diff --git a/src/containerapp/azext_containerapp/_params.py b/src/containerapp/azext_containerapp/_params.py
index b2d778e08ae..6ed1709f19e 100644
--- a/src/containerapp/azext_containerapp/_params.py
+++ b/src/containerapp/azext_containerapp/_params.py
@@ -75,9 +75,12 @@ def load_arguments(self, _):
         c.argument('transport', arg_type=get_enum_type(['auto', 'http', 'http2']), help="The transport protocol used for ingress traffic.")
 
     with self.argument_context('containerapp create') as c:
-        c.argument('assign_identity', nargs='+', help="Space-separated identities. Use '[system]' to refer to the system assigned identity.")
         c.argument('traffic_weights', nargs='*', options_list=['--traffic-weight'], help="A list of revision weight(s) for the container app. Space-separated values in 'revision_name=weight' format. For latest revision, use 'latest=weight'")
 
+    with self.argument_context('containerapp create', arg_group='Identity') as c:
+        c.argument('user_assigned', nargs='+', help="Space-separated user identities to be assigned.")
+        c.argument('system_assigned', help="Boolean indicating whether to assign system-assigned identity.")
+
     with self.argument_context('containerapp scale') as c:
         c.argument('min_replicas', type=int, help="The minimum number of replicas.")
         c.argument('max_replicas', type=int, help="The maximum number of replicas.")
@@ -115,7 +118,7 @@ def load_arguments(self, _):
 
     with self.argument_context('containerapp identity') as c:
         c.argument('user_assigned', nargs='+', help="Space-separated user identities.")
-        c.argument('system_assigned', help="System-assigned identity.")
+        c.argument('system_assigned', help="Boolean indicating whether to assign system-assigned identity.")
 
     with self.argument_context('containerapp identity remove') as c:
         c.argument('user_assigned', nargs='*', help="Space-separated user identities. If no user identities are specified, all user identities will be removed.")
diff --git a/src/containerapp/azext_containerapp/custom.py b/src/containerapp/azext_containerapp/custom.py
index c09a4d1b395..06ce16ad26d 100644
--- a/src/containerapp/azext_containerapp/custom.py
+++ b/src/containerapp/azext_containerapp/custom.py
@@ -293,7 +293,8 @@ def create_containerapp(cmd,
                         args=None,
                         tags=None,
                         no_wait=False,
-                        assign_identity=None):
+                        system_assigned=False,
+                        user_assigned=None):
     _validate_subscription_registered(cmd, "Microsoft.App")
 
     if yaml:
@@ -310,9 +311,6 @@ def create_containerapp(cmd,
     if managed_env is None:
         raise RequiredArgumentMissingError('Usage error: --environment is required if not using --yaml')
 
-    if assign_identity is None:
-        assign_identity = []
-
     # Validate managed environment
     parsed_managed_env = parse_resource_id(managed_env)
     managed_env_name = parsed_managed_env['name']
@@ -382,8 +380,11 @@ def create_containerapp(cmd,
     identity_def = ManagedServiceIdentityModel
     identity_def["type"] = "None"
 
-    assign_system_identity = '[system]' in assign_identity
-    assign_user_identities = [x for x in assign_identity if x != '[system]']
+    assign_system_identity = system_assigned
+    if user_assigned:
+        assign_user_identities = [x.lower() for x in user_assigned]
+    else:
+        assign_user_identities = []
 
     if assign_system_identity and assign_user_identities:
         identity_def["type"] = "SystemAssigned, UserAssigned"