fix: respect env variables in .env for settings.json variable substitution (#3416)

packages/cli/src/config/settings.ts

@@ -7,8 +7,10 @@
 import * as fs from 'fs';
 import * as path from 'path';
 import { homedir } from 'os';
+import * as dotenv from 'dotenv';
 import {
   MCPServerConfig,
+  GEMINI_CONFIG_DIR as GEMINI_DIR,
   getErrorMessage,
   BugCommandSettings,
   TelemetrySettings,
@@ -172,11 +174,48 @@ function resolveEnvVarsInObject<T>(obj: T): T {
   return obj;
 }
 
+function findEnvFile(startDir: string): string | null {
+  let currentDir = path.resolve(startDir);
+  while (true) {
+    // prefer gemini-specific .env under GEMINI_DIR
+    const geminiEnvPath = path.join(currentDir, GEMINI_DIR, '.env');
+    if (fs.existsSync(geminiEnvPath)) {
+      return geminiEnvPath;
+    }
+    const envPath = path.join(currentDir, '.env');
+    if (fs.existsSync(envPath)) {
+      return envPath;
+    }
+    const parentDir = path.dirname(currentDir);
+    if (parentDir === currentDir || !parentDir) {
+      // check .env under home as fallback, again preferring gemini-specific .env
+      const homeGeminiEnvPath = path.join(homedir(), GEMINI_DIR, '.env');
+      if (fs.existsSync(homeGeminiEnvPath)) {
+        return homeGeminiEnvPath;
+      }
+      const homeEnvPath = path.join(homedir(), '.env');
+      if (fs.existsSync(homeEnvPath)) {
+        return homeEnvPath;
+      }
+      return null;
+    }
+    currentDir = parentDir;
+  }
+}
+
+export function loadEnvironment(): void {
+  const envFilePath = findEnvFile(process.cwd());
+  if (envFilePath) {
+    dotenv.config({ path: envFilePath, quiet: true });
+  }
+}
+
 /**
  * Loads settings from user and workspace directories.
  * Project settings override user settings.
  */
 export function loadSettings(workspaceDir: string): LoadedSettings {
+  loadEnvironment();
   let userSettings: Settings = {};
   let workspaceSettings: Settings = {};
   const settingsErrors: SettingsError[] = [];