[BUG] Desktop app does not expand ${VAR} in .mcp.json env block

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Environment variable expansion (${VAR}) in .mcp.json works in the CLI but not in the Claude Code Desktop app (Mac). The MCP server receives the literal string ${SOME_API_TOKEN} instead of the resolved value, causing HTTP 401 auth failures.

Environment

• Claude Code version: 2.1.29
• Platform: macOS (Darwin 25.3.0, arm64)
• Shell: zsh
• Desktop app: Claude for Mac

What Should Happen?

${VAR} expansion in .mcp.json should work identically in the Desktop app and CLI, per the [docs](https://code.claude.com/docs/en/mcp#environment-variable-expansion-in-mcp-json). If the variable is defined in both ~/.zshenv and settings.local.json env, it should be available for expansion regardless of how Claude Code is launched.

Error Messages/Logs

Tool 'some_tool_here' execution failed: HTTP 401: Auth method is not supported

Steps to Reproduce

1. Set an env var in ~/.zshenv:

export SOME_API_TOKEN="your-token-here"

1. Reference it in .mcp.json:

{ "mcpServers": { "server1": { "type": "stdio", "command": "npx", "args": ["@server1/mcp"], "env": { "API_TOKEN": "${SOME_API_TOKEN}" } } } }

1. Launch Claude Code CLI — MCP server starts, auth works, tools available.
2. Launch Claude Code Desktop app — MCP server gets literal ${SOME_API_TOKEN}, returns HTTP 401.

Claude Model

Not sure / Multiple models

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

Claude 1.1.9310 (cb30ac) 2026-03-27T17:11:42.000Z

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_