diff --git a/packages/coding-agent/CHANGELOG.md b/packages/coding-agent/CHANGELOG.md
index 10abf3c4..1225fdb6 100644
--- a/packages/coding-agent/CHANGELOG.md
+++ b/packages/coding-agent/CHANGELOG.md
@@ -4,6 +4,7 @@
 
 ### Fixed
 
+- Fixed API key and header config resolution to treat plain strings as literals, support `$ENV_VAR` / `${ENV_VAR}` interpolation and `$!` bang escaping, and require explicit env syntax for config files, avoiding Windows case-insensitive env matches corrupting literal keys ([#5095](https://github.com/earendil-works/pi/issues/5095)).
 - Fixed session disposal to abort in-flight agent, compaction, branch summary, retry, and bash work ([#5029](https://github.com/earendil-works/pi/pull/5029) by [@TerminallyChilI](https://github.com/TerminallyChilI)).
 - Fixed `pi.getAllTools()` to expose each tool's `promptGuidelines` for extensions that need per-tool guideline attribution ([#4879](https://github.com/earendil-works/pi/issues/4879)).
 - Fixed follow-up messages queued by `agent_end` extension handlers to drain before the agent becomes idle ([#5115](https://github.com/earendil-works/pi-mono/pull/5115) by [@DanielThomas](https://github.com/DanielThomas)).
diff --git a/packages/coding-agent/docs/custom-provider.md b/packages/coding-agent/docs/custom-provider.md
index 70ede4c3..50cb1ef0 100644
--- a/packages/coding-agent/docs/custom-provider.md
+++ b/packages/coding-agent/docs/custom-provider.md
@@ -43,7 +43,7 @@ export default function (pi: ExtensionAPI) {
   pi.registerProvider("my-provider", {
     name: "My Provider",
     baseUrl: "https://api.example.com",
-    apiKey: "MY_API_KEY",
+    apiKey: "$MY_API_KEY",
     api: "openai-completions",
     models: [
       {
@@ -83,7 +83,7 @@ pi.registerProvider("openai", {
 pi.registerProvider("google", {
   baseUrl: "https://ai-gateway.corp.com/google",
   headers: {
-    "X-Corp-Auth": "CORP_AUTH_TOKEN"  // env var or literal
+    "X-Corp-Auth": "$CORP_AUTH_TOKEN"  // env var or literal
   }
 });
 ```
@@ -112,7 +112,7 @@ export default async function (pi: ExtensionAPI) {
 
   pi.registerProvider("local-openai", {
     baseUrl: "http://localhost:1234/v1",
-    apiKey: "LOCAL_OPENAI_API_KEY",
+    apiKey: "$LOCAL_OPENAI_API_KEY",
     api: "openai-completions",
     models: payload.data.map((model) => ({
       id: model.id,
@@ -132,7 +132,7 @@ This registers the fetched models before startup finishes.
 ```typescript
 pi.registerProvider("my-llm", {
   baseUrl: "https://api.my-llm.com/v1",
-  apiKey: "MY_LLM_API_KEY",  // env var name or literal value
+  apiKey: "$MY_LLM_API_KEY",  // env var reference
   api: "openai-completions",  // which streaming API to use
   models: [
     {
@@ -155,6 +155,8 @@ pi.registerProvider("my-llm", {
 
 When `models` is provided, it **replaces** all existing models for that provider.
 
+`apiKey` and custom header values use the same config value syntax as `models.json`: `!command` at the start executes a command for the whole value, `$ENV_VAR` and `${ENV_VAR}` interpolate environment variables, `$$` emits a literal `$`, and `$!` emits a literal `!`.
+
 ## Unregister Provider
 
 Use `pi.unregisterProvider(name)` to remove a provider that was previously registered via `pi.registerProvider(name, ...)`:
@@ -163,7 +165,7 @@ Use `pi.unregisterProvider(name)` to remove a provider that was previously regis
 // Register
 pi.registerProvider("my-llm", {
   baseUrl: "https://api.my-llm.com/v1",
-  apiKey: "MY_LLM_API_KEY",
+  apiKey: "$MY_LLM_API_KEY",
   api: "openai-completions",
   models: [
     {
@@ -243,7 +245,7 @@ If your provider expects `Authorization: Bearer <key>` but doesn't use a standar
 ```typescript
 pi.registerProvider("custom-api", {
   baseUrl: "https://api.example.com",
-  apiKey: "MY_API_KEY",
+  apiKey: "$MY_API_KEY",
   authHeader: true,  // adds Authorization: Bearer header
   api: "openai-completions",
   models: [...]
@@ -592,7 +594,7 @@ Register your stream function:
 ```typescript
 pi.registerProvider("my-provider", {
   baseUrl: "https://api.example.com",
-  apiKey: "MY_API_KEY",
+  apiKey: "$MY_API_KEY",
   api: "my-custom-api",
   models: [...],
   streamSimple: streamMyProvider
@@ -629,7 +631,7 @@ interface ProviderConfig {
   /** API endpoint URL. Required when defining models. */
   baseUrl?: string;
 
-  /** API key or environment variable name. Required when defining models (unless oauth). */
+  /** API key literal, env interpolation ($ENV_VAR or ${ENV_VAR}), or !command. Required when defining models (unless oauth). */
   apiKey?: string;
 
   /** API type for streaming. Required at provider or model level when defining models. */
@@ -642,7 +644,7 @@ interface ProviderConfig {
     options?: SimpleStreamOptions
   ) => AssistantMessageEventStream;
 
-  /** Custom headers to include in requests. Values can be env var names. */
+  /** Custom headers to include in requests. Values use the same resolution syntax as apiKey. */
   headers?: Record<string, string>;
 
   /** If true, adds Authorization: Bearer header with the resolved API key. */
diff --git a/packages/coding-agent/docs/extensions.md b/packages/coding-agent/docs/extensions.md
index db856fc8..40781092 100644
--- a/packages/coding-agent/docs/extensions.md
+++ b/packages/coding-agent/docs/extensions.md
@@ -199,7 +199,7 @@ export default async function (pi: ExtensionAPI) {
 
   pi.registerProvider("local-openai", {
     baseUrl: "http://localhost:1234/v1",
-    apiKey: "LOCAL_OPENAI_API_KEY",
+    apiKey: "$LOCAL_OPENAI_API_KEY",
     api: "openai-completions",
     models: payload.data.map((model) => ({
       id: model.id,
@@ -1555,7 +1555,7 @@ If you need to discover models from a remote endpoint, prefer an async extension
 pi.registerProvider("my-proxy", {
   name: "My Proxy",
   baseUrl: "https://proxy.example.com",
-  apiKey: "PROXY_API_KEY",  // env var name or literal
+  apiKey: "$PROXY_API_KEY",  // env var reference
   api: "anthropic-messages",
   models: [
     {
@@ -1602,7 +1602,7 @@ pi.registerProvider("corporate-ai", {
 **Config options:**
 - `name` - Display name for the provider in UI such as `/login`.
 - `baseUrl` - API endpoint URL. Required when defining models.
-- `apiKey` - API key or environment variable name. Required when defining models (unless `oauth` provided).
+- `apiKey` - API key literal, environment interpolation (`$ENV_VAR` or `${ENV_VAR}`), or leading `!command`. Required when defining models (unless `oauth` provided). `$$` escapes `$`, and `$!` escapes a literal `!` without triggering command execution.
 - `api` - API type: `"anthropic-messages"`, `"openai-completions"`, `"openai-responses"`, etc.
 - `headers` - Custom headers to include in requests.
 - `authHeader` - If true, adds `Authorization: Bearer` header automatically.
diff --git a/packages/coding-agent/docs/models.md b/packages/coding-agent/docs/models.md
index 85fccaf3..c97a6cf3 100644
--- a/packages/coding-agent/docs/models.md
+++ b/packages/coding-agent/docs/models.md
@@ -101,7 +101,7 @@ Use `google-generative-ai` with a `baseUrl` to add models from Google AI Studio,
     "my-google": {
       "baseUrl": "https://generativelanguage.googleapis.com/v1beta",
       "api": "google-generative-ai",
-      "apiKey": "GEMINI_API_KEY",
+      "apiKey": "$GEMINI_API_KEY",
       "models": [
         {
           "id": "gemma-4-31b-it",
@@ -143,22 +143,31 @@ Set `api` at provider level (default for all models) or model level (override pe
 
 ### Value Resolution
 
-The `apiKey` and `headers` fields support three formats:
+The `apiKey` and `headers` fields support command execution, environment interpolation, and literals:
 
