diff --git a/CHANGELOG.md b/CHANGELOG.md
index 329e095dfca..b8fe8c8957a 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -5,6 +5,7 @@
 ### Bug fixes and improvements
 
 - server: do not serialize env vars in logs or errors for remote schemas
+- server: fix regression introduced in v2.7.0-beta.1: the `kind` field in source metadata was inadvertently made a required field, breaking upgrades from v1 and new cloud projects
 
 ## v2.6.2
 
diff --git a/server/src-lib/Hasura/RQL/Types/Metadata.hs b/server/src-lib/Hasura/RQL/Types/Metadata.hs
index c0d03476e94..5a348fd629f 100644
--- a/server/src-lib/Hasura/RQL/Types/Metadata.hs
+++ b/server/src-lib/Hasura/RQL/Types/Metadata.hs
@@ -103,7 +103,7 @@ where
 
 import Control.Lens hiding (set, (.=))
 import Data.Aeson.Casing
-import Data.Aeson.Extended (mapWithJSONPath)
+import Data.Aeson.Extended (FromJSONWithContext (..), mapWithJSONPath)
 import Data.Aeson.Ordered qualified as AO
 import Data.Aeson.TH
 import Data.Aeson.Types
@@ -465,10 +465,9 @@ deriving instance (Backend b) => Eq (SourceMetadata b)
 
 instance (Backend b) => Cacheable (SourceMetadata b)
 
-instance (Backend b) => FromJSON (SourceMetadata b) where
-  parseJSON = withObject "Object" $ \o -> do
+instance (Backend b) => FromJSONWithContext (BackendSourceKind b) (SourceMetadata b) where
+  parseJSONWithContext _smKind = withObject "Object" $ \o -> do
     _smName <- o .: "name"
-    _smKind <- o .: "kind"
     _smTables <- oMapFromL _tmTable <$> o .: "tables"
     _smFunctions <- oMapFromL _fmFunction <$> o .:? "functions" .!= []
     _smConfiguration <- o .: "configuration"
@@ -620,11 +619,11 @@ instance FromJSON Metadata where
     where
       parseSourceMetadata :: Value -> Parser (AB.AnyBackend SourceMetadata)
       parseSourceMetadata = withObject "SourceMetadata" \o -> do
-        backendSourceKind <- explicitParseField AB.parseBackendSourceKindFromJSON o "kind"
-        AB.dispatchAnyBackend'' @FromJSON @Backend
+        backendSourceKind <- explicitParseFieldMaybe AB.parseBackendSourceKindFromJSON o "kind" .!= AB.mkAnyBackend PostgresVanillaKind
+        AB.dispatchAnyBackend @Backend
           backendSourceKind
-          ( \(_kind :: BackendSourceKind b) ->
-              AB.mkAnyBackend @b <$> parseJSON (Object o)
+          ( \(kind :: BackendSourceKind b) ->
+              AB.mkAnyBackend @b <$> parseJSONWithContext kind (Object o)
           )
 
 emptyMetadata :: Metadata
diff --git a/server/tests-py/test_metadata.py b/server/tests-py/test_metadata.py
index 36c8f325ba2..393bdc6bbd8 100644
--- a/server/tests-py/test_metadata.py
+++ b/server/tests-py/test_metadata.py
@@ -136,6 +136,39 @@ class TestMetadata:
             "code": "unexpected"
         }
 
+    """Test that missing "kind" key in metadata source defaults to "postgres".
+    Regression test for https://github.com/hasura/graphql-engine-mono/issues/4501"""
+    def test_replace_metadata_default_kind(self, hge_ctx):
+        st_code, resp = hge_ctx.v1metadataq({"type": "export_metadata", "args": {}})
+        assert st_code == 200, resp
+        default_source_config = {}
+        default_source = list(filter(lambda source: (source["name"] == "default"), resp["sources"]))
+        if default_source:
+            default_source_config = default_source[0]["configuration"]
+        else:
+            assert False, "default source config not found"
+            return
+        st_code, resp = hge_ctx.v1metadataq({
+               "type": "replace_metadata",
+               "version": 2,
+               "args": {
+                 "metadata": {
+                   "version": 3,
+                   "sources": [
+                     {
+                       "name": "default",
+                       "tables": [],
+                       "configuration": default_source_config
+                     }
+                   ]
+                 }
+               }
+             })
+        assert st_code == 200, resp
+        st_code, resp = hge_ctx.v1metadataq({"type": "export_metadata", "args": {}})
+        assert st_code == 200, resp
+        assert resp["sources"][0]["kind"] == "postgres"
+
     def test_dump_internal_state(self, hge_ctx):
         check_query_f(hge_ctx, self.dir() + '/dump_internal_state.yaml')