/7.3 in combination with MySQL 8.4 requires additional configuration to function properly.
+		if ( process.env.LOCAL_DB_VERSION === '8.4' ) {
+			composeFiles = composeFiles + ' -f tools/local-env/old-php-mysql-84.override.yml';
+		}
+
+		return composeFiles;
+	},
+
+	/**
+	 * Determines the option to pass for proper authentication plugin configuration given the specified PHP version,
+	 * database type, and database version.
+	 */
+	determine_auth_option: function() {
+		if ( process.env.LOCAL_DB_TYPE !== 'mysql' ) {
+			return;
+		}
+
+		if ( process.env.LOCAL_PHP !== '7.2-fpm' && process.env.LOCAL_PHP !== '7.3-fpm' ) {
+			return;
+		}
+
+		// MySQL 8.4 removed --default-authentication-plugin in favor of --authentication-policy.
+		if ( process.env.LOCAL_DB_VERSION === '8.4' ) {
+			process.env.LOCAL_DB_AUTH_OPTION = '--authentication-policy=mysql_native_password';
+		} else {
+			process.env.LOCAL_DB_AUTH_OPTION = '--default-authentication-plugin=mysql_native_password';
+		}
+	}
+};
+
+module.exports = local_env_utils;