-- **Shell command:** `"!command"` executes and uses stdout
+- **Shell command:** `"!command"` at the start executes the whole value as a command and uses stdout
   ```json
   "apiKey": "!security find-generic-password -ws 'anthropic'"
   "apiKey": "!op read 'op://vault/item/credential'"
   ```
-- **Environment variable:** Uses the value of the named variable
+- **Environment interpolation:** `"$ENV_VAR"` or `"${ENV_VAR}"` uses the value of the named variable. Interpolation works inside larger literals.
   ```json
-  "apiKey": "MY_API_KEY"
+  "apiKey": "$MY_API_KEY"
+  "apiKey": "${KEY_PREFIX}_${KEY_SUFFIX}"
+  ```
+  `$FOO_BAR` is the variable `FOO_BAR`; use `${FOO}_BAR` when `BAR` is literal text. Missing environment variables make the value unresolved.
+- **Escapes:** `"$$"` emits a literal `"$"`; `"$!"` emits a literal `"!"` without triggering command execution.
+  ```json
+  "apiKey": "$$literal-dollar-prefix"
+  "apiKey": "$!literal-bang-prefix"
   ```
 - **Literal value:** Used directly
   ```json
   "apiKey": "sk-..."
   ```
 
+Legacy uppercase env-var-like values such as `MY_API_KEY` are migrated to `$MY_API_KEY` on startup.
+
 For `models.json`, shell commands are resolved at request time. pi intentionally does not apply built-in TTL, stale reuse, or recovery logic for arbitrary commands. Different commands need different caching and failure strategies, and pi cannot infer the right one.
 
 If your command is slow, expensive, rate-limited, or should keep using a previous value on transient failures, wrap it in your own script or command that implements the caching or TTL behavior you want.
@@ -172,10 +181,10 @@ If your command is slow, expensive, rate-limited, or should keep using a previou
   "providers": {
     "custom-proxy": {
       "baseUrl": "https://proxy.example.com/v1",
-      "apiKey": "MY_API_KEY",
+      "apiKey": "$MY_API_KEY",
       "api": "anthropic-messages",
       "headers": {
-        "x-portkey-api-key": "PORTKEY_API_KEY",
+        "x-portkey-api-key": "$PORTKEY_API_KEY",
         "x-secret": "!op read 'op://vault/item/secret'"
       },
       "models": [...]
@@ -268,7 +277,7 @@ To merge custom models into a built-in provider, include the `models` array:
   "providers": {
     "anthropic": {
       "baseUrl": "https://my-proxy.example.com/v1",
-      "apiKey": "ANTHROPIC_API_KEY",
+      "apiKey": "$ANTHROPIC_API_KEY",
       "api": "anthropic-messages",
       "models": [...]
     }
@@ -327,7 +336,7 @@ Some Anthropic models require adaptive thinking (`thinking.type: "adaptive"` plu
     "anthropic-proxy": {
       "baseUrl": "https://proxy.example.com",
       "api": "anthropic-messages",
-      "apiKey": "ANTHROPIC_PROXY_KEY",
+      "apiKey": "$ANTHROPIC_PROXY_KEY",
       "compat": {
         "supportsEagerToolInputStreaming": false,
         "supportsLongCacheRetention": true,
@@ -405,7 +414,7 @@ Example:
   "providers": {
     "openrouter": {
       "baseUrl": "https://openrouter.ai/api/v1",
-      "apiKey": "OPENROUTER_API_KEY",
+      "apiKey": "$OPENROUTER_API_KEY",
       "api": "openai-completions",
       "models": [
         {
@@ -455,7 +464,7 @@ Vercel AI Gateway example:
   "providers": {
     "vercel-ai-gateway": {
       "baseUrl": "https://ai-gateway.vercel.sh/v1",
-      "apiKey": "AI_GATEWAY_API_KEY",
+      "apiKey": "$AI_GATEWAY_API_KEY",
       "api": "openai-completions",
       "models": [
         {
diff --git a/packages/coding-agent/docs/providers.md b/packages/coding-agent/docs/providers.md
index 7e80f931..07b6ba08 100644
--- a/packages/coding-agent/docs/providers.md
+++ b/packages/coding-agent/docs/providers.md
@@ -101,23 +101,31 @@ The file is created with `0600` permissions (user read/write only). Auth file cr
 
 ### Key Resolution
 
-The `key` field supports three formats:
+The `key` field supports command execution, environment interpolation, and literals:
 
-- **Shell command:** `"!command"` executes and uses stdout (cached for process lifetime)
+- **Shell command:** `"!command"` at the start executes the whole value as a command and uses stdout (cached for process lifetime)
   ```json
   { "type": "api_key", "key": "!security find-generic-password -ws 'anthropic'" }
   { "type": "api_key", "key": "!op read 'op://vault/item/credential'" }
   ```
-- **Environment variable:** Uses the value of the named variable
+- **Environment interpolation:** `"$ENV_VAR"` or `"${ENV_VAR}"` uses the value of the named variable. Interpolation works inside larger literals.
   ```json
-  { "type": "api_key", "key": "MY_ANTHROPIC_KEY" }
+  { "type": "api_key", "key": "$MY_ANTHROPIC_KEY" }
+  { "type": "api_key", "key": "${KEY_PREFIX}_${KEY_SUFFIX}" }
+  ```
+  `$FOO_BAR` is the variable `FOO_BAR`; use `${FOO}_BAR` when `BAR` is literal text. Missing environment variables make the value unresolved.
+- **Escapes:** `"$$"` emits a literal `"$"`; `"$!"` emits a literal `"!"` without triggering command execution.
+  ```json
+  { "type": "api_key", "key": "$$literal-dollar-prefix" }
+  { "type": "api_key", "key": "$!literal-bang-prefix" }
   ```
 - **Literal value:** Used directly
   ```json
   { "type": "api_key", "key": "sk-ant-..." }
+  { "type": "api_key", "key": "public" }
   ```
 
-OAuth credentials are also stored here after `/login` and managed automatically.
+Legacy uppercase env-var-like values such as `MY_API_KEY` are migrated to `$MY_API_KEY` on startup. OAuth credentials are also stored here after `/login` and managed automatically.
 
 ## Cloud Providers
 
diff --git a/packages/coding-agent/examples/extensions/custom-provider-anthropic/index.ts b/packages/coding-agent/examples/extensions/custom-provider-anthropic/index.ts
index 69267f40..51426362 100644
--- a/packages/coding-agent/examples/extensions/custom-provider-anthropic/index.ts
+++ b/packages/coding-agent/examples/extensions/custom-provider-anthropic/index.ts
@@ -568,7 +568,7 @@ function streamCustomAnthropic(
 export default function (pi: ExtensionAPI) {
 	pi.registerProvider("custom-anthropic", {
 		baseUrl: "https://api.anthropic.com",
-		apiKey: "CUSTOM_ANTHROPIC_API_KEY",
+		apiKey: "$CUSTOM_ANTHROPIC_API_KEY",
 		api: "custom-anthropic-api",
 
