diff --git a/azurerm/helpers/azure/resource_group.go b/azurerm/helpers/azure/resource_group.go
index 9a15422613a7..7967f69f7bf8 100644
--- a/azurerm/helpers/azure/resource_group.go
+++ b/azurerm/helpers/azure/resource_group.go
@@ -36,6 +36,16 @@ func SchemaResourceGroupNameForDataSource() *schema.Schema {
 	}
 }
 
+func SchemaResourceGroupNameOptionalComputed() *schema.Schema {
+	return &schema.Schema{
+		Type:         schema.TypeString,
+		ForceNew:     true,
+		Optional:     true,
+		Computed:     true,
+		ValidateFunc: validateResourceGroupName,
+	}
+}
+
 func validateResourceGroupName(v interface{}, k string) (warnings []string, errors []error) {
 	value := v.(string)
 
diff --git a/azurerm/internal/services/web/app_service_environment_resource.go b/azurerm/internal/services/web/app_service_environment_resource.go
index 3632b0946cdc..21650652e52a 100644
--- a/azurerm/internal/services/web/app_service_environment_resource.go
+++ b/azurerm/internal/services/web/app_service_environment_resource.go
@@ -86,6 +86,9 @@ func resourceArmAppServiceEnvironment() *schema.Resource {
 				}, false),
 			},
 
+			// TODO in 3.0 Make it "Required"
+			"resource_group_name": azure.SchemaResourceGroupNameOptionalComputed(),
+
 			"tags": tags.ForceNewSchema(),
 
 			// Computed
@@ -93,11 +96,6 @@ func resourceArmAppServiceEnvironment() *schema.Resource {
 				Type:     schema.TypeString,
 				Computed: true,
 			},
-
-			"resource_group_name": {
-				Type:     schema.TypeString,
-				Computed: true,
-			},
 		},
 	}
 }
@@ -118,10 +116,19 @@ func resourceArmAppServiceEnvironmentCreate(d *schema.ResourceData, meta interfa
 		return err
 	}
 
+	// TODO: Remove the implicit behavior in new major version.
+	// Discrepancy of resource group between ASE and Subnet is allowed. While for the sake of
+	// compatibility, we still allow user to use the resource group of Subnet to be the one for
+	// ASE implicitly. While allow user to explicitly specify the resource group, which takes higher
+	// precedence.
 	resourceGroup := subnet.ResourceGroup
-	vnet, err := networksClient.Get(ctx, resourceGroup, subnet.VirtualNetworkName, "")
+	if v, ok := d.GetOk("resource_group_name"); ok {
+		resourceGroup = v.(string)
+	}
+
+	vnet, err := networksClient.Get(ctx, subnet.ResourceGroup, subnet.VirtualNetworkName, "")
 	if err != nil {
-		return fmt.Errorf("Error retrieving Virtual Network %q (Resource Group %q): %+v", subnet.VirtualNetworkName, resourceGroup, err)
+		return fmt.Errorf("Error retrieving Virtual Network %q (Resource Group %q): %+v", subnet.VirtualNetworkName, subnet.ResourceGroup, err)
 	}
 
 	// the App Service Environment has to be in the same location as the Virtual Network
@@ -129,7 +136,7 @@ func resourceArmAppServiceEnvironmentCreate(d *schema.ResourceData, meta interfa
 	if loc := vnet.Location; loc != nil {
 		location = azure.NormalizeLocation(*loc)
 	} else {
-		return fmt.Errorf("Error determining Location from Virtual Network %q (Resource Group %q): `location` was nil", subnet.VirtualNetworkName, resourceGroup)
+		return fmt.Errorf("Error determining Location from Virtual Network %q (Resource Group %q): `location` was nil", subnet.VirtualNetworkName, subnet.ResourceGroup)
 	}
 
 	existing, err := client.Get(ctx, resourceGroup, name)
diff --git a/azurerm/internal/services/web/tests/app_service_environment_resource_test.go b/azurerm/internal/services/web/tests/app_service_environment_resource_test.go
index e338f201084f..71769ef80e8e 100644
--- a/azurerm/internal/services/web/tests/app_service_environment_resource_test.go
+++ b/azurerm/internal/services/web/tests/app_service_environment_resource_test.go
@@ -120,6 +120,25 @@ func TestAccAzureRMAppServiceEnvironment_withAppServicePlan(t *testing.T) {
 	})
 }
 
+func TestAccAzureRMAppServiceEnvironment_dedicatedResourceGroup(t *testing.T) {
+	data := acceptance.BuildTestData(t, "azurerm_app_service_environment", "test")
+
+	resource.ParallelTest(t, resource.TestCase{
+		PreCheck:     func() { acceptance.PreCheck(t) },
+		Providers:    acceptance.SupportedProviders,
+		CheckDestroy: testCheckAzureRMAppServiceEnvironmentDestroy,
+		Steps: []resource.TestStep{
+			{
+				Config: testAccAzureRMAppServiceEnvironment_dedicatedResourceGroup(data),
+				Check: resource.ComposeTestCheckFunc(
+					testCheckAzureRMAppServiceEnvironmentExists(data.ResourceName),
+				),
+			},
+			data.ImportStep(),
+		},
+	})
+}
+
 func testCheckAzureRMAppServiceEnvironmentExists(resourceName string) resource.TestCheckFunc {
 	return func(s *terraform.State) error {
 		client := acceptance.AzureProvider.Meta().(*clients.Client).Web.AppServiceEnvironmentsClient
@@ -234,6 +253,24 @@ resource "azurerm_app_service_plan" "test" {
 `, template, data.RandomInteger)
 }
 
+func testAccAzureRMAppServiceEnvironment_dedicatedResourceGroup(data acceptance.TestData) string {
+	template := testAccAzureRMAppServiceEnvironment_template(data)
+	return fmt.Sprintf(`
+%s
+
+resource "azurerm_resource_group" "test2" {
+  name     = "acctestRG2-%[2]d"
+  location = "%s"
+}
+
+resource "azurerm_app_service_environment" "test" {
+  name                = "acctest-ase-%[2]d"
+  resource_group_name = azurerm_resource_group.test2.name
+  subnet_id           = azurerm_subnet.ase.id
+}
+`, template, data.RandomInteger, data.Locations.Secondary)
+}
+
 func testAccAzureRMAppServiceEnvironment_template(data acceptance.TestData) string {
 	return fmt.Sprintf(`
 provider "azurerm" {
diff --git a/website/docs/r/app_service_environment.html.markdown b/website/docs/r/app_service_environment.html.markdown
index a0518caac047..ed0cea611f3c 100644
--- a/website/docs/r/app_service_environment.html.markdown
+++ b/website/docs/r/app_service_environment.html.markdown
@@ -61,12 +61,14 @@ resource "azurerm_app_service_environment" "example" {
 
 * `front_end_scale_factor` - (Optional) Scale factor for front end instances. Possible values are between `5` and `15`. Defaults to `15`.
 
+* `resource_group_name` - (Optional) The name of the Resource Group where the App Service Environment exists. Defaults to the Resource Group of the Subnet (specified by `subnet_id`).
+
+* `tags` - (Optional) A mapping of tags to assign to the resource. Changing this forces a new resource to be created. 
+
 ## Attribute Reference
 
 * `id` - The ID of the App Service Environment.
 
-* `resource_group_name` - The name of the Resource Group where the App Service Environment exists.
-
 * `location` - The location where the App Service Environment exists.
 
 ## Timeouts