diff --git a/driver/config/config.go b/driver/config/config.go
index 0d755a11ba63..2b0380677dd8 100644
--- a/driver/config/config.go
+++ b/driver/config/config.go
@@ -162,6 +162,7 @@ const (
 	ViperKeySelfServiceVerificationNotifyUnknownRecipients   = "selfservice.flows.verification.notify_unknown_recipients"
 	ViperKeyDefaultIdentitySchemaID                          = "identity.default_schema_id"
 	ViperKeyIdentitySchemas                                  = "identity.schemas"
+	ViperKeyIdentitySchemaFallbackTemplate                   = "identity.schema_fallback_template"
 	ViperKeyHasherAlgorithm                                  = "hashers.algorithm"
 	ViperKeyHasherArgon2ConfigMemory                         = "hashers.argon2.memory"
 	ViperKeyHasherArgon2ConfigIterations                     = "hashers.argon2.iterations"
@@ -356,6 +357,8 @@ func HookStrategyKey(key, strategy string) string {
 	}
 }
 
+var ErrSchemaNotFound = errors.New("schema not found")
+
 func (s Schemas) FindSchemaByID(id string) (*Schema, error) {
 	for _, sc := range s {
 		if sc.ID == id {
@@ -363,7 +366,7 @@ func (s Schemas) FindSchemaByID(id string) (*Schema, error) {
 		}
 	}
 
-	return nil, errors.Errorf("unable to find identity schema with id: %s", id)
+	return nil, errors.Wrapf(ErrSchemaNotFound, "schema with id %s not found", id)
 }
 
 func MustNew(t testing.TB, l *logrusx.Logger, stdOutOrErr io.Writer, opts ...configx.OptionModifier) *Config {
@@ -467,7 +470,7 @@ func (p *Config) validateIdentitySchemas(ctx context.Context) error {
 		return err
 	}
 
-	ss, err := p.IdentityTraitsSchemas(ctx)
+	ss, err := p.ConfiguredSchemas(ctx)
 	if err != nil {
 		return err
 	}
@@ -571,7 +574,7 @@ func (p *Config) listenOn(ctx context.Context, key string) string {
 }
 
 func (p *Config) DefaultIdentityTraitsSchemaURL(ctx context.Context) (*url.URL, error) {
-	ss, err := p.IdentityTraitsSchemas(ctx)
+	ss, err := p.ConfiguredSchemas(ctx)
 	if err != nil {
 		return nil, err
 	}
@@ -597,7 +600,10 @@ func (p *Config) OIDCRedirectURIBase(ctx context.Context) *url.URL {
 	return p.GetProvider(ctx).URIF(ViperKeyOIDCBaseRedirectURL, p.SelfPublicURL(ctx))
 }
 
-func (p *Config) IdentityTraitsSchemas(ctx context.Context) (ss Schemas, err error) {
+// ConfiguredSchemas returns the identity traits schemas.
+//
+// Please use driver.Registry.IdentityTraitsSchemas() instead.
+func (p *Config) ConfiguredSchemas(ctx context.Context) (ss Schemas, err error) {
 	if err = p.GetProvider(ctx).Koanf.Unmarshal(ViperKeyIdentitySchemas, &ss); err != nil {
 		return ss, nil
 	}
@@ -605,6 +611,10 @@ func (p *Config) IdentityTraitsSchemas(ctx context.Context) (ss Schemas, err err
 	return ss, nil
 }
 
+func (p *Config) IdentityTraitsSchemaFallback(ctx context.Context) (fallback string) {
+	return p.GetProvider(ctx).StringF(ViperKeyIdentitySchemaFallbackTemplate, "")
+}
+
 func (p *Config) AdminListenOn(ctx context.Context) string {
 	return p.listenOn(ctx, "admin")
 }
diff --git a/driver/config/config_test.go b/driver/config/config_test.go
index 6cb37f100850..c72d4cd9c3b8 100644
--- a/driver/config/config_test.go
+++ b/driver/config/config_test.go
@@ -168,7 +168,7 @@ func TestViperProvider(t *testing.T) {
 			require.NoError(t, err)
 			assert.Equal(t, "http://test.kratos.ory.sh/default-identity.schema.json", ds.String())
 