 		models: [
diff --git a/packages/coding-agent/examples/extensions/custom-provider-gitlab-duo/index.ts b/packages/coding-agent/examples/extensions/custom-provider-gitlab-duo/index.ts
index 23d0a40a..c23f0dac 100644
--- a/packages/coding-agent/examples/extensions/custom-provider-gitlab-duo/index.ts
+++ b/packages/coding-agent/examples/extensions/custom-provider-gitlab-duo/index.ts
@@ -327,7 +327,7 @@ export function streamGitLabDuo(
 export default function (pi: ExtensionAPI) {
 	pi.registerProvider("gitlab-duo", {
 		baseUrl: AI_GATEWAY_URL,
-		apiKey: "GITLAB_TOKEN",
+		apiKey: "$GITLAB_TOKEN",
 		api: "gitlab-duo-api",
 		models: MODELS.map(({ id, name, reasoning, input, cost, contextWindow, maxTokens }) => ({
 			id,
diff --git a/packages/coding-agent/src/core/extensions/types.ts b/packages/coding-agent/src/core/extensions/types.ts
index 0d5bb7af..7696c62e 100644
--- a/packages/coding-agent/src/core/extensions/types.ts
+++ b/packages/coding-agent/src/core/extensions/types.ts
@@ -1256,7 +1256,7 @@ export interface ExtensionAPI {
 	 * // Register a new provider with custom models
 	 * pi.registerProvider("my-proxy", {
 	 *   baseUrl: "https://proxy.example.com",
-	 *   apiKey: "PROXY_API_KEY",
+	 *   apiKey: "$PROXY_API_KEY",
 	 *   api: "anthropic-messages",
 	 *   models: [
 	 *     {
@@ -1322,7 +1322,7 @@ export interface ProviderConfig {
 	name?: string;
 	/** Base URL for the API endpoint. Required when defining models. */
 	baseUrl?: string;
-	/** API key or environment variable name. Required when defining models (unless oauth provided). */
+	/** API key literal, env interpolation ($ENV_VAR or ${ENV_VAR}), or leading !command. Required when defining models (unless oauth provided). */
 	apiKey?: string;
 	/** API type. Required at provider or model level when defining models. */
 	api?: Api;
diff --git a/packages/coding-agent/src/core/model-registry.ts b/packages/coding-agent/src/core/model-registry.ts
index 712874d8..455ab71f 100644
--- a/packages/coding-agent/src/core/model-registry.ts
+++ b/packages/coding-agent/src/core/model-registry.ts
@@ -25,11 +25,17 @@ import { type Static, Type } from "typebox";
 import { Compile } from "typebox/compile";
 import type { TLocalizedValidationError } from "typebox/error";
 import { getAgentDir } from "../config.ts";
+import { warnDeprecation } from "../utils/deprecation.ts";
+import { stripJsonComments } from "../utils/json.ts";
 import { normalizePath } from "../utils/paths.ts";
 import type { AuthStatus, AuthStorage } from "./auth-storage.ts";
 import { BUILT_IN_PROVIDER_DISPLAY_NAMES } from "./provider-display-names.ts";
 import {
 	clearConfigValueCache,
+	getConfigValueEnvVarNames,
+	isCommandConfigValue,
+	isConfigValueConfigured,
+	isLegacyEnvVarNameConfigValue,
 	resolveConfigValueOrThrow,
 	resolveConfigValueUncached,
 	resolveHeadersOrThrow,
@@ -218,13 +224,6 @@ function formatValidationPath(error: TLocalizedValidationError): string {
 	return path || "root";
 }
 
-/** Strip `//` line comments and trailing commas from JSON, leaving string literals untouched. */
-function stripJsonComments(input: string): string {
-	return input
-		.replace(/"(?:\\.|[^"\\])*"|\/\/[^\n]*/g, (m) => (m[0] === '"' ? m : ""))
-		.replace(/"(?:\\.|[^"\\])*"|,(\s*[}\]])/g, (m, tail) => tail ?? (m[0] === '"' ? m : ""));
-}
-
 /** Provider override config (baseUrl, compat) without request auth/headers */
 interface ProviderOverride {
 	baseUrl?: string;
@@ -237,6 +236,77 @@ interface ProviderRequestConfig {
 	authHeader?: boolean;
 }
 
+function migrateLegacyRegisterProviderConfigValue(providerName: string, field: string, value: string): string {
+	if (!isLegacyEnvVarNameConfigValue(value)) return value;
+	warnDeprecation(
+		`registerProvider("${providerName}") ${field} value "${value}" is treated as a legacy environment variable reference. This will no longer be detected as an environment variable reference in a future release. Pass "$${value}" instead.`,
+	);
+	return `$${value}`;
+}
+
+function migrateLegacyRegisterProviderHeaders(
+	providerName: string,
+	field: string,
+	headers: Record<string, string> | undefined,
+): Record<string, string> | undefined {
+	if (!headers) return undefined;
+	let migratedHeaders: Record<string, string> | undefined;
+	for (const [key, value] of Object.entries(headers)) {
+		const migratedValue = migrateLegacyRegisterProviderConfigValue(providerName, `${field} header "${key}"`, value);
+		if (migratedValue === value) continue;
+		migratedHeaders ??= { ...headers };
+		migratedHeaders[key] = migratedValue;
+	}
+	return migratedHeaders ?? headers;
+}
+
+function migrateLegacyRegisterProviderConfigValues(
+	providerName: string,
+	config: ProviderConfigInput,
+): ProviderConfigInput {
+	let migratedConfig: ProviderConfigInput | undefined;
+
+	const setMigratedConfigValue = <TKey extends keyof ProviderConfigInput>(
+		key: TKey,
+		value: ProviderConfigInput[TKey],
+	) => {
+		migratedConfig ??= { ...config };
+		migratedConfig[key] = value;
+	};
+
+	if (config.apiKey) {
+		const apiKey = migrateLegacyRegisterProviderConfigValue(providerName, "apiKey", config.apiKey);
+		if (apiKey !== config.apiKey) {
+			setMigratedConfigValue("apiKey", apiKey);
+		}
+	}
+
+	const headers = migrateLegacyRegisterProviderHeaders(providerName, "headers", config.headers);
+	if (headers !== config.headers) {
+		setMigratedConfigValue("headers", headers);
+	}
+
+	if (config.models) {
+		let models: ProviderConfigInput["models"] | undefined;
+		for (let index = 0; index < config.models.length; index++) {
+			const model = config.models[index];
+			const modelHeaders = migrateLegacyRegisterProviderHeaders(
+				providerName,
+				`model "${model.id}" headers`,
+				model.headers,
+			);
+			if (modelHeaders === model.headers) continue;
+			models ??= [...config.models];
+			models[index] = { ...model, headers: modelHeaders };
+		}
+		if (models) {
+			setMigratedConfigValue("models", models);
+		}
+	}
+
+	return migratedConfig ?? config;
+}
+
 export type ResolvedRequestAuth =
 	| {
 			ok: true;
@@ -641,9 +711,10 @@ export class ModelRegistry {
 	 * Get API key for a model.
 	 */
 	hasConfiguredAuth(model: Model<Api>): boolean {
+		const providerApiKey = this.providerRequestConfigs.get(model.provider)?.apiKey;
 		return (
 			this.authStorage.hasAuth(model.provider) ||
-			this.providerRequestConfigs.get(model.provider)?.apiKey !== undefined
+			(providerApiKey !== undefined && isConfigValueConfigured(providerApiKey))
 		);
 	}
 
@@ -738,12 +809,15 @@ export class ModelRegistry {
 			return authStatus;
 		}
 
-		if (providerApiKey.startsWith("!")) {
+		if (isCommandConfigValue(providerApiKey)) {
 			return { configured: true, source: "models_json_command" };
 		}
 
-		if (process.env[providerApiKey]) {
-			return { configured: true, source: "environment", label: providerApiKey };
+		const envVarNames = getConfigValueEnvVarNames(providerApiKey);
+		if (envVarNames.length > 0) {
+			return isConfigValueConfigured(providerApiKey)
+				? { configured: true, source: "environment", label: envVarNames.join(", ") }
+				: { configured: false };
 		}
 
 		return { configured: true, source: "models_json_key" };
@@ -794,9 +868,10 @@ export class ModelRegistry {
 	 * If provider has oauth: registers OAuth provider for /login support.
 	 */
 	registerProvider(providerName: string, config: ProviderConfigInput): void {
-		this.validateProviderConfig(providerName, config);
-		this.applyProviderConfig(providerName, config);
-		this.upsertRegisteredProvider(providerName, config);
+		const migratedConfig = migrateLegacyRegisterProviderConfigValues(providerName, config);
+		this.validateProviderConfig(providerName, migratedConfig);
+		this.applyProviderConfig(providerName, migratedConfig);
+		this.upsertRegisteredProvider(providerName, migratedConfig);
 	}
 
 	/**
diff --git a/packages/coding-agent/src/core/resolve-config-value.ts b/packages/coding-agent/src/core/resolve-config-value.ts
index 215914ba..119e379d 100644
--- a/packages/coding-agent/src/core/resolve-config-value.ts
+++ b/packages/coding-agent/src/core/resolve-config-value.ts
@@ -8,18 +8,151 @@ import { getShellConfig } from "../utils/shell.ts";
 
