diff --git a/docs/changelog.rst b/docs/changelog.rst
index 0052a0ee7..982ffcd0d 100644
--- a/docs/changelog.rst
+++ b/docs/changelog.rst
@@ -52,6 +52,8 @@ Detailed list of changes
 
 - themes kitten: Allow absolute paths for ``--config-file-name`` (:iss:`6638`)
 
+- Expand environment variables in the :opt:`shell` option (:iss:`6511`)
+
 
 0.30.0 [2023-09-18]
 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
diff --git a/kitty/options/definition.py b/kitty/options/definition.py
index 75749d2c2..c37ddeb02 100644
--- a/kitty/options/definition.py
+++ b/kitty/options/definition.py
@@ -2782,7 +2782,7 @@ The shell program to execute. The default value of :code:`.` means to use
 whatever shell is set as the default shell for the current user. Note that on
 macOS if you change this, you might need to add :code:`--login` and
 :code:`--interactive` to ensure that the shell starts in interactive mode and
-reads its startup rc files.
+reads its startup rc files. Environment variables are expanded in this setting.
 '''
     )
 
diff --git a/kitty/utils.py b/kitty/utils.py
index c138ce336..2d0fe4ad3 100644
--- a/kitty/utils.py
+++ b/kitty/utils.py
@@ -771,7 +771,19 @@ def resolved_shell(opts: Optional[Options] = None) -> List[str]:
         ans = [shell_path]
     else:
         import shlex
-        ans = shlex.split(q)
+        env = {}
+        if opts is not None:
+            env['TERM'] = opts.term
+        if 'SHELL' not in os.environ:
+            env['SHELL'] = shell_path
+        if 'HOME' not in os.environ:
+            env['HOME'] = os.path.expanduser('~')
+        if 'USER' not in os.environ:
+            import pwd
+            env['USER'] = pwd.getpwuid(os.geteuid()).pw_name
+        def expand(x: str) -> str:
+            return expandvars(x, env)
+        list(map(expand, shlex.split(q)))
     return ans