-			ss, err := c.IdentityTraitsSchemas(ctx)
+			ss, err := c.ConfiguredSchemas(ctx)
 			require.NoError(t, err)
 			assert.Equal(t, 2, len(ss))
 
diff --git a/driver/registry_default_schemas.go b/driver/registry_default_schemas.go
index 9f68fbd2d86e..45ea6e028d0d 100644
--- a/driver/registry_default_schemas.go
+++ b/driver/registry_default_schemas.go
@@ -13,7 +13,7 @@ import (
 )
 
 func (m *RegistryDefault) IdentityTraitsSchemas(ctx context.Context) (schema.Schemas, error) {
-	ms, err := m.Config().IdentityTraitsSchemas(ctx)
+	ms, err := m.Config().ConfiguredSchemas(ctx)
 	if err != nil {
 		return nil, err
 	}
diff --git a/embedx/config.schema.json b/embedx/config.schema.json
index 0a94c54dbb23..4c418e0f91fb 100644
--- a/embedx/config.schema.json
+++ b/embedx/config.schema.json
@@ -2502,6 +2502,10 @@
             },
             "required": ["id", "url"]
           }
+        },
+        "schema_fallback_template": {
+          "title": "Identity Schema Fallback Template",
+          "type": "string"
         }
       },
       "required": ["schemas"],
diff --git a/identity/validator.go b/identity/validator.go
index 3bd8f9476fa5..99bd26208348 100644
--- a/identity/validator.go
+++ b/identity/validator.go
@@ -46,7 +46,7 @@ func (v *Validator) ValidateWithRunner(ctx context.Context, i *Identity, runners
 		return err
 	}
 
-	s, err := ss.GetByID(i.SchemaID)
+	s, err := ss.GetByID(i.SchemaID, v.d.Config().IdentityTraitsSchemaFallback(ctx))
 	if err != nil {
 		return err
 	}
diff --git a/internal/testhelpers/config.go b/internal/testhelpers/config.go
index 2a24709c0745..4efae159b712 100644
--- a/internal/testhelpers/config.go
+++ b/internal/testhelpers/config.go
@@ -42,7 +42,7 @@ func SetDefaultIdentitySchema(conf *config.Config, url string) func() {
 // It also registeres a test cleanup function, to reset the schemas to the original values, after the test finishes
 func UseIdentitySchema(t *testing.T, conf *config.Config, url string) (id string) {
 	id = randx.MustString(16, randx.Alpha)
-	schemas, err := conf.IdentityTraitsSchemas(context.Background())
+	schemas, err := conf.ConfiguredSchemas(context.Background())
 	require.NoError(t, err)
 	conf.MustSet(context.Background(), config.ViperKeyIdentitySchemas, append(schemas, config.Schema{
 		ID:  id,
diff --git a/persistence/sql/identity/persister_identity.go b/persistence/sql/identity/persister_identity.go
index 52daaf2fc71b..9b8c12c15378 100644
--- a/persistence/sql/identity/persister_identity.go
+++ b/persistence/sql/identity/persister_identity.go
@@ -922,17 +922,11 @@ func (p *IdentityPersister) ListIdentities(ctx context.Context, params identity.
 		return nil, nil, err
 	}
 
-	schemaCache := map[string]string{}
 	for k := range is {
 		i := &is[k]
 
