diff --git a/changelog/68525.fixed.md b/changelog/68525.fixed.md
new file mode 100644
index 000000000000..f21f7fe82e6a
--- /dev/null
+++ b/changelog/68525.fixed.md
@@ -0,0 +1 @@
+Fix `pip.installed` state managed pre-release upgrades
diff --git a/requirements/pytest.txt b/requirements/pytest.txt
index 376464b0a0d7..81a65e448b2d 100644
--- a/requirements/pytest.txt
+++ b/requirements/pytest.txt
@@ -1,4 +1,5 @@
 mock >= 3.0.0
+packaging
 # PyTest
 docker >= 7.1.0; python_version >= '3.8'
 docker < 7.1.0; python_version < '3.8'
diff --git a/salt/modules/pip.py b/salt/modules/pip.py
index d108d0815ad8..320dbdf1a40c 100644
--- a/salt/modules/pip.py
+++ b/salt/modules/pip.py
@@ -1654,7 +1654,11 @@ def list_all_versions(
     pip_version = version(bin_env=bin_env, cwd=cwd, user=user)
     if salt.utils.versions.compare(ver1=pip_version, oper=">=", ver2="21.2"):
         regex = re.compile(r"\s*Available versions: (.*)")
-        cmd.extend(["index", "versions", pkg])
+        # pre-release versions are not included by default
+        if any([include_alpha, include_beta, include_rc]):
+            cmd.extend(["index", "versions", "--pre", pkg])
+        else:
+            cmd.extend(["index", "versions", pkg])
     else:
         if salt.utils.versions.compare(ver1=pip_version, oper=">=", ver2="20.3"):
             cmd.append("--use-deprecated=legacy-resolver")
diff --git a/tests/pytests/functional/modules/test_pip.py b/tests/pytests/functional/modules/test_pip.py
index fa2b1a6573dc..b0f9abf07e02 100644
--- a/tests/pytests/functional/modules/test_pip.py
+++ b/tests/pytests/functional/modules/test_pip.py
@@ -6,6 +6,7 @@
 from contextlib import contextmanager
 
 import pytest
+from packaging.version import parse as parse_version
 
 import salt.utils.platform
 from salt.exceptions import CommandNotFoundError
@@ -113,6 +114,48 @@ def test_list_available_packages_with_index_url(pip, pip_version, tmp_path):
         assert available_versions
 
 
+@pytest.mark.parametrize(
+    "pip_version",
+    (
+        pytest.param(
+            "pip==9.0.3",
+            marks=pytest.mark.skipif(
+                sys.version_info >= (3, 10),
+                reason="'pip==9.0.3' is not available on Py >= 3.10",
+            ),
+        ),
+        "pip<20.0",
+        "pip<21.0",
+        "pip>=21.0",
+    ),
+)
+@pytest.mark.parametrize("include_alpha", (True, False))
+@pytest.mark.parametrize("include_beta", (True, False))
+@pytest.mark.parametrize("include_rc", (True, False))
+def test_list_available_packages_with_pre_releases_flags(
+    venv, pip, pip_version, include_alpha, include_beta, include_rc
+):
+    """Tests that pre-release versions are returned when flags enable them.
+
+    Note: relies on PyPI hosting pre-release versions of `typing-extensions`.
+    """
+    venv.install("-U", pip_version)
+    package_name = "typing-extensions"
+    versions = pip.list_all_versions(
+        package_name,
+        bin_env=str(venv.venv_bin_dir),
+        include_alpha=include_alpha,
+        include_beta=include_beta,
+        include_rc=include_rc,
+    )
+
+    has_prerelease = any(map(lambda v: v.is_prerelease, map(parse_version, versions)))
+    if any(include_alpha, include_beta, include_rc):
+        assert has_prerelease
+    else:
+        assert not has_prerelease
+
+
 def test_issue_2087_missing_pip(venv, pip, modules):
     # Let's remove the pip binary
     pip_bin = venv.venv_bin_dir / "pip"