diff --git a/pipeline.Dockerfile b/pipeline.Dockerfile
index a8af1897b..49d00ae4f 100644
--- a/pipeline.Dockerfile
+++ b/pipeline.Dockerfile
@@ -60,4 +60,4 @@ RUN update-alternatives --install /usr/bin/python python /usr/bin/python3 1 \
     && vagrant plugin install vagrant-libvirt \
     # Install Kubernetes collections
     && pip install --no-compile --no-cache-dir kubernetes \
-    && ansible-galaxy collection install kubernetes.core kubevirt.core
+    && ansible-galaxy collection install kubernetes.core
diff --git a/tests/cloud_playbooks/roles/packet-ci/tasks/create-vms.yml b/tests/cloud_playbooks/roles/packet-ci/tasks/create-vms.yml
index 30e27c76f..21206e888 100644
--- a/tests/cloud_playbooks/roles/packet-ci/tasks/create-vms.yml
+++ b/tests/cloud_playbooks/roles/packet-ci/tasks/create-vms.yml
@@ -21,8 +21,26 @@
   retries: 30
   delay: 10
 
-- name: "Create inventory for CI tests"
-  template:
-    src: "inv.kubevirt.yml.j2"
-    dest: "{{ inventory_path }}/inv.kubevirt.yml"
+- name: Massage VirtualMachineInstance data into an Ansible inventory structure
+  vars:
+    ips: "{{ vmis.resources | map(attribute='status.interfaces.0.ipAddress') }}"
+    names: "{{ vmis.resources | map(attribute='metadata.name') }}"
+    _groups: "{{ vmis.resources | map(attribute='metadata.annotations.ansible_groups') | map('split', ',') }}"
+    hosts: "{{ ips | zip(_groups, names)
+                | map('zip', ['ansible_host', 'ansible_groups', 'k8s_vmi_name'])
+                | map('map', 'reverse') | map('community.general.dict') }}"
+  loop: "{{ hosts | map(attribute='ansible_groups') | flatten | unique }}"
+  set_fact:
+    ci_inventory: "{{ ci_inventory|d({}) | combine({
+                    item: {
+                      'hosts': hosts | selectattr('ansible_groups', 'contains', item)
+                                     | rekey_on_member('k8s_vmi_name')
+                      }
+                    })
+                  }}"
+
+- name: Create inventory for CI tests
+  copy:
+    content: "{{ ci_inventory | to_yaml }}"
+    dest: "{{ inventory_path }}/ci_inventory.yml"
     mode: "0644"
diff --git a/tests/cloud_playbooks/roles/packet-ci/templates/inv.kubevirt.yml.j2 b/tests/cloud_playbooks/roles/packet-ci/templates/inv.kubevirt.yml.j2
deleted file mode 100644
index 435a5f5c3..000000000
--- a/tests/cloud_playbooks/roles/packet-ci/templates/inv.kubevirt.yml.j2
+++ /dev/null
@@ -1,16 +0,0 @@
-plugin: kubevirt.core.kubevirt
-namespaces:
-- {{ pod_namespace }}
-label_selector: ci_job_id={{ ci_job_id }}
-create_groups: true
-compose:
-  ci_groups: |
-    group_names |
-    select('ansible.builtin.match', 'label_kubespray_io*') |
-    map('regex_replace', 'label_kubespray_io_(.*)_true', '\1')
-use_service: false
-host_format: "{name}"
-keyed_groups:
-- key: ci_groups
-  prefix: ""
-  separator: ""
diff --git a/tests/cloud_playbooks/roles/packet-ci/templates/vm.yml.j2 b/tests/cloud_playbooks/roles/packet-ci/templates/vm.yml.j2
index 139103c72..920944963 100644
--- a/tests/cloud_playbooks/roles/packet-ci/templates/vm.yml.j2
+++ b/tests/cloud_playbooks/roles/packet-ci/templates/vm.yml.j2
@@ -6,15 +6,14 @@ metadata:
   namespace: {{ pod_namespace }}
   annotations:
     kubespray.com/ci.template-path: "tests/cloud_playbooks/roles/packet-ci/templates/vm.yml.j2"
+    ansible_groups: "{{ kubespray_groups | join(',') }}"
+    # This does not use a dns prefix because dots are hard to escape with map(attribute=) in Jinja
   labels:
     kubevirt.io/os: {{ cloud_image }}
     kubevirt.io/size: small
     kubevirt.io/domain: "{{ test_name }}"
     ci_job_id: "{{ ci_job_id }}"
     ci_job_name: "{{ ci_job_name }}"
-    {% for group in kubespray_groups -%}
-    kubespray.io/{{ group }}: "true"
-    {% endfor -%}
   # leverage the Kubernetes GC for resources cleanup
   ownerReferences:
   - apiVersion: v1