diff --git a/dvc/fs/gdrive.py b/dvc/fs/gdrive.py
index 327462426..2d2c92b54 100644
--- a/dvc/fs/gdrive.py
+++ b/dvc/fs/gdrive.py
@@ -3,6 +3,7 @@ import logging
 import os
 import posixpath
 import re
+import tempfile
 import threading
 from collections import defaultdict
 from contextlib import contextmanager
@@ -208,8 +209,17 @@ class GDriveFileSystem(BaseFileSystem):
         from pydrive2.auth import GoogleAuth
         from pydrive2.drive import GoogleDrive
 
-        if os.getenv(GDriveFileSystem.GDRIVE_CREDENTIALS_DATA):
-            with open(self._gdrive_user_credentials_path, "w") as cred_file:
+        temporary_save_path = self._gdrive_user_credentials_path
+        is_credentials_temp = os.getenv(
+            GDriveFileSystem.GDRIVE_CREDENTIALS_DATA
+        )
+        if self._use_service_account:
+            temporary_save_path = os.path.join(
+                tempfile.gettempdir(), "google-creds.json"
+            )
+
+        if is_credentials_temp:
+            with open(temporary_save_path, "w") as cred_file:
                 cred_file.write(
                     os.getenv(GDriveFileSystem.GDRIVE_CREDENTIALS_DATA)
                 )
@@ -217,6 +227,7 @@ class GDriveFileSystem(BaseFileSystem):
         auth_settings = {
             "client_config_backend": "settings",
             "save_credentials": True,
+            "save_credentials_backend": "file",
             "save_credentials_file": self._gdrive_user_credentials_path,
             "get_refresh_token": True,
             "oauth_scope": [
@@ -226,13 +237,16 @@ class GDriveFileSystem(BaseFileSystem):
         }
 
         if self._use_service_account:
-            auth_settings["save_credentials_backend"] = "json"
             auth_settings["service_config"] = {
                 "client_user_email": self._service_account_user_email,
                 "client_json_file_path": self._service_account_json_file_path,
             }
+            if is_credentials_temp:
+                auth_settings["service_config"][
+                    "client_json_file_path"
+                ] = temporary_save_path
+
         else:
-            auth_settings["save_credentials_backend"] = "file"
             auth_settings["client_config"] = {
                 "client_id": self._client_id or self.DEFAULT_GDRIVE_CLIENT_ID,
                 "client_secret": self._client_secret
@@ -267,8 +281,8 @@ class GDriveFileSystem(BaseFileSystem):
         except Exception as exc:
             raise GDriveAuthError(self.credentials_location) from exc
         finally:
-            if os.getenv(GDriveFileSystem.GDRIVE_CREDENTIALS_DATA):
-                os.remove(self._gdrive_user_credentials_path)
+            if is_credentials_temp:
+                os.remove(temporary_save_path)
 
         return GoogleDrive(gauth)
 
diff --git a/setup.py b/setup.py
index a256e04d7..6bba528b6 100644
--- a/setup.py
+++ b/setup.py
@@ -95,7 +95,7 @@ install_requires = [
 # Extra dependencies for remote integrations
 
 gs = ["gcsfs>=0.7.2"]
-gdrive = ["pydrive2>=1.7.3", "six >= 1.13.0"]
+gdrive = ["pydrive2>=1.8.1", "six >= 1.13.0"]
 s3 = ["boto3>=1.9.201"]
 azure = ["adlfs>=0.6.3", "azure-identity>=1.4.0", "knack"]
 # https://github.com/Legrandin/pycryptodome/issues/465