-		if u, ok := schemaCache[i.SchemaID]; ok {
-			i.SchemaURL = u
-		} else {
-			if err := p.InjectTraitsSchemaURL(ctx, i); err != nil {
-				return nil, nil, err
-			}
-			schemaCache[i.SchemaID] = i.SchemaURL
+		if err := p.InjectTraitsSchemaURL(ctx, i); err != nil {
+			return nil, nil, err
 		}
 
 		if err := i.Validate(); err != nil {
@@ -1133,20 +1127,9 @@ func (p *IdentityPersister) validateIdentity(ctx context.Context, i *identity.Id
 	return nil
 }
 
+// InjectTraitsSchemaURL sets the schema URL on the identity. The schema URL is the one hosted by Ory Kratos, and not the actual
+// schema URL, which might very well be a base64 encoded string, or an internal URL. The Schema URL is not used internally, but only exposed when the identity is sent over the REST API.
 func (p *IdentityPersister) InjectTraitsSchemaURL(ctx context.Context, i *identity.Identity) (err error) {
-	// This trace is more noisy than it's worth in diagnostic power.
-	// ctx, span := p.r.Tracer(ctx).Tracer().Start(ctx, "persistence.sql.InjectTraitsSchemaURL")
-	// defer otelx.End(span, &err)
-
-	ss, err := p.r.IdentityTraitsSchemas(ctx)
-	if err != nil {
-		return err
-	}
-	s, err := ss.GetByID(i.SchemaID)
-	if err != nil {
-		return errors.WithStack(herodot.ErrInternalServerError.WithReasonf(
-			`The JSON Schema "%s" for this identity's traits could not be found.`, i.SchemaID))
-	}
-	i.SchemaURL = s.SchemaURL(p.r.Config().SelfPublicURL(ctx)).String()
+	i.SchemaURL = schema.IDToURL(p.r.Config().SelfPublicURL(ctx), i.SchemaID).String()
 	return nil
 }
diff --git a/schema/handler.go b/schema/handler.go
index e154ae75d699..4abfd78c0d83 100644
--- a/schema/handler.go
+++ b/schema/handler.go
@@ -115,14 +115,16 @@ func (h *Handler) getIdentitySchema(w http.ResponseWriter, r *http.Request, ps h
 	}
 
 	id := ps.ByName("id")
-	s, err := ss.GetByID(id)
+
+	// The first attempt should use no fallback template.
+	s, err := ss.GetByID(id, "")
 	if err != nil {
-		// Maybe it is a base64 encoded ID?
+		// schema.SchemaURL base64 encodes the schema ID in order for it to work with httprouter if the schema ID contains slashes.
 		if dec, err := base64.RawURLEncoding.DecodeString(id); err == nil {
 			id = string(dec)
 		}
 
-		s, err = ss.GetByID(id)
+		s, err = ss.GetByID(id, h.r.Config().IdentityTraitsSchemaFallback(ctx))
 		if err != nil {
 			h.r.Writer().WriteError(w, r, errors.WithStack(herodot.ErrNotFound.WithReasonf("Identity schema `%s` could not be found.", id)))
 			return
diff --git a/schema/handler_test.go b/schema/handler_test.go
index a5bdf06a5a83..d2a625eda32c 100644
--- a/schema/handler_test.go
+++ b/schema/handler_test.go
@@ -76,7 +76,7 @@ func TestHandler(t *testing.T) {
 	}
 
 	getSchemaById := func(id string) *schema.Schema {
-		s, err := schemas.GetByID(id)
+		s, err := schemas.GetByID(id, "")
 		require.NoError(t, err)
 		return s
 	}
diff --git a/schema/schema.go b/schema/schema.go
index 69b6bbca7332..7c84e88f0a9b 100644
--- a/schema/schema.go
+++ b/schema/schema.go
@@ -6,6 +6,7 @@ package schema
 import (
 	"context"
 	"encoding/base64"
+	"fmt"
 	"io"
 	"net/url"
 	"strings"
@@ -26,7 +27,7 @@ type IdentityTraitsProvider interface {
 	IdentityTraitsSchemas(ctx context.Context) (Schemas, error)
 }
 
