diff --git a/src/utils/resolveVariables.ts b/src/utils/resolveVariables.ts
index 2134a56bd7..484d7510c2 100644
--- a/src/utils/resolveVariables.ts
+++ b/src/utils/resolveVariables.ts
@@ -10,6 +10,7 @@ import { cloneObject } from '../utils/cloneObject';
 
 const variableMatcher: RegExp = /\$\{[a-z.\-_:]+\}/ig;
 const configVariableMatcher: RegExp = /\$\{config:([a-z.\-_]+)\}/i;
+const envVariableMatcher: RegExp = /\$\{env:([\w\d]+)\}/i;
 
 export function resolveVariables<T>(target: T, folder?: WorkspaceFolder, additionalVariables?: { [key: string]: string }): T {
     if (!target) {
@@ -50,14 +51,14 @@ function resolveSingleVariable(variable: string, folder?: WorkspaceFolder, addit
         }
     }
 
-    // Replace additional variables
+    // Replace additional variables as specified by the caller
     const variableNameOnly = variable.replace(/[${}]/ig, '');
     const replacement = additionalVariables?.[variable] ?? additionalVariables?.[variableNameOnly];
     if (replacement !== undefined) {
         return replacement;
     }
 
-    // Replace config variables
+    // Replace config variables, e.g. ${config:foo.bar}
     const configMatch = configVariableMatcher.exec(variable);
     if (configMatch && configMatch.length > 1) {
         const configName: string = configMatch[1]; // Index 1 is the "something.something" group of "${config:something.something}"
@@ -72,6 +73,17 @@ function resolveSingleVariable(variable: string, folder?: WorkspaceFolder, addit
         }
     }
 
+    // Replace environment variables, e.g. ${env:FOO}
+    const envMatch = envVariableMatcher.exec(variable);
+    if (envMatch && envMatch.length > 1) {
+        const envVarName: string = envMatch[1]; // Index 1 is the "FOO" group of "${env:FOO}"
+        const envVarValue = process.env[envVarName];
+
+        if (envVarValue) {
+            return envVarValue;
+        }
+    }
+
     // Replace other variables
     switch (variable) {
         case '${file}':