diff --git a/.gitignore b/.gitignore
new file mode 100644
index 000000000..723ef36f4
--- /dev/null
+++ b/.gitignore
@@ -0,0 +1 @@
+.idea
\ No newline at end of file
diff --git a/ENVIRONMENT.rst b/ENVIRONMENT.rst
index 6875fa68b..22685a593 100644
--- a/ENVIRONMENT.rst
+++ b/ENVIRONMENT.rst
@@ -17,6 +17,7 @@ Environment Configuration Settings
 - **PGROOT**: a directory where we put the pgdata (by default /home/postgres/pgroot). One may adjust it to point to the mount point of the persistent volume, such as EBS.
 - **WALE_TMPDIR**: directory to store WAL-E temporary files. PGROOT/../tmp by default, make sure it has a few GBs of free space.
 - **PGDATA**: location of PostgreSQL data directory, by default PGROOT/pgdata.
+- **WAL_DIRECTORY**: location where the write-ahead log should be stored. By default stored inside PGDATA. This option is useful if you plan to use separate disks for WAL and data.
 - **PGUSER_STANDBY**: username for the replication user, 'standby' by default.
 - **PGPASSWORD_STANDBY**: a password for the replication user, 'standby' by default.
 - **STANDBY_HOST**: hostname or IP address of the primary to stream from.
diff --git a/postgres-appliance/bootstrap/clone_with_wale.py b/postgres-appliance/bootstrap/clone_with_wale.py
index 9e0adc1c5..a0ec6fd2c 100755
--- a/postgres-appliance/bootstrap/clone_with_wale.py
+++ b/postgres-appliance/bootstrap/clone_with_wale.py
@@ -22,6 +22,7 @@ def read_configuration():
     parser = argparse.ArgumentParser(description="Script to clone from S3 with support for point-in-time-recovery")
     parser.add_argument('--scope', required=True, help='target cluster name')
     parser.add_argument('--datadir', required=True, help='target cluster postgres data directory')
+    parser.add_argument('--waldir', required=True, help='target cluster postgres wal directory')
     parser.add_argument('--recovery-target-time',
                         help='the timestamp up to which recovery will proceed (including time zone)',
                         dest='recovery_target_time_string')
@@ -29,7 +30,7 @@ def read_configuration():
                         'command to fetch that backup without running it')
     args = parser.parse_args()
 
-    options = namedtuple('Options', 'name datadir recovery_target_time dry_run')
+    options = namedtuple('Options', 'name datadir recovery_target_time dry_run waldir')
     if args.recovery_target_time_string:
         recovery_target_time = parse(args.recovery_target_time_string)
         if recovery_target_time.tzinfo is None:
@@ -37,7 +38,7 @@ def read_configuration():
     else:
         recovery_target_time = None
 
-    return options(args.scope, args.datadir, recovery_target_time, args.dry_run)
+    return options(args.scope, args.datadir, recovery_target_time, args.dry_run, args.waldir)
 
 
 def build_wale_command(command, datadir=None, backup=None):
@@ -178,10 +179,28 @@ def run_clone_from_s3(options):
     return 0
 
 
+def create_symbolic_link_wal_directory(pg_data, wal_dir):
+    pg_wal = f'{pg_data}/pg_wal'
+    logger.info(f"Examining whether WAL already exists or not. directory={pg_wal}")
+
+    if not os.path.isdir(pg_wal):
+        create_symbolic_link_wal_dir = ['ln', '-s', wal_dir, pg_wal]
+        ret = subprocess.call(create_symbolic_link_wal_dir)
+        if ret == 0:
+            logger.info(f"Successfully created a wal directory with symbolic link to {wal_dir}")
+        else:
+            raise Exception("Creating a separate wal directory failed with exit code {0}".format(ret))
+    else:
+        logger.info(f"Wal directory with symbolic link to {wal_dir} already exists.")
+
+
 def main():
     options = read_configuration()
     try:
         run_clone_from_s3(options)
+        logger.info(f'Found waldir={options.waldir}')
+        if options.waldir:
+            create_symbolic_link_wal_directory(options.datadir, options.waldir)
     except Exception:
         logger.exception("Clone failed")
         return 1
diff --git a/postgres-appliance/scripts/basebackup.sh b/postgres-appliance/scripts/basebackup.sh
index 7c8fc68dc..dbd0b6a2f 100755
--- a/postgres-appliance/scripts/basebackup.sh
+++ b/postgres-appliance/scripts/basebackup.sh
@@ -14,6 +14,9 @@ while getopts ":-:" optchar; do
         retries=* )
             RETRIES=${OPTARG#*=}
             ;;
+        wal_dir=* )
+            WAL_DIR=${OPTARG#*=}
+            ;;
     esac
 done
 
@@ -27,6 +30,12 @@ else
     PG_BASEBACKUP_OPTS=()
 fi
 
+if [[ -n "$WAL_DIR" ]]; then
+  PG_WAL_OPTS=(--waldir="$WAL_DIR")
+else
+  PG_WAL_OPTS=()
+fi
+
 WAL_FAST=$(dirname "$DATA_DIR")/wal_fast
 readonly WAL_FAST
 mkdir -p "$WAL_FAST"
@@ -97,7 +106,7 @@ fi
 