-func (s Schemas) GetByID(id string) (*Schema, error) {
+func (s Schemas) GetByID(id string, fallbackTemplate string) (*Schema, error) {
 	if id == "" {
 		id = config.DefaultIdentityTraitsSchemaID
 	}
@@ -37,6 +38,21 @@ func (s Schemas) GetByID(id string) (*Schema, error) {
 		}
 	}
 
+	if fallbackTemplate != "" {
+		source := fmt.Sprintf(fallbackTemplate, id)
+
+		parsedURL, err := url.Parse(source)
+		if err != nil {
+			return nil, errors.WithStack(herodot.ErrBadRequest.WithReasonf("Unable to parse identity schema fallback tempalte. Please contact the site's administrator."))
+		}
+
+		return &Schema{
+			ID:     id,
+			URL:    parsedURL,
+			RawURL: fmt.Sprintf(fallbackTemplate, id),
+		}, nil
+	}
+
 	return nil, errors.WithStack(herodot.ErrBadRequest.WithReasonf("Unable to find JSON Schema ID: %s", id))
 }
 
@@ -98,11 +114,16 @@ func GetKeysInOrder(ctx context.Context, schemaRef string) ([]string, error) {
 }
 
 type Schema struct {
-	ID     string   `json:"id"`
-	URL    *url.URL `json:"-"`
-	RawURL string   `json:"url"`
+	ID  string   `json:"id"`
+	URL *url.URL `json:"-"`
+	// RawURL contains the raw URL value as it was passed in the configuration. URL parsing can break base64 encoded URLs.
+	RawURL string `json:"url"`
 }
 
 func (s *Schema) SchemaURL(host *url.URL) *url.URL {
-	return urlx.AppendPaths(host, SchemasPath, base64.RawURLEncoding.EncodeToString([]byte(s.ID)))
+	return IDToURL(host, s.ID)
+}
+
+func IDToURL(host *url.URL, id string) *url.URL {
+	return urlx.AppendPaths(host, SchemasPath, base64.RawURLEncoding.EncodeToString([]byte(id)))
 }
diff --git a/schema/schema_test.go b/schema/schema_test.go
index bb77fdd55a2e..71432676bb31 100644
--- a/schema/schema_test.go
+++ b/schema/schema_test.go
@@ -40,37 +40,47 @@ func TestSchemas_GetByID(t *testing.T) {
 	}
 
 	t.Run("case=get first schema", func(t *testing.T) {
-		s, err := ss.GetByID("foo")
+		s, err := ss.GetByID("foo", "")
 		require.NoError(t, err)
 		assert.Equal(t, &ss[0], s)
 	})
 
 	t.Run("case=get second schema", func(t *testing.T) {
-		s, err := ss.GetByID("bar")
+		s, err := ss.GetByID("bar", "")
 		require.NoError(t, err)
 		assert.Equal(t, &ss[1], s)
 	})
 
 	t.Run("case=get third schema", func(t *testing.T) {
-		s, err := ss.GetByID("foobar")
+		s, err := ss.GetByID("foobar", "")
 		require.NoError(t, err)
 		assert.Equal(t, &ss[2], s)
 	})
 
 	t.Run("case=get default schema", func(t *testing.T) {
-		s1, err := ss.GetByID("")
+		s1, err := ss.GetByID("", "")
 		require.NoError(t, err)
-		s2, err := ss.GetByID(config.DefaultIdentityTraitsSchemaID)
+		s2, err := ss.GetByID(config.DefaultIdentityTraitsSchemaID, "")
 		require.NoError(t, err)
 		assert.Equal(t, &ss[3], s1)
 		assert.Equal(t, &ss[3], s2)
 	})
 