 // Cache for shell command results (persists for process lifetime)
 const commandResultCache = new Map<string, string | undefined>();
+const ENV_VAR_NAME_RE = /^[A-Za-z_][A-Za-z0-9_]*$/;
+const ENV_VAR_NAME_PREFIX_RE = /^[A-Za-z_][A-Za-z0-9_]*/;
+const LEGACY_ENV_VAR_NAME_RE = /^[A-Z_][A-Z0-9_]*$/;
+
+type TemplatePart = { type: "literal"; value: string } | { type: "env"; name: string };
+
+type ConfigValueReference = { type: "command"; config: string } | { type: "template"; parts: TemplatePart[] };
+
+function appendLiteral(parts: TemplatePart[], value: string): void {
+	if (!value) return;
+	const previousPart = parts[parts.length - 1];
+	if (previousPart?.type === "literal") {
+		previousPart.value += value;
+		return;
+	}
+	parts.push({ type: "literal", value });
+}
+
+function parseConfigValueTemplate(config: string): TemplatePart[] {
+	const parts: TemplatePart[] = [];
+	let index = 0;
+
+	while (index < config.length) {
+		const dollarIndex = config.indexOf("$", index);
+		if (dollarIndex < 0) {
+			appendLiteral(parts, config.slice(index));
+			break;
+		}
+
+		appendLiteral(parts, config.slice(index, dollarIndex));
+		const nextChar = config[dollarIndex + 1];
+
+		if (nextChar === "$" || nextChar === "!") {
+			appendLiteral(parts, nextChar);
+			index = dollarIndex + 2;
+			continue;
+		}
+
+		if (nextChar === "{") {
+			const endIndex = config.indexOf("}", dollarIndex + 2);
+			if (endIndex < 0) {
+				appendLiteral(parts, "$");
+				index = dollarIndex + 1;
+				continue;
+			}
+
+			const name = config.slice(dollarIndex + 2, endIndex);
+			if (ENV_VAR_NAME_RE.test(name)) {
+				parts.push({ type: "env", name });
+			} else {
+				appendLiteral(parts, config.slice(dollarIndex, endIndex + 1));
+			}
+			index = endIndex + 1;
+			continue;
+		}
+
+		const match = config.slice(dollarIndex + 1).match(ENV_VAR_NAME_PREFIX_RE);
+		if (match) {
+			parts.push({ type: "env", name: match[0] });
+			index = dollarIndex + 1 + match[0].length;
+			continue;
+		}
+
+		appendLiteral(parts, "$");
+		index = dollarIndex + 1;
+	}
+
+	return parts;
+}
+
+function parseConfigValueReference(config: string): ConfigValueReference {
+	if (config.startsWith("!")) {
+		return { type: "command", config };
+	}
+
+	return { type: "template", parts: parseConfigValueTemplate(config) };
+}
+
+function resolveEnvConfigValue(name: string): string | undefined {
+	return process.env[name] || undefined;
+}
+
+function getTemplateEnvVarNames(parts: TemplatePart[]): string[] {
+	const names: string[] = [];
+	for (const part of parts) {
+		if (part.type !== "env" || names.includes(part.name)) continue;
+		names.push(part.name);
+	}
+	return names;
+}
+
+function resolveTemplate(parts: TemplatePart[]): string | undefined {
+	let resolved = "";
+	for (const part of parts) {
+		if (part.type === "literal") {
+			resolved += part.value;
+			continue;
+		}
+		const envValue = resolveEnvConfigValue(part.name);
+		if (envValue === undefined) return undefined;
+		resolved += envValue;
+	}
+	return resolved;
+}
+
+export function getConfigValueEnvVarName(config: string): string | undefined {
+	const reference = parseConfigValueReference(config);
+	if (reference.type !== "template") return undefined;
+	return reference.parts.length === 1 && reference.parts[0]?.type === "env" ? reference.parts[0].name : undefined;
+}
+
+export function getConfigValueEnvVarNames(config: string): string[] {
+	const reference = parseConfigValueReference(config);
+	return reference.type === "template" ? getTemplateEnvVarNames(reference.parts) : [];
+}
+
+export function getMissingConfigValueEnvVarNames(config: string): string[] {
+	return getConfigValueEnvVarNames(config).filter((name) => resolveEnvConfigValue(name) === undefined);
+}
+
+export function isCommandConfigValue(config: string): boolean {
+	return parseConfigValueReference(config).type === "command";
+}
+
+export function isConfigValueConfigured(config: string): boolean {
+	return getMissingConfigValueEnvVarNames(config).length === 0;
+}
+
+export function isLegacyEnvVarNameConfigValue(config: string): boolean {
+	return LEGACY_ENV_VAR_NAME_RE.test(config);
+}
 
 /**
  * Resolve a config value (API key, header value, etc.) to an actual value.
  * - If starts with "!", executes the rest as a shell command and uses stdout (cached)
- * - Otherwise checks environment variable first, then treats as literal (not cached)
+ * - Interpolates "$ENV_VAR" or "${ENV_VAR}" references with the named environment variable
+ * - In non-command values, "$$" escapes a literal "$" and "$!" escapes a literal "!"
+ * - Otherwise treats the value as a literal
  */
 export function resolveConfigValue(config: string): string | undefined {
-	if (config.startsWith("!")) {
-		return executeCommand(config);
+	const reference = parseConfigValueReference(config);
+	if (reference.type === "command") {
+		return executeCommand(reference.config);
 	}
-	const envValue = process.env[config];
-	return envValue || config;
+	return resolveTemplate(reference.parts);
 }
 
 function executeWithConfiguredShell(command: string): { executed: boolean; value: string | undefined } {
@@ -89,11 +222,11 @@ function executeCommand(commandConfig: string): string | undefined {
  * Resolve all header values using the same resolution logic as API keys.
  */
 export function resolveConfigValueUncached(config: string): string | undefined {
-	if (config.startsWith("!")) {
-		return executeCommandUncached(config);
+	const reference = parseConfigValueReference(config);
+	if (reference.type === "command") {
+		return executeCommandUncached(reference.config);
 	}
-	const envValue = process.env[config];
-	return envValue || config;
+	return resolveTemplate(reference.parts);
 }
 
 export function resolveConfigValueOrThrow(config: string, description: string): string {
@@ -102,8 +235,19 @@ export function resolveConfigValueOrThrow(config: string, description: string):
 		return resolvedValue;
 	}
 
-	if (config.startsWith("!")) {
-		throw new Error(`Failed to resolve ${description} from shell command: ${config.slice(1)}`);
+	const reference = parseConfigValueReference(config);
+	if (reference.type === "command") {
+		throw new Error(`Failed to resolve ${description} from shell command: ${reference.config.slice(1)}`);
+	}
+
+	if (reference.type === "template") {
+		const missingEnvVars = getMissingConfigValueEnvVarNames(config);
+		if (missingEnvVars.length === 1) {
+			throw new Error(`Failed to resolve ${description} from environment variable: ${missingEnvVars[0]}`);
+		}
+		if (missingEnvVars.length > 1) {
+			throw new Error(`Failed to resolve ${description} from environment variables: ${missingEnvVars.join(", ")}`);
+		}
 	}
 
 	throw new Error(`Failed to resolve ${description}`);
diff --git a/packages/coding-agent/src/migrations.ts b/packages/coding-agent/src/migrations.ts
index 39aeea04..eb07f220 100644
--- a/packages/coding-agent/src/migrations.ts
+++ b/packages/coding-agent/src/migrations.ts
@@ -3,10 +3,12 @@
  */
 
 import chalk from "chalk";
-import { existsSync, mkdirSync, readdirSync, readFileSync, renameSync, rmSync, writeFileSync } from "fs";
+import { chmodSync, existsSync, mkdirSync, readdirSync, readFileSync, renameSync, rmSync, writeFileSync } from "fs";
 import { dirname, join } from "path";
 import { CONFIG_DIR_NAME, getAgentDir, getBinDir } from "./config.ts";
 import { migrateKeybindingsConfig } from "./core/keybindings.ts";
+import { isLegacyEnvVarNameConfigValue } from "./core/resolve-config-value.ts";
+import { stripJsonComments } from "./utils/json.ts";
 
 const MIGRATION_GUIDE_URL =
 	"https://github.com/earendil-works/pi-mono/blob/main/packages/coding-agent/CHANGELOG.md#extensions-migration";
@@ -72,6 +74,135 @@ export function migrateAuthToAuthJson(): string[] {
 	return providers;
 }
 
