diff --git a/src/config/index.ts b/src/config/index.ts
index 8bf1adc..7ec1537 100644
--- a/src/config/index.ts
+++ b/src/config/index.ts
@@ -41,6 +41,14 @@ export const saveSettings = (settings: McpSettings): boolean => {
   }
 };
 
+export const replaceEnvVars = (env: Record<string, any>): Record<string, any> => {
+  const res: Record<string, string> = {};
+  for (const [key, value] of Object.entries(env)) {
+    res[key] = expandEnvVars(value);
+  }
+  return res;
+};
+
 export const expandEnvVars = (value: string): string => {
   return value.replace(/\$\{([^}]+)\}/g, (_, key) => process.env[key] || '');
 };
diff --git a/src/services/mcpService.ts b/src/services/mcpService.ts
index 3f83688..ee16662 100644
--- a/src/services/mcpService.ts
+++ b/src/services/mcpService.ts
@@ -5,7 +5,7 @@ import { SSEClientTransport } from '@modelcontextprotocol/sdk/client/sse.js';
 import { StdioClientTransport } from '@modelcontextprotocol/sdk/client/stdio.js';
 import { StreamableHTTPClientTransport } from '@modelcontextprotocol/sdk/client/streamableHttp.js';
 import { ServerInfo, ServerConfig } from '../types/index.js';
-import { loadSettings, saveSettings, expandEnvVars } from '../config/index.js';
+import { loadSettings, saveSettings, expandEnvVars, replaceEnvVars } from '../config/index.js';
 import config from '../config/index.js';
 import { getGroup } from './sseService.js';
 import { getServersInGroup } from './groupService.js';
@@ -95,7 +95,7 @@ export const initializeClientsFromSettings = (isInit: boolean): ServerInfo[] =>
       transport = new SSEClientTransport(new URL(conf.url));
     } else if (conf.command && conf.args) {
       // If type is stdio or if command and args are provided without type
-      const env: Record<string, string> = conf.env || {};
+      const env: Record<string, string> = replaceEnvVars(conf.env || {});
       env['PATH'] = expandEnvVars(process.env.PATH as string) || '';
 
       // Add UV_DEFAULT_INDEX from settings if available (for Python packages)