diff --git a/Cargo.lock b/Cargo.lock
index 9d2fd2166..a377d0551 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -6717,6 +6717,7 @@ dependencies = [
  "serde",
  "serde_json",
  "smallvec",
+ "temp-env",
  "thiserror 2.0.18",
  "tracing",
  "tracing-test",
diff --git a/crates/uv-pep508/Cargo.toml b/crates/uv-pep508/Cargo.toml
index 5270b2528..788fc6f89 100644
--- a/crates/uv-pep508/Cargo.toml
+++ b/crates/uv-pep508/Cargo.toml
@@ -34,6 +34,7 @@ rustc-hash = { workspace = true }
 schemars = { workspace = true, optional = true }
 serde = { workspace = true, features = ["derive", "rc"] }
 smallvec = { workspace = true }
+temp-env = { workspace = true }
 thiserror = { workspace = true }
 tracing = { workspace = true, optional = true }
 unicode-width = { workspace = true }
diff --git a/crates/uv-pep508/src/lib.rs b/crates/uv-pep508/src/lib.rs
index 368e6bc99..56416afb6 100644
--- a/crates/uv-pep508/src/lib.rs
+++ b/crates/uv-pep508/src/lib.rs
@@ -1084,7 +1084,6 @@ impl<T: Pep508Url + Display, D: rkyv::rancor::Fallible + ?Sized>
 mod tests {
     //! Half of these tests are copied from <https://github.com/pypa/packaging/pull/624>
 
-    use std::env;
     use std::str::FromStr;
 
     use insta::assert_snapshot;
@@ -1822,7 +1821,7 @@ mod tests {
             "foo @ file:foo-3.0.0-py3-none-any.whl",
             "foo @ ./foo-3.0.0-py3-none-any.whl",
         ];
-        let cwd = env::current_dir().unwrap();
+        let cwd = std::env::current_dir().unwrap();
 
         for requirement in requirements {
             assert_eq!(
diff --git a/crates/uv-pep508/src/verbatim_url.rs b/crates/uv-pep508/src/verbatim_url.rs
index ff424658b..9669d0669 100644
--- a/crates/uv-pep508/src/verbatim_url.rs
+++ b/crates/uv-pep508/src/verbatim_url.rs
@@ -791,4 +791,77 @@ mod tests {
             @"ambiguous user/pass authority in URL (not percent-encoded?): https:***@domain/a/b/c"
         );
     }
+
+    #[test]
+    fn env_vars() {
+        temp_env::with_vars(
+            [
+                ("FOO", None),
+                ("BAR", Some("bar")),
+                ("BAZ", Some("baz")),
+                ("Not-Valid", Some("Not-Valid")),
+                ("TEST_1", Some("Test 1")),
+                ("PROJECT_ROOT", None),
+            ],
+            || {
+                // Basic
+                assert_eq!(expand_env_vars(""), Cow::Borrowed(""));
+                assert_eq!(expand_env_vars("test"), Cow::Borrowed("test"));
+                assert_eq!(expand_env_vars("$"), Cow::Borrowed("$"));
+
+                // Invalid
+                assert_eq!(expand_env_vars("$FOO"), Cow::Borrowed("$FOO"));
+                assert_eq!(expand_env_vars("$BAR"), Cow::Borrowed("$BAR"));
+                assert_eq!(expand_env_vars("${BAR"), Cow::Borrowed("${BAR"));
+                assert_eq!(expand_env_vars("$BAR}"), Cow::Borrowed("$BAR}"));
+                assert_eq!(expand_env_vars("${ BAR }"), Cow::Borrowed("${ BAR }"));
+                assert_eq!(
+                    expand_env_vars("${Not-Valid}"),
+                    Cow::Borrowed("${Not-Valid}")
+                );
+                assert_eq!(expand_env_vars("${}"), Cow::Borrowed("${}"));
+
+                // Missing
+                assert_eq!(expand_env_vars("${FOO}"), "${FOO}");
+
+                // Case sensitive
+                assert_eq!(expand_env_vars("${bar}"), "${bar}");
+
+                // One variable referenced
+                assert_eq!(expand_env_vars("${BAR}"), "bar");
+                assert_eq!(expand_env_vars("foo ${BAR}"), "foo bar");
+                assert_eq!(expand_env_vars("foo ${BAR} baz"), "foo bar baz");
+                assert_eq!(expand_env_vars("foo ${BAR} baz ${BAR}"), "foo bar baz bar");
+
+                // Two variables referenced
+                assert_eq!(expand_env_vars("${FOO} ${BAR} ${BAZ}"), "${FOO} bar baz");
+                assert_eq!(expand_env_vars("<${BAR}-${BAZ}>"), "<bar-baz>");
+                assert_eq!(
+                    expand_env_vars("${FOO}${BAR}${BAZ}${FOO}${BAR}${BAZ}"),
+                    "${FOO}barbaz${FOO}barbaz"
+                );
+
+                // Weird
+                assert_eq!(expand_env_vars("${${TEST_1}}"), "${Test 1}");
+
+                // PROJECT_ROOT
+                let cwd = std::env::current_dir().unwrap();
+                let cwd = cwd.to_string_lossy();
+
+                assert_eq!(
+                    expand_env_vars("${PROJECT_ROOT}/file"),
+                    format!("{cwd}/file")
+                );
+                assert_eq!(
+                    expand_env_vars("$PROJECT_ROOT/file.txt"),
+                    Cow::Borrowed("$PROJECT_ROOT/file.txt")
+                );
+
+                assert_eq!(
+                    expand_env_vars("${FOO} ${BAR} ${PROJECT_ROOT} ${BAZ}"),
+                    format!("${{FOO}} bar {cwd} baz")
+                );
+            },
+        );
+    }
 }