+interface ConfigValueMigration {
+	location: string;
+	from: string;
+	to: string;
+}
+
+function migrateLegacyEnvVarString(value: string): string | undefined {
+	return isLegacyEnvVarNameConfigValue(value) ? `$${value}` : undefined;
+}
+
+function migrateStringProperty(
+	record: Record<string, unknown>,
+	key: string,
+	location: string,
+	migrations: ConfigValueMigration[],
+): boolean {
+	const value = record[key];
+	if (typeof value !== "string") return false;
+	const migrated = migrateLegacyEnvVarString(value);
+	if (migrated === undefined) return false;
+	record[key] = migrated;
+	migrations.push({ location, from: value, to: migrated });
+	return true;
+}
+
+function migrateHeadersConfig(headers: unknown, location: string, migrations: ConfigValueMigration[]): boolean {
+	if (typeof headers !== "object" || headers === null || Array.isArray(headers)) return false;
+	const headerRecord = headers as Record<string, unknown>;
+	let migrated = false;
+	for (const [key, value] of Object.entries(headerRecord)) {
+		if (typeof value !== "string") continue;
+		const migratedValue = migrateLegacyEnvVarString(value);
+		if (migratedValue === undefined) continue;
+		headerRecord[key] = migratedValue;
+		migrations.push({ location: `${location}[${JSON.stringify(key)}]`, from: value, to: migratedValue });
+		migrated = true;
+	}
+	return migrated;
+}
+
+function migrateAuthJsonConfigValues(agentDir: string): ConfigValueMigration[] {
+	const authPath = join(agentDir, "auth.json");
+	if (!existsSync(authPath)) return [];
+
+	try {
+		const parsed = JSON.parse(readFileSync(authPath, "utf-8")) as unknown;
+		if (typeof parsed !== "object" || parsed === null || Array.isArray(parsed)) return [];
+		const authData = parsed as Record<string, unknown>;
+
+		const migrations: ConfigValueMigration[] = [];
+		for (const [provider, credential] of Object.entries(authData)) {
+			if (typeof credential !== "object" || credential === null || Array.isArray(credential)) continue;
+			const credentialRecord = credential as Record<string, unknown>;
+			if (credentialRecord.type !== "api_key") continue;
+			migrateStringProperty(credentialRecord, "key", `auth.json[${JSON.stringify(provider)}].key`, migrations);
+		}
+
+		if (migrations.length === 0) return [];
+		writeFileSync(authPath, `${JSON.stringify(parsed, null, 2)}\n`, "utf-8");
+		chmodSync(authPath, 0o600);
+		return migrations;
+	} catch {
+		return [];
+	}
+}
+
+function migrateModelsJsonConfigValues(agentDir: string): ConfigValueMigration[] {
+	const modelsPath = join(agentDir, "models.json");
+	if (!existsSync(modelsPath)) return [];
+
+	const parsed = JSON.parse(stripJsonComments(readFileSync(modelsPath, "utf-8"))) as unknown;
+	if (typeof parsed !== "object" || parsed === null || Array.isArray(parsed)) return [];
+	const modelsData = parsed as Record<string, unknown>;
+	const providers = modelsData.providers;
+	if (typeof providers !== "object" || providers === null || Array.isArray(providers)) return [];
+
+	const migrations: ConfigValueMigration[] = [];
+	for (const [provider, providerConfig] of Object.entries(providers)) {
+		if (typeof providerConfig !== "object" || providerConfig === null || Array.isArray(providerConfig)) continue;
+		const providerRecord = providerConfig as Record<string, unknown>;
+		const providerLocation = `models.json.providers[${JSON.stringify(provider)}]`;
+		migrateStringProperty(providerRecord, "apiKey", `${providerLocation}.apiKey`, migrations);
+		migrateHeadersConfig(providerRecord.headers, `${providerLocation}.headers`, migrations);
+
+		if (Array.isArray(providerRecord.models)) {
+			for (let index = 0; index < providerRecord.models.length; index++) {
+				const modelConfig = providerRecord.models[index];
+				if (typeof modelConfig !== "object" || modelConfig === null || Array.isArray(modelConfig)) continue;
+				const modelRecord = modelConfig as Record<string, unknown>;
+				const modelKey = typeof modelRecord.id === "string" ? JSON.stringify(modelRecord.id) : String(index);
+				migrateHeadersConfig(modelRecord.headers, `${providerLocation}.models[${modelKey}].headers`, migrations);
+			}
+		}
+
+		const modelOverrides = providerRecord.modelOverrides;
+		if (typeof modelOverrides === "object" && modelOverrides !== null && !Array.isArray(modelOverrides)) {
+			for (const [modelId, modelOverride] of Object.entries(modelOverrides)) {
+				if (typeof modelOverride !== "object" || modelOverride === null || Array.isArray(modelOverride)) continue;
+				const modelOverrideRecord = modelOverride as Record<string, unknown>;
+				migrateHeadersConfig(
+					modelOverrideRecord.headers,
+					`${providerLocation}.modelOverrides[${JSON.stringify(modelId)}].headers`,
+					migrations,
+				);
+			}
+		}
+	}
+
+	if (migrations.length === 0) return [];
+	writeFileSync(modelsPath, `${JSON.stringify(parsed, null, 2)}\n`, "utf-8");
+	return migrations;
+}
+
+function migrateExplicitEnvVarConfigValues(): void {
+	const agentDir = getAgentDir();
+	const migrations = [...migrateAuthJsonConfigValues(agentDir), ...migrateModelsJsonConfigValues(agentDir)];
+	if (migrations.length === 0) return;
+
+	const details = migrations.map((migration) => `  - ${migration.location}: ${migration.from} -> ${migration.to}`);
+	console.log(
+		chalk.yellow(
+			[
+				"Warning: Migrated API key/header environment references to explicit $ENV_VAR syntax. Plain strings will be treated as literals.",
+				...details,
+			].join("\n"),
+		),
+	);
+}
+
 /**
  * Migrate sessions from ~/.pi/agent/*.jsonl to proper session directories.
  *
@@ -307,6 +438,7 @@ export function runMigrations(cwd: string): {
 	deprecationWarnings: string[];
 } {
 	const migratedAuthProviders = migrateAuthToAuthJson();
+	migrateExplicitEnvVarConfigValues();
 	migrateSessionsFromAgentRoot();
 	migrateToolsToBin();
 	migrateKeybindingsConfigFile();
diff --git a/packages/coding-agent/src/utils/deprecation.ts b/packages/coding-agent/src/utils/deprecation.ts
new file mode 100644
index 00000000..78a2f146
--- /dev/null
+++ b/packages/coding-agent/src/utils/deprecation.ts
@@ -0,0 +1,14 @@
+import chalk from "chalk";
+
+const emittedDeprecationWarnings = new Set<string>();
+
+export function warnDeprecation(message: string): void {
+	if (emittedDeprecationWarnings.has(message)) return;
+	emittedDeprecationWarnings.add(message);
+	console.warn(chalk.yellow(`Deprecation warning: ${message}`));
+}
+
+/** Clear deprecation warning state. Exported for tests. */
+export function clearDeprecationWarningsForTests(): void {
+	emittedDeprecationWarnings.clear();
+}
diff --git a/packages/coding-agent/src/utils/json.ts b/packages/coding-agent/src/utils/json.ts
new file mode 100644
index 00000000..9ee7b7b1
--- /dev/null
+++ b/packages/coding-agent/src/utils/json.ts
@@ -0,0 +1,6 @@
+/** Strip `//` line comments and trailing commas from JSON, leaving string literals untouched. */
+export function stripJsonComments(input: string): string {
+	return input
+		.replace(/"(?:\\.|[^"\\])*"|\/\/[^\n]*/g, (m) => (m[0] === '"' ? m : ""))
+		.replace(/"(?:\\.|[^"\\])*"|,(\s*[}\]])/g, (m, tail) => tail ?? (m[0] === '"' ? m : ""));
+}
diff --git a/packages/coding-agent/test/auth-storage.test.ts b/packages/coding-agent/test/auth-storage.test.ts
index 9ec97100..24242b6b 100644
--- a/packages/coding-agent/test/auth-storage.test.ts
+++ b/packages/coding-agent/test/auth-storage.test.ts
@@ -112,13 +112,13 @@ describe("AuthStorage", () => {
 			expect(apiKey).toBeUndefined();
 		});
 
-		test("apiKey as environment variable name resolves to env value", async () => {
+		test("apiKey with $ prefix resolves to env value", async () => {
 			const originalEnv = process.env.TEST_AUTH_API_KEY_12345;
 			process.env.TEST_AUTH_API_KEY_12345 = "env-api-key-value";
 
 			try {
 				writeAuthJson({
-					anthropic: { type: "api_key", key: "TEST_AUTH_API_KEY_12345" },
+					anthropic: { type: "api_key", key: "$TEST_AUTH_API_KEY_12345" },
 				});
 
 				authStorage = AuthStorage.create(authJsonPath);
@@ -134,6 +134,140 @@ describe("AuthStorage", () => {
 			}
 		});
 