 ATTEMPT=0
 while [[ $((ATTEMPT++)) -le $RETRIES ]]; do
-    pg_basebackup --pgdata="${DATA_DIR}" "${PG_BASEBACKUP_OPTS[@]}" --dbname="${CONNSTR}" &
+    pg_basebackup --pgdata="${DATA_DIR}" "${PG_WAL_OPTS[@]}" "${PG_BASEBACKUP_OPTS[@]}" --dbname="${CONNSTR}" &
     basebackup_pid=$!
     wait $basebackup_pid
     EXITCODE=$?
diff --git a/postgres-appliance/scripts/configure_spilo.py b/postgres-appliance/scripts/configure_spilo.py
index 3195327fb..13ac246da 100755
--- a/postgres-appliance/scripts/configure_spilo.py
+++ b/postgres-appliance/scripts/configure_spilo.py
@@ -229,7 +229,7 @@ def deep_update(a, b):
   method: clone_with_wale
   clone_with_wale:
     command: envdir "{{CLONE_WALE_ENV_DIR}}" python3 /scripts/clone_with_wale.py
-      --recovery-target-time="{{CLONE_TARGET_TIME}}"
+      --recovery-target-time="{{CLONE_TARGET_TIME}}" --waldir="{{WAL_DIRECTORY}}"
     recovery_conf:
         restore_command: envdir "{{CLONE_WALE_ENV_DIR}}" timeout "{{WAL_RESTORE_TIMEOUT}}"
           /scripts/restore_command.sh "%f" "%p"
@@ -254,6 +254,9 @@ def deep_update(a, b):
       --port={{CLONE_PORT}} --user="{{CLONE_USER}}"
   {{/CLONE_WITH_BASEBACKUP}}
   initdb:
+    {{#WAL_DIRECTORY}}
+    - waldir: /home/postgres/wal
+    {{/WAL_DIRECTORY}}
     - encoding: UTF8
     - locale: {{INITDB_LOCALE}}.UTF-8
     - data-checksums
@@ -370,10 +373,12 @@ def deep_update(a, b):
     threshold_backup_size_percentage: {{WALE_BACKUP_THRESHOLD_PERCENTAGE}}
     retries: 2
     no_master: 1
+    wal_dir: "{{WAL_DIRECTORY}}"
   {{/USE_WALE}}
   basebackup_fast_xlog:
     command: /scripts/basebackup.sh
     retries: 2
+    wal_dir: "{{WAL_DIRECTORY}}"
 {{#STANDBY_WITH_WALE}}
   bootstrap_standby_with_wale:
     command: envdir "{{STANDBY_WALE_ENV_DIR}}" bash /scripts/wale_restore.sh
@@ -381,6 +386,7 @@ def deep_update(a, b):
     threshold_backup_size_percentage: {{WALE_BACKUP_THRESHOLD_PERCENTAGE}}
     retries: 2
     no_master: 1
+    wal_dir: "{{WAL_DIRECTORY}}"
 {{/STANDBY_WITH_WALE}}
 '''
 
@@ -524,6 +530,7 @@ def get_placeholders(provider):
     placeholders.setdefault('PGROOT', os.path.join(placeholders['PGHOME'], 'pgroot'))
     placeholders.setdefault('WALE_TMPDIR', os.path.abspath(os.path.join(placeholders['PGROOT'], '../tmp')))
     placeholders.setdefault('PGDATA', os.path.join(placeholders['PGROOT'], 'pgdata'))
+    placeholders.setdefault('WAL_DIRECTORY', '')
     placeholders.setdefault('HUMAN_ROLE', 'zalandos')
     placeholders.setdefault('PGUSER_STANDBY', 'standby')
     placeholders.setdefault('PGPASSWORD_STANDBY', 'standby')
diff --git a/postgres-appliance/scripts/restore_command.sh b/postgres-appliance/scripts/restore_command.sh
index a4bb88939..7164ef5ee 100755
--- a/postgres-appliance/scripts/restore_command.sh
+++ b/postgres-appliance/scripts/restore_command.sh
@@ -27,7 +27,7 @@ readonly wal_destination=$2
 
 wal_dir=$(dirname "$wal_destination")
 readonly wal_dir
-wal_fast_source=$(dirname "$(dirname "$(realpath "$wal_dir")")")/wal_fast/$wal_filename
+wal_fast_source=$(dirname "$PGDATA/wal_fast/$wal_filename")
 readonly wal_fast_source
 
 [[ -f $wal_fast_source ]] && exec mv "${wal_fast_source}" "${wal_destination}"
diff --git a/postgres-appliance/scripts/wale_restore.sh b/postgres-appliance/scripts/wale_restore.sh
index 497afe30f..9b758c518 100755
--- a/postgres-appliance/scripts/wale_restore.sh
+++ b/postgres-appliance/scripts/wale_restore.sh
@@ -27,6 +27,9 @@ while getopts ":-:" optchar; do
         no_master=*|no-master=* )
             NO_MASTER=${OPTARG#*=}
             ;;
+        wal_dir=* )
+            WAL_DIR=${OPTARG#*=}
+            ;;
     esac
 done
 
