This article analyzes the environmental opportunities and limitations of digitalization in the agricultural sector by applying qualitative governance analysis. Agriculture is recognized as a key application area for digital technologies, including artificial intelligence. This is not least because it faces major sustainability challenges, especially with regard to meeting the climate and biodiversity targets set out in the Paris Agreement and the Convention on Biological Diversity, as well as the water-related objectives of EU environmental legislation. Based on an overview of the possible applications of digital technologies in agriculture, the article offers a status quo analysis of legal acts with relevance to digitalization in the EU agricultural sector. It is found that a reliable legal framework with regard to product liability and product safety, as well as data privacy, data access, and data security is important in this context. In addition, the European Common Agricultural Policy, as the most important funding instrument for digital innovations in the agricultural sector, should be designed in such a way that it links digitalization-related objectives more closely with sustainability targets. So far, the existing EU governance does not fully exploit the potentials of digitalization for environmental protection, and sight is lost of possible negative side effects such as rebound and shifting effects. Therefore, the article also offers proposals for the optimization of EU governance.