+		test("apiKey with braced env syntax resolves to env value", async () => {
+			const originalEnv = process.env.TEST_AUTH_BRACED_API_KEY_12345;
+			process.env.TEST_AUTH_BRACED_API_KEY_12345 = "braced-env-api-key-value";
+			const bracedKey = "$" + "{TEST_AUTH_BRACED_API_KEY_12345}";
+
+			try {
+				writeAuthJson({
+					anthropic: { type: "api_key", key: bracedKey },
+				});
+
+				authStorage = AuthStorage.create(authJsonPath);
+				const apiKey = await authStorage.getApiKey("anthropic");
+
+				expect(apiKey).toBe("braced-env-api-key-value");
+			} finally {
+				if (originalEnv === undefined) {
+					delete process.env.TEST_AUTH_BRACED_API_KEY_12345;
+				} else {
+					process.env.TEST_AUTH_BRACED_API_KEY_12345 = originalEnv;
+				}
+			}
+		});
+
+		test("apiKey interpolates braced env references inside literals", async () => {
+			const originalPartA = process.env.TEST_AUTH_INTERPOLATED_PART_A_12345;
+			const originalPartB = process.env.TEST_AUTH_INTERPOLATED_PART_B_12345;
+			process.env.TEST_AUTH_INTERPOLATED_PART_A_12345 = "left";
+			process.env.TEST_AUTH_INTERPOLATED_PART_B_12345 = "right";
+			const interpolatedKey = [
+				"$",
+				"{TEST_AUTH_INTERPOLATED_PART_A_12345}_$",
+				"{TEST_AUTH_INTERPOLATED_PART_B_12345}",
+			].join("");
+
+			try {
+				writeAuthJson({
+					anthropic: { type: "api_key", key: interpolatedKey },
+				});
+
+				authStorage = AuthStorage.create(authJsonPath);
+				const apiKey = await authStorage.getApiKey("anthropic");
+
+				expect(apiKey).toBe("left_right");
+			} finally {
+				if (originalPartA === undefined) {
+					delete process.env.TEST_AUTH_INTERPOLATED_PART_A_12345;
+				} else {
+					process.env.TEST_AUTH_INTERPOLATED_PART_A_12345 = originalPartA;
+				}
+				if (originalPartB === undefined) {
+					delete process.env.TEST_AUTH_INTERPOLATED_PART_B_12345;
+				} else {
+					process.env.TEST_AUTH_INTERPOLATED_PART_B_12345 = originalPartB;
+				}
+			}
+		});
+
+		test("apiKey with $$ prefix escapes a leading dollar", async () => {
+			writeAuthJson({
+				anthropic: { type: "api_key", key: "$$TEST_AUTH_API_KEY_12345" },
+			});
+
+			authStorage = AuthStorage.create(authJsonPath);
+			const apiKey = await authStorage.getApiKey("anthropic");
+
+			expect(apiKey).toBe("$TEST_AUTH_API_KEY_12345");
+		});
+
+		test("apiKey with $! escapes a literal bang and still interpolates later env refs", async () => {
+			const originalEnv = process.env.TEST_AUTH_API_KEY_12345;
+			process.env.TEST_AUTH_API_KEY_12345 = "env-api-key-value";
+
+			try {
+				writeAuthJson({
+					anthropic: { type: "api_key", key: "$!literal-$TEST_AUTH_API_KEY_12345" },
+				});
+
+				authStorage = AuthStorage.create(authJsonPath);
+				const apiKey = await authStorage.getApiKey("anthropic");
+
+				expect(apiKey).toBe("!literal-env-api-key-value");
+			} finally {
+				if (originalEnv === undefined) {
+					delete process.env.TEST_AUTH_API_KEY_12345;
+				} else {
+					process.env.TEST_AUTH_API_KEY_12345 = originalEnv;
+				}
+			}
+		});
+
+		test("plain API key is used directly even when it matches an env var", async () => {
+			const originalEnv = process.env.TEST_AUTH_API_KEY_12345;
+			process.env.TEST_AUTH_API_KEY_12345 = "env-api-key-value";
+
+			try {
+				writeAuthJson({
+					anthropic: { type: "api_key", key: "TEST_AUTH_API_KEY_12345" },
+				});
+
+				authStorage = AuthStorage.create(authJsonPath);
+				const apiKey = await authStorage.getApiKey("anthropic");
+
+				expect(apiKey).toBe("TEST_AUTH_API_KEY_12345");
+			} finally {
+				if (originalEnv === undefined) {
+					delete process.env.TEST_AUTH_API_KEY_12345;
+				} else {
+					process.env.TEST_AUTH_API_KEY_12345 = originalEnv;
+				}
+			}
+		});
+
+		test("literal public API key is not corrupted by the Windows PUBLIC env var", async () => {
+			const originalPublic = process.env.PUBLIC;
+			process.env.PUBLIC = "C:\\Users\\Public";
+
+			try {
+				writeAuthJson({
+					opencode: { type: "api_key", key: "public" },
+				});
+
+				authStorage = AuthStorage.create(authJsonPath);
+				const apiKey = await authStorage.getApiKey("opencode");
+
+				expect(apiKey).toBe("public");
+			} finally {
+				if (originalPublic === undefined) {
+					delete process.env.PUBLIC;
+				} else {
+					process.env.PUBLIC = originalPublic;
+				}
+			}
+		});
+
 		test("apiKey as literal value is used directly when not an env var", async () => {
 			// Make sure this isn't an env var
 			delete process.env.literal_api_key_value;
@@ -274,7 +408,7 @@ describe("AuthStorage", () => {
 					process.env[envVarName] = "first-value";
 
 					writeAuthJson({
-						anthropic: { type: "api_key", key: envVarName },
+						anthropic: { type: "api_key", key: `$${envVarName}` },
 					});
 