@@ -87,8 +90,16 @@ while true; do
     if $WAL_E backup-fetch "$DATA_DIR" LATEST; then
         version=$(<"$DATA_DIR/PG_VERSION")
         [[ "$version" =~ \. ]] && wal_name=xlog || wal_name=wal
-        readonly wal_dir=$DATA_DIR/pg_$wal_name
-        [[ ! -d $wal_dir ]] && rm -f "$wal_dir" && mkdir "$wal_dir"
+        readonly pg_wal_location=$DATA_DIR/pg_$wal_name
+
+        # Only create a symbolic link when a separate WAL directory is specified.
+        if [[ -n "$WAL_DIR" ]]; then
+          PG_WAL_OPTS=(ln -s "$WAL_DIR" "$pg_wal_location")
+        else
+          PG_WAL_OPTS=(mkdir "$pg_wal_location")
+        fi
+
+        [[ ! -d $pg_wal_location ]] && rm -f "$pg_wal_location" && "${PG_WAL_OPTS[@]}"
         # remove broken symlinks from PGDATA
         find "$DATA_DIR" -xtype l -delete
         exit 0
diff --git a/postgres-appliance/tests/test_spilo.sh b/postgres-appliance/tests/test_spilo.sh
index 478c44640..44f9f1345 100755
--- a/postgres-appliance/tests/test_spilo.sh
+++ b/postgres-appliance/tests/test_spilo.sh
@@ -227,6 +227,16 @@ function start_clone_with_basebackup_upgrade_container() {
         -d spilo3
 }
 
+function start_separate_wal_directory_container() {
+  local ID=$1
+
+  docker-compose run \
+      -e SCOPE=separatewal \
+      -e WAL_DIRECTORY="/home/postgres/wal" \
+      --name "${PREFIX}separatewal$ID" \
+      -d "spilo$ID"
+}
+
 function verify_clone_upgrade() {
     local type=$2
     local from_version=$3
@@ -241,6 +251,18 @@ function verify_archive_mode_is_on() {
     [ "$archive_mode" = "on" ]
 }
 
+function verify_wal_outside_data_directory() {
+  local target_path="/home/postgres/wal"
+  is_symbolic_link=$(
+      docker_exec "$1" "
+          [ -L '/home/postgres/pgdata/pgroot/data/pg_wal' ] &&
+          readlink -f '/home/postgres/pgdata/pgroot/data/pg_wal' | grep -q \"$target_path\" &&
+          echo true ||
+          echo false"
+  )
+  [ "$is_symbolic_link" = true ]
+}
+
 
 # TEST SUITE 1 - In-place major upgrade 12->13->...->16
 # TEST SUITE 2 - Major upgrade 12->16 after wal-e clone (with CLONE_PGVERSION set)
@@ -248,6 +270,7 @@ function verify_archive_mode_is_on() {
 # TEST SUITE 4 - Major upgrade 12->13 after wal-e clone (no CLONE_PGVERSION)
 # TEST SUITE 5 - Replica bootstrap with wal-e
 # TEST SUITE 6 - Major upgrade 13->14 after clone with basebackup
+# TEST SUITE 7 - Form a fresh cluster that persists WALs outside of data directory
 function test_spilo() {
     # TEST SUITE 1
     local container=$1
@@ -345,6 +368,11 @@ function test_spilo() {
     basebackup_container=$(start_clone_with_basebackup_upgrade_container "$upgrade_container")  # SCOPE=upgrade2 PGVERSION=14 CLONE: _SCOPE=upgrade
     log_info "[TS6] Started $basebackup_container for testing major upgrade 13->14 after clone with basebackup"
 
+    # TEST SUITE 7
+    local seapate_wal_container="${PREFIX}separatewal1"
+    start_separate_wal_directory_container 1 # WAL_DIRECTORY="/home/postgres/wal" SCOPE=separatewal
+    start_separate_wal_directory_container 2 # WAL_DIRECTORY="/home/postgres/wal" SCOPE=separatewal
+    log_info "[TS7] Started a fresh cluster to test for persisting WALs on a specified location"
 
     # TEST SUITE 1
     # run_test test_pg_upgrade_to_16_check_failed "$container"  # pg_upgrade --check complains about timescaledb
@@ -367,6 +395,12 @@ function test_spilo() {
     log_info "[TS6] Testing in-place major upgrade 13->14 after clone with basebackup"
     run_test verify_clone_upgrade "$basebackup_container" "basebackup" 13 14
     run_test verify_archive_mode_is_on "$basebackup_container"
+
+    # TEST SUITE 7
+    wait_all_streaming "$seapate_wal_container" 1
+    wait_zero_lag "$seapate_wal_container" 1
+    run_test verify_wal_outside_data_directory "$seapate_wal_container"
+    run_test verify_wal_outside_data_directory "${PREFIX}separatewal2"
 }
 
 function main() {