diff --git a/.azure/hpu-tests.yml b/.azure/hpu-tests.yml
index 3ec5f5e0..8f164a32 100644
--- a/.azure/hpu-tests.yml
+++ b/.azure/hpu-tests.yml
@@ -30,15 +30,15 @@ jobs:
     strategy:
       matrix:
         'w. pytorch-lightning | pypi':
-          image: "1.11.0/ubuntu20.04/habanalabs/pytorch-installer-2.0.1:latest"
+          image: "1.12.0/ubuntu20.04/habanalabs/pytorch-installer-2.0.1:latest"
           dependency: "pytorch-lightning"
           pkg_source: "pypi"
         'w. lightning | pypi':
-          image: "1.11.0/ubuntu20.04/habanalabs/pytorch-installer-2.0.1:latest"
+          image: "1.12.0/ubuntu20.04/habanalabs/pytorch-installer-2.0.1:latest"
           dependency: "lightning"
           pkg_source: "pypi"
         'w. lightning | source':
-          image: "1.11.0/ubuntu20.04/habanalabs/pytorch-installer-2.0.1:latest"
+          image: "1.12.0/ubuntu20.04/habanalabs/pytorch-installer-2.0.1:latest"
           dependency: "lightning"
           pkg_source: "source"
     pool: "intel-hpus"
@@ -52,7 +52,7 @@ jobs:
                 --shm-size=4g \
                 -v /usr/bin/docker:/tmp/docker:ro"
     variables:
-      DEEPSPEED_VERSION: "1.11.0"
+      DEEPSPEED_VERSION: "1.12.0"
     workspace:
       clean: all
 
diff --git a/CHANGELOG.md b/CHANGELOG.md
index c35e5bfa..9c400963 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -5,6 +5,29 @@ All notable changes to this project will be documented in this file.
 The format is based on [Keep a Changelog](https://keepachangelog.com/en/1.0.0/),
 and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0.html).
 
+## [Unreleased] - 2023-MM-DD
+
+### Added
+
+-
+
+### Changed
+
+- Changed HPU docker image based on synapse AI release 1.12.0 ([#90](https://github.com/Lightning-AI/lightning-Habana/pull/90))
+
+### Fixed
+
+-
+
+### Removed
+
+-
+
+### Deprecated
+
+-
+
+
 ## [1.1.0] - 2023-09-26
 
 
diff --git a/dockers/ci-runner-hpu/Dockerfile b/dockers/ci-runner-hpu/Dockerfile
index 62f68d64..d4909a2b 100644
--- a/dockers/ci-runner-hpu/Dockerfile
+++ b/dockers/ci-runner-hpu/Dockerfile
@@ -16,7 +16,7 @@
 #        gaudi-docker-agent:latest
 
 ARG DIST="latest"
-ARG GAUDI_VERSION="1.11.0"
+ARG GAUDI_VERSION="1.12.0"
 ARG PYTORCH_INSTALLER_VERSION="2.0.1"
 FROM vault.habana.ai/gaudi-docker/${GAUDI_VERSION}/ubuntu20.04/habanalabs/pytorch-installer-${PYTORCH_INSTALLER_VERSION}:${DIST}
 
diff --git a/src/lightning_habana/__about__.py b/src/lightning_habana/__about__.py
index 885bab30..ea993238 100644
--- a/src/lightning_habana/__about__.py
+++ b/src/lightning_habana/__about__.py
@@ -1,4 +1,4 @@
-__version__ = "1.1.0"
+__version__ = "1.1.1.dev"
 __author__ = "Lightning-AI et al."
 __author_email__ = "name@lightning.ai"
 __license__ = "Apache-2.0"
diff --git a/src/lightning_habana/pytorch/strategies/deepspeed.py b/src/lightning_habana/pytorch/strategies/deepspeed.py
index 0278e648..5c06e677 100644
--- a/src/lightning_habana/pytorch/strategies/deepspeed.py
+++ b/src/lightning_habana/pytorch/strategies/deepspeed.py
@@ -79,8 +79,8 @@
 warning_cache = WarningCache()
 
 _HPU_DEEPSPEED_AVAILABLE = (
-    # HPU deep speed is supported only through this pip install git+https://github.com/HabanaAI/DeepSpeed.git@1.11.0
-    RequirementCache("deepspeed==0.9.4+hpu.synapse.v1.11.0")
+    # HPU deep speed is supported only through this pip install git+https://github.com/HabanaAI/DeepSpeed.git@1.12.0
+    RequirementCache("deepspeed==0.9.4+hpu.synapse.v1.12.0")
 )
 if TYPE_CHECKING and _HPU_DEEPSPEED_AVAILABLE:
     import deepspeed
@@ -255,7 +255,7 @@ def __init__(
         if not _HPU_DEEPSPEED_AVAILABLE:
             raise MisconfigurationException(
                 "To use the `HPUDeepSpeedStrategy`, you must have hpu DeepSpeed installed."
-                " Install it by running `pip install git+https://github.com/HabanaAI/DeepSpeed.git@1.11.0`."
+                " Install it by running `pip install git+https://github.com/HabanaAI/DeepSpeed.git@1.12.0`."
             )
 
         super().__init__(