 					authStorage = AuthStorage.create(authJsonPath);
diff --git a/packages/coding-agent/test/config-value-migration.test.ts b/packages/coding-agent/test/config-value-migration.test.ts
new file mode 100644
index 00000000..35d4f155
--- /dev/null
+++ b/packages/coding-agent/test/config-value-migration.test.ts
@@ -0,0 +1,138 @@
+import * as fs from "node:fs";
+import * as os from "node:os";
+import * as path from "node:path";
+import { afterEach, describe, expect, it, vi } from "vitest";
+import { ENV_AGENT_DIR } from "../src/config.ts";
+import { runMigrations } from "../src/migrations.ts";
+
+describe("config value env var syntax migration", () => {
+	const tempDirs: string[] = [];
+
+	afterEach(() => {
+		for (const dir of tempDirs.splice(0)) {
+			fs.rmSync(dir, { recursive: true, force: true });
+		}
+		vi.restoreAllMocks();
+	});
+
+	function createAgentDir(): string {
+		const agentDir = fs.mkdtempSync(path.join(os.tmpdir(), "pi-config-value-migration-test-"));
+		tempDirs.push(agentDir);
+		return agentDir;
+	}
+
+	function withAgentDir(agentDir: string, fn: () => void): void {
+		const previousAgentDir = process.env[ENV_AGENT_DIR];
+		process.env[ENV_AGENT_DIR] = agentDir;
+		try {
+			fn();
+		} finally {
+			if (previousAgentDir === undefined) {
+				delete process.env[ENV_AGENT_DIR];
+			} else {
+				process.env[ENV_AGENT_DIR] = previousAgentDir;
+			}
+		}
+	}
+
+	it("rewrites legacy uppercase auth.json API key values to explicit env references", () => {
+		const agentDir = createAgentDir();
+		fs.writeFileSync(
+			path.join(agentDir, "auth.json"),
+			`${JSON.stringify(
+				{
+					anthropic: { type: "api_key", key: "ANTHROPIC_API_KEY" },
+					openai: { type: "api_key", key: "$OPENAI_API_KEY" },
+					opencode: { type: "api_key", key: "public" },
+					github: { type: "oauth", access: "ACCESS_TOKEN", refresh: "REFRESH_TOKEN", expires: 1 },
+				},
+				null,
+				2,
+			)}\n`,
+			"utf-8",
+		);
+		const logSpy = vi.spyOn(console, "log").mockImplementation(() => {});
+
+		withAgentDir(agentDir, () => runMigrations(agentDir));
+
+		const migrated = JSON.parse(fs.readFileSync(path.join(agentDir, "auth.json"), "utf-8")) as Record<
+			string,
+			Record<string, unknown>
+		>;
+		expect(migrated.anthropic.key).toBe("$ANTHROPIC_API_KEY");
+		expect(migrated.openai.key).toBe("$OPENAI_API_KEY");
+		expect(migrated.opencode.key).toBe("public");
+		expect(migrated.github.access).toBe("ACCESS_TOKEN");
+		const logMessage = String(logSpy.mock.calls[0]?.[0] ?? "");
+		expect(logMessage).toContain("explicit $ENV_VAR syntax");
+		expect(logMessage).toContain('auth.json["anthropic"].key: ANTHROPIC_API_KEY -> $ANTHROPIC_API_KEY');
+	});
+
+	it("rewrites legacy uppercase models.json API key and header values", () => {
+		const agentDir = createAgentDir();
+		fs.writeFileSync(
+			path.join(agentDir, "models.json"),
+			`${JSON.stringify(
+				{
+					providers: {
+						"custom-provider": {
+							baseUrl: "https://example.com/v1",
+							apiKey: "CUSTOM_API_KEY",
+							api: "openai-completions",
+							headers: {
+								"x-api-key": "HEADER_API_KEY",
+								"x-literal": "literal",
+							},
+							models: [
+								{
+									id: "model-a",
+									headers: { "x-model-key": "MODEL_API_KEY" },
+								},
+							],
+							modelOverrides: {
+								"model-b": { headers: { "x-override-key": "OVERRIDE_API_KEY" } },
+							},
+						},
+					},
+				},
+				null,
+				2,
+			)}\n`,
+			"utf-8",
+		);
+		const logSpy = vi.spyOn(console, "log").mockImplementation(() => {});
+
+		withAgentDir(agentDir, () => runMigrations(agentDir));
+
+		const migrated = JSON.parse(fs.readFileSync(path.join(agentDir, "models.json"), "utf-8")) as {
+			providers: Record<
+				string,
+				{
+					apiKey?: string;
+					headers?: Record<string, string>;
+					models?: Array<{ headers?: Record<string, string> }>;
+					modelOverrides?: Record<string, { headers?: Record<string, string> }>;
+				}
+			>;
+		};
+		const provider = migrated.providers["custom-provider"]!;
+		expect(provider.apiKey).toBe("$CUSTOM_API_KEY");
+		expect(provider.headers?.["x-api-key"]).toBe("$HEADER_API_KEY");
+		expect(provider.headers?.["x-literal"]).toBe("literal");
+		expect(provider.models?.[0]?.headers?.["x-model-key"]).toBe("$MODEL_API_KEY");
+		expect(provider.modelOverrides?.["model-b"]?.headers?.["x-override-key"]).toBe("$OVERRIDE_API_KEY");
+		const logMessage = String(logSpy.mock.calls[0]?.[0] ?? "");
+		expect(logMessage).toContain(
+			'models.json.providers["custom-provider"].apiKey: CUSTOM_API_KEY -> $CUSTOM_API_KEY',
+		);
+		expect(logMessage).toContain(
+			'models.json.providers["custom-provider"].headers["x-api-key"]: HEADER_API_KEY -> $HEADER_API_KEY',
+		);
+		expect(logMessage).toContain(
+			'models.json.providers["custom-provider"].models["model-a"].headers["x-model-key"]: MODEL_API_KEY -> $MODEL_API_KEY',
+		);
+		expect(logMessage).toContain(
+			'models.json.providers["custom-provider"].modelOverrides["model-b"].headers["x-override-key"]: OVERRIDE_API_KEY -> $OVERRIDE_API_KEY',
+		);
+	});
+});
diff --git a/packages/coding-agent/test/extensions-runner.test.ts b/packages/coding-agent/test/extensions-runner.test.ts
index 03de2d77..2e7b0c01 100644
--- a/packages/coding-agent/test/extensions-runner.test.ts
+++ b/packages/coding-agent/test/extensions-runner.test.ts
@@ -36,7 +36,7 @@ describe("ExtensionRunner", () => {
 
 	const providerModelConfig: ProviderConfig = {
 		baseUrl: "https://provider.test/v1",
-		apiKey: "PROVIDER_TEST_KEY",
+		apiKey: "provider-test-key",
 		api: "openai-completions",
 		models: [
 			{
diff --git a/packages/coding-agent/test/model-registry.test.ts b/packages/coding-agent/test/model-registry.test.ts
index ad706ab5..95b70fbd 100644
--- a/packages/coding-agent/test/model-registry.test.ts
+++ b/packages/coding-agent/test/model-registry.test.ts
@@ -4,9 +4,10 @@ import { join } from "node:path";
 import type { AnthropicMessagesCompat, Api, Context, Model, OpenAICompletionsCompat } from "@earendil-works/pi-ai";
 import { getApiProvider } from "@earendil-works/pi-ai";
 import { getOAuthProvider } from "@earendil-works/pi-ai/oauth";
-import { afterEach, beforeEach, describe, expect, test } from "vitest";
+import { afterEach, beforeEach, describe, expect, test, vi } from "vitest";
 import { AuthStorage } from "../src/core/auth-storage.ts";
 import { clearApiKeyCache, ModelRegistry, type ProviderConfigInput } from "../src/core/model-registry.ts";
+import { clearDeprecationWarningsForTests } from "../src/utils/deprecation.ts";
 
 describe("ModelRegistry", () => {
 	let tempDir: string;
@@ -18,6 +19,7 @@ describe("ModelRegistry", () => {
 		mkdirSync(tempDir, { recursive: true });
 		modelsJsonPath = join(tempDir, "models.json");
 		authStorage = AuthStorage.create(join(tempDir, "auth.json"));
+		clearDeprecationWarningsForTests();
 	});
 
 	afterEach(() => {
@@ -25,6 +27,8 @@ describe("ModelRegistry", () => {
 			rmSync(tempDir, { recursive: true });
 		}
 		clearApiKeyCache();
+		clearDeprecationWarningsForTests();
+		vi.restoreAllMocks();
 	});
 
 	/** Create minimal provider config  */
@@ -35,7 +39,7 @@ describe("ModelRegistry", () => {
 	): ProviderConfigInput {
 		return {
 			baseUrl,
-			apiKey: "TEST_KEY",
+			apiKey: "test-key",
 			api: api as Api,
 			models: models.map((m) => ({
 				id: m.id,
@@ -852,7 +856,7 @@ describe("ModelRegistry", () => {
 			registry.registerProvider("named-provider", {
 				name: "Named Provider",
 				baseUrl: "https://provider.test/v1",
-				apiKey: "TEST_KEY",
+				apiKey: "test-key",
 				api: "openai-completions",
 				models: [
 					{
@@ -892,6 +896,30 @@ describe("ModelRegistry", () => {
 			expect(registry.getProviderDisplayName("oauth-provider")).toBe("OAuth Provider");
 		});
 
+		test("registerProvider warns and temporarily treats uppercase apiKey as an env reference", async () => {
+			const originalEnv = process.env.CUSTOM_NAME;
+			process.env.CUSTOM_NAME = "legacy-env-key";
+			const warnSpy = vi.spyOn(console, "warn").mockImplementation(() => {});
+
+			try {
+				const registry = ModelRegistry.create(authStorage, modelsJsonPath);
+
+				registry.registerProvider("legacy-provider", {
+					...providerConfig("https://provider.test/v1", [{ id: "demo-model" }], "openai-completions"),
+					apiKey: "CUSTOM_NAME",
+				});
+
+				expect(await registry.getApiKeyForProvider("legacy-provider")).toBe("legacy-env-key");
+				expect(warnSpy).toHaveBeenCalledWith(expect.stringContaining('Pass "$CUSTOM_NAME" instead'));
+			} finally {
+				if (originalEnv === undefined) {
+					delete process.env.CUSTOM_NAME;
+				} else {
+					process.env.CUSTOM_NAME = originalEnv;
+				}
+			}
+		});
+
 		test("failed registerProvider does not persist invalid streamSimple config", () => {
 			const registry = ModelRegistry.create(authStorage, modelsJsonPath);
 
@@ -911,7 +939,7 @@ describe("ModelRegistry", () => {
 
 			registry.registerProvider("demo-provider", {
 				baseUrl: "https://provider.test/v1",
-				apiKey: "TEST_KEY",
+				apiKey: "test-key",
 				api: "openai-completions",
 				models: [
 					{
@@ -931,7 +959,7 @@ describe("ModelRegistry", () => {
 			expect(() =>
 				registry.registerProvider("demo-provider", {
 					baseUrl: "https://provider.test/v2",
-					apiKey: "TEST_KEY",
+					apiKey: "test-key",
 					models: [
 						{
 							id: "broken-model",
@@ -1187,7 +1215,117 @@ describe("ModelRegistry", () => {
 			expect(apiKey).toBeUndefined();
 		});
 