 	t.Run("case=should return error on not existing id", func(t *testing.T) {
-		s, err := ss.GetByID("not existing id")
+		s, err := ss.GetByID("not existing id", "")
 		require.Error(t, err)
 		assert.Equal(t, (*Schema)(nil), s)
 	})
+
+	t.Run("case=should return fallback", func(t *testing.T) {
+		s, err := ss.GetByID("fallback", "https://%s/")
+		require.NoError(t, err)
+		assert.Equal(t, &Schema{
+			ID:     "fallback",
+			URL:    urlx.ParseOrPanic("https://fallback/"),
+			RawURL: "https://fallback/",
+		}, s)
+	})
 }
 
 func TestSchemas_List(t *testing.T) {
diff --git a/selfservice/flow/settings/error.go b/selfservice/flow/settings/error.go
index 2fd190c888e9..96112c1068ba 100644
--- a/selfservice/flow/settings/error.go
+++ b/selfservice/flow/settings/error.go
@@ -221,7 +221,7 @@ func (s *ErrorHandler) WriteFlowError(
 		return
 	}
 
-	schema, err := schemas.GetByID(id.SchemaID)
+	schema, err := schemas.GetByID(id.SchemaID, s.d.Config().IdentityTraitsSchemaFallback(r.Context()))
 	if err != nil {
 		s.forward(w, r, f, err)
 		return
diff --git a/selfservice/strategy/code/strategy.go b/selfservice/strategy/code/strategy.go
index fd8993447744..ffba87edf57d 100644
--- a/selfservice/strategy/code/strategy.go
+++ b/selfservice/strategy/code/strategy.go
@@ -213,7 +213,7 @@ func (s *Strategy) populateChooseMethodFlow(r *http.Request, f flow.Flow) error
 			if err != nil {
 				return err
 			}
-			iSchema, err := allSchemas.GetByID(sess.Identity.SchemaID)
+			iSchema, err := allSchemas.GetByID(sess.Identity.SchemaID, s.deps.Config().IdentityTraitsSchemaFallback(r.Context()))
 			if err != nil {
 				return err
 			}
diff --git a/selfservice/strategy/profile/strategy.go b/selfservice/strategy/profile/strategy.go
index 0942d738840e..095c29d4da84 100644
--- a/selfservice/strategy/profile/strategy.go
+++ b/selfservice/strategy/profile/strategy.go
@@ -81,19 +81,19 @@ func (s *Strategy) SettingsStrategyID() string {
 func (s *Strategy) RegisterSettingsRoutes(public *x.RouterPublic) {}
 
 func (s *Strategy) PopulateSettingsMethod(r *http.Request, id *identity.Identity, f *settings.Flow) error {
-	schemas, err := s.d.Config().IdentityTraitsSchemas(r.Context())
+	schemas, err := s.d.IdentityTraitsSchemas(r.Context())
 	if err != nil {
 		return err
 	}
 
-	traitsSchema, err := schemas.FindSchemaByID(id.SchemaID)
+	traitsSchema, err := schemas.GetByID(id.SchemaID, s.d.Config().IdentityTraitsSchemaFallback(r.Context()))
 	if err != nil {
 		return err
 	}
 
 	// use a schema compiler that disables identifiers
 	schemaCompiler := jsonschema.NewCompiler()
-	nodes, err := container.NodesFromJSONSchema(r.Context(), node.ProfileGroup, traitsSchema.URL, "", schemaCompiler)
+	nodes, err := container.NodesFromJSONSchema(r.Context(), node.ProfileGroup, traitsSchema.URL.String(), "", schemaCompiler)
 	if err != nil {
 		return err
 	}
@@ -270,7 +270,7 @@ func (s *Strategy) newSettingsProfileDecoder(ctx context.Context, i *identity.Id
 	if err != nil {
 		return nil, err
 	}
-	ss, err := schemas.GetByID(i.SchemaID)
+	ss, err := schemas.GetByID(i.SchemaID, s.d.Config().IdentityTraitsSchemaFallback(ctx))
 	if err != nil {
 		return nil, err
 	}