diff --git a/src/lightning/fabric/CHANGELOG.md b/src/lightning/fabric/CHANGELOG.md
index f0a29b8e15..919704929b 100644
--- a/src/lightning/fabric/CHANGELOG.md
+++ b/src/lightning/fabric/CHANGELOG.md
@@ -59,6 +59,7 @@ The format is based on [Keep a Changelog](http://keepachangelog.com/en/1.0.0/).
 ### Fixed
 
 - Fixed an issue causing a wrong environment plugin to be selected when `accelerator=tpu` and `devices > 1` ([#16806](https://github.com/Lightning-AI/lightning/pull/16806))
+- Fixed parsing of defaults for `--accelerator` and `--precision` in Fabric CLI when `accelerator` and `precision` are set to non-default values in the code ([#16818](https://github.com/Lightning-AI/lightning/pull/16818))
 
 
 ## [1.9.2] - 2023-02-15
diff --git a/src/lightning/fabric/cli.py b/src/lightning/fabric/cli.py
index 4671a75da7..cd715b79cf 100644
--- a/src/lightning/fabric/cli.py
+++ b/src/lightning/fabric/cli.py
@@ -56,7 +56,7 @@ if _CLICK_AVAILABLE:
     @click.option(
         "--accelerator",
         type=click.Choice(_SUPPORTED_ACCELERATORS),
-        default="cpu",
+        default=None,
         help="The hardware accelerator to run on.",
     )
     @click.option(
@@ -108,7 +108,7 @@ if _CLICK_AVAILABLE:
     @click.option(
         "--precision",
         type=click.Choice(get_args(_PRECISION_INPUT_STR) + get_args(_PRECISION_INPUT_STR_ALIAS)),
-        default="32-true",
+        default=None,
         help=(
             "Double precision (``64-true`` or ``64``), full precision (``32-true`` or ``64``), "
             "half precision (``16-mixed`` or ``16``) or bfloat16 precision (``bf16-mixed`` or ``bf16``)"
@@ -133,12 +133,14 @@ def _set_env_variables(args: Namespace) -> None:
     The Fabric connector will parse the arguments set here.
     """
     os.environ["LT_CLI_USED"] = "1"
-    os.environ["LT_ACCELERATOR"] = str(args.accelerator)
+    if args.accelerator is not None:
+        os.environ["LT_ACCELERATOR"] = str(args.accelerator)
     if args.strategy is not None:
         os.environ["LT_STRATEGY"] = str(args.strategy)
     os.environ["LT_DEVICES"] = str(args.devices)
     os.environ["LT_NUM_NODES"] = str(args.num_nodes)
-    os.environ["LT_PRECISION"] = str(args.precision)
+    if args.precision is not None:
+        os.environ["LT_PRECISION"] = str(args.precision)
 
 
 def _get_num_processes(accelerator: str, devices: str) -> int:
diff --git a/tests/tests_fabric/test_cli.py b/tests/tests_fabric/test_cli.py
index 051df16528..7f249a0c95 100644
--- a/tests/tests_fabric/test_cli.py
+++ b/tests/tests_fabric/test_cli.py
@@ -39,11 +39,11 @@ def test_cli_env_vars_defaults(monkeypatch, fake_script):
         _run_model.main([fake_script])
     assert e.value.code == 0
     assert os.environ["LT_CLI_USED"] == "1"
-    assert os.environ["LT_ACCELERATOR"] == "cpu"
+    assert "LT_ACCELERATOR" not in os.environ
     assert "LT_STRATEGY" not in os.environ
     assert os.environ["LT_DEVICES"] == "1"
     assert os.environ["LT_NUM_NODES"] == "1"
-    assert os.environ["LT_PRECISION"] == "32-true"
+    assert "LT_PRECISION" not in os.environ
 
 
 @pytest.mark.parametrize("accelerator", ["cpu", "gpu", "cuda", pytest.param("mps", marks=RunIf(mps=True))])
diff --git a/tests/tests_fabric/test_connector.py b/tests/tests_fabric/test_connector.py
index b29fb92376..c31094406c 100644
--- a/tests/tests_fabric/test_connector.py
+++ b/tests/tests_fabric/test_connector.py
@@ -813,11 +813,14 @@ def test_strategy_str_passed_being_case_insensitive(_, strategy, strategy_cls):
     assert isinstance(connector.strategy, strategy_cls)
 
 
-@pytest.mark.parametrize("precision", ["64-true", "32-true", "16-mixed", "bf16-mixed"])
+@pytest.mark.parametrize("precision", [None, "64-true", "32-true", "16-mixed", "bf16-mixed"])
 @mock.patch("lightning.fabric.accelerators.cuda.num_cuda_devices", return_value=1)
 def test_precision_from_environment(_, precision):
     """Test that the precision input can be set through the environment variable."""
-    with mock.patch.dict(os.environ, {"LT_PRECISION": precision}):
+    env_vars = {}
+    if precision is not None:
+        env_vars["LT_PRECISION"] = precision
+    with mock.patch.dict(os.environ, env_vars):
         connector = _Connector(accelerator="cuda")  # need to use cuda, because AMP not available on CPU
     assert isinstance(connector.precision, Precision)
 
@@ -825,6 +828,7 @@ def test_precision_from_environment(_, precision):
 @pytest.mark.parametrize(
     "accelerator, strategy, expected_accelerator, expected_strategy",
     [
+        (None, None, CPUAccelerator, SingleDeviceStrategy),
         ("cpu", None, CPUAccelerator, SingleDeviceStrategy),
         ("cpu", "ddp", CPUAccelerator, DDPStrategy),
         pytest.param("mps", None, MPSAccelerator, SingleDeviceStrategy, marks=RunIf(mps=True)),
@@ -836,7 +840,9 @@ def test_precision_from_environment(_, precision):
 )
 def test_accelerator_strategy_from_environment(accelerator, strategy, expected_accelerator, expected_strategy):
     """Test that the accelerator and strategy input can be set through the environment variables."""
-    env_vars = {"LT_ACCELERATOR": accelerator}
+    env_vars = {}
+    if accelerator is not None:
+        env_vars["LT_ACCELERATOR"] = accelerator
     if strategy is not None:
         env_vars["LT_STRATEGY"] = strategy