-		test("apiKey as environment variable name resolves to env value", async () => {
+		test("apiKey with $ prefix resolves to env value", async () => {
+			const originalEnv = process.env.TEST_API_KEY_12345;
+			process.env.TEST_API_KEY_12345 = "env-api-key-value";
+
+			try {
+				writeRawModelsJson({
+					"custom-provider": providerWithApiKey("$TEST_API_KEY_12345"),
+				});
+
+				const registry = ModelRegistry.create(authStorage, modelsJsonPath);
+				const apiKey = await registry.getApiKeyForProvider("custom-provider");
+
+				expect(apiKey).toBe("env-api-key-value");
+			} finally {
+				if (originalEnv === undefined) {
+					delete process.env.TEST_API_KEY_12345;
+				} else {
+					process.env.TEST_API_KEY_12345 = originalEnv;
+				}
+			}
+		});
+
+		test("apiKey with braced env syntax resolves to env value", async () => {
+			const originalEnv = process.env.TEST_BRACED_API_KEY_12345;
+			process.env.TEST_BRACED_API_KEY_12345 = "braced-env-api-key-value";
+			const bracedKey = "$" + "{TEST_BRACED_API_KEY_12345}";
+
+			try {
+				writeRawModelsJson({
+					"custom-provider": providerWithApiKey(bracedKey),
+				});
+
+				const registry = ModelRegistry.create(authStorage, modelsJsonPath);
+				const apiKey = await registry.getApiKeyForProvider("custom-provider");
+
+				expect(apiKey).toBe("braced-env-api-key-value");
+			} finally {
+				if (originalEnv === undefined) {
+					delete process.env.TEST_BRACED_API_KEY_12345;
+				} else {
+					process.env.TEST_BRACED_API_KEY_12345 = originalEnv;
+				}
+			}
+		});
+
+		test("apiKey interpolates braced env references inside literals", async () => {
+			const originalPartA = process.env.TEST_INTERPOLATED_PART_A_12345;
+			const originalPartB = process.env.TEST_INTERPOLATED_PART_B_12345;
+			process.env.TEST_INTERPOLATED_PART_A_12345 = "left";
+			process.env.TEST_INTERPOLATED_PART_B_12345 = "right";
+			const interpolatedKey = ["$", "{TEST_INTERPOLATED_PART_A_12345}_$", "{TEST_INTERPOLATED_PART_B_12345}"].join(
+				"",
+			);
+
+			try {
+				writeRawModelsJson({
+					"custom-provider": providerWithApiKey(interpolatedKey),
+				});
+
+				const registry = ModelRegistry.create(authStorage, modelsJsonPath);
+				const apiKey = await registry.getApiKeyForProvider("custom-provider");
+
+				expect(apiKey).toBe("left_right");
+			} finally {
+				if (originalPartA === undefined) {
+					delete process.env.TEST_INTERPOLATED_PART_A_12345;
+				} else {
+					process.env.TEST_INTERPOLATED_PART_A_12345 = originalPartA;
+				}
+				if (originalPartB === undefined) {
+					delete process.env.TEST_INTERPOLATED_PART_B_12345;
+				} else {
+					process.env.TEST_INTERPOLATED_PART_B_12345 = originalPartB;
+				}
+			}
+		});
+
+		test("apiKey with $$ prefix escapes a leading dollar", async () => {
+			writeRawModelsJson({
+				"custom-provider": providerWithApiKey("$$TEST_API_KEY_12345"),
+			});
+
+			const registry = ModelRegistry.create(authStorage, modelsJsonPath);
+			const apiKey = await registry.getApiKeyForProvider("custom-provider");
+
+			expect(apiKey).toBe("$TEST_API_KEY_12345");
+		});
+
+		test("apiKey with $! escapes a literal bang and still interpolates later env refs", async () => {
+			const originalEnv = process.env.TEST_API_KEY_12345;
+			process.env.TEST_API_KEY_12345 = "env-api-key-value";
+
+			try {
+				writeRawModelsJson({
+					"custom-provider": providerWithApiKey("$!literal-$TEST_API_KEY_12345"),
+				});
+
+				const registry = ModelRegistry.create(authStorage, modelsJsonPath);
+				const apiKey = await registry.getApiKeyForProvider("custom-provider");
+
+				expect(apiKey).toBe("!literal-env-api-key-value");
+			} finally {
+				if (originalEnv === undefined) {
+					delete process.env.TEST_API_KEY_12345;
+				} else {
+					process.env.TEST_API_KEY_12345 = originalEnv;
+				}
+			}
+		});
+
+		test("plain apiKey is used directly even when it matches an env var", async () => {
 			const originalEnv = process.env.TEST_API_KEY_12345;
 			process.env.TEST_API_KEY_12345 = "env-api-key-value";
 
@@ -1199,7 +1337,7 @@ describe("ModelRegistry", () => {
 				const registry = ModelRegistry.create(authStorage, modelsJsonPath);
 				const apiKey = await registry.getApiKeyForProvider("custom-provider");
 
-				expect(apiKey).toBe("env-api-key-value");
+				expect(apiKey).toBe("TEST_API_KEY_12345");
 			} finally {
 				if (originalEnv === undefined) {
 					delete process.env.TEST_API_KEY_12345;
@@ -1318,7 +1456,7 @@ describe("ModelRegistry", () => {
 					process.env[envVarName] = "status-test-key";
 
 					writeRawModelsJson({
-						"custom-provider": providerWithApiKey(envVarName),
+						"custom-provider": providerWithApiKey(`$${envVarName}`),
 					});
 
 					const registry = ModelRegistry.create(authStorage, modelsJsonPath);
@@ -1337,6 +1475,41 @@ describe("ModelRegistry", () => {
 				}
 			});
 
+			test("provider auth status reports interpolated apiKey environment variables", () => {
+				const envVarNameA = "TEST_API_KEY_STATUS_PART_A_98765";
+				const envVarNameB = "TEST_API_KEY_STATUS_PART_B_98765";
+				const originalEnvA = process.env[envVarNameA];
+				const originalEnvB = process.env[envVarNameB];
+				process.env[envVarNameA] = "left";
+				process.env[envVarNameB] = "right";
+				const interpolatedKey = ["$", "{", envVarNameA, "}_$", "{", envVarNameB, "}"].join("");
+
+				try {
+					writeRawModelsJson({
+						"custom-provider": providerWithApiKey(interpolatedKey),
+					});
+
+					const registry = ModelRegistry.create(authStorage, modelsJsonPath);
+
+					expect(registry.getProviderAuthStatus("custom-provider")).toEqual({
+						configured: true,
+						source: "environment",
+						label: `${envVarNameA}, ${envVarNameB}`,
+					});
+				} finally {
+					if (originalEnvA === undefined) {
+						delete process.env[envVarNameA];
+					} else {
+						process.env[envVarNameA] = originalEnvA;
+					}
+					if (originalEnvB === undefined) {
+						delete process.env[envVarNameB];
+					} else {
+						process.env[envVarNameB] = originalEnvB;
+					}
+				}
+			});
+
 			test("provider auth status reports non-env apiKey values from models.json as a config key", () => {
 				writeRawModelsJson({
 					"custom-provider": providerWithApiKey("literal_api_key_value"),
@@ -1350,6 +1523,29 @@ describe("ModelRegistry", () => {
 				});
 			});
 
+			test("missing explicit env apiKey keeps provider unavailable", () => {
+				const envVarName = "TEST_API_KEY_MISSING_TEST_98765";
+				const originalEnv = process.env[envVarName];
+				delete process.env[envVarName];
+
+				try {
+					writeRawModelsJson({
+						"custom-provider": providerWithApiKey(`$${envVarName}`),
+					});
+
+					const registry = ModelRegistry.create(authStorage, modelsJsonPath);
+
+					expect(registry.getProviderAuthStatus("custom-provider")).toEqual({ configured: false });
+					expect(registry.getAvailable().some((model) => model.provider === "custom-provider")).toBe(false);
+				} finally {
+					if (originalEnv === undefined) {
+						delete process.env[envVarName];
+					} else {
+						process.env[envVarName] = originalEnv;
+					}
+				}
+			});
+
 			test("provider auth status reports command apiKey values from models.json without executing them", () => {
 				const counterFile = join(tempDir, "status-counter");
 				writeFileSync(counterFile, "0");
@@ -1376,7 +1572,7 @@ describe("ModelRegistry", () => {
 					process.env[envVarName] = "first-value";
 
 					writeRawModelsJson({
-						"custom-provider": providerWithApiKey(envVarName),
+						"custom-provider": providerWithApiKey(`$${envVarName}`),
 					});
 
 					const registry = ModelRegistry.create(authStorage, modelsJsonPath);