diff --git a/outputview/outputexecutejob.cpp b/outputview/outputexecutejob.cpp
--- a/outputview/outputexecutejob.cpp
+++ b/outputview/outputexecutejob.cpp
@@ -438,7 +438,9 @@
     if( environmentProfile.isEmpty() ) {
         environmentProfile = environmentGroup.defaultGroup();
     }
-    OutputExecuteJobPrivate::mergeEnvironment( environment, environmentGroup.variables( environmentProfile ) );
+    QMap <QString, QString> userEnv = environmentGroup.variables( environmentProfile );
+    expandVariables ( userEnv, environment );
+    OutputExecuteJobPrivate::mergeEnvironment( environment, userEnv );
     OutputExecuteJobPrivate::mergeEnvironment( environment, m_environmentOverrides );
     if( m_properties.testFlag( OutputExecuteJob::PortableMessages ) ) {
         environment.remove( "LC_ALL" );
diff --git a/util/environmentgrouplist.h b/util/environmentgrouplist.h
--- a/util/environmentgrouplist.h
+++ b/util/environmentgrouplist.h
@@ -24,6 +24,7 @@
 
 #include <KSharedConfig>
 
+class QProcessEnvironment;
 class KConfig;
 template <typename T1, typename T2> class QMap;
 class QString;
@@ -140,6 +141,8 @@
 
 };
 
+KDEVPLATFORMUTIL_EXPORT void expandVariables( QMap<QString, QString>& variables, QProcessEnvironment& environment );
+
 }
 
 #endif
diff --git a/util/environmentgrouplist.cpp b/util/environmentgrouplist.cpp
--- a/util/environmentgrouplist.cpp
+++ b/util/environmentgrouplist.cpp
@@ -25,6 +25,7 @@
 
 #include <KConfigGroup>
 
+#include <QRegularExpression>
 
 namespace KDevelop {
 class EnvironmentGroupListPrivate
@@ -201,3 +202,21 @@
 
     return env;
 }
+
+void KDevelop::expandVariables ( QMap<QString, QString>& variables, QProcessEnvironment& environment )
+{
+    QRegularExpression rVar("(?<!\\\\)(\\$\\w+)");
+    QRegularExpression rNotVar("\\\\\\$");
+    for (auto it = variables.begin(); it != variables.end(); ++it) {
+        QRegularExpressionMatch m;
+        while ((m=rVar.match(it.value())).hasMatch()) {
+            if (environment.contains(m.captured(1).midRef(1).toString())) {
+                it.value().replace(m.capturedStart(0), m.capturedLength(0), environment.value(m.captured(0).midRef(1).toString()));
+            } else {
+                //TODO: an warning
+                it.value().replace(m.capturedStart(0), m.capturedLength(0), "");
+            }
+        }
+        it.value().replace(rNotVar,"$");
+    }
+}
diff --git a/util/tests/CMakeLists.txt b/util/tests/CMakeLists.txt
--- a/util/tests/CMakeLists.txt
+++ b/util/tests/CMakeLists.txt
@@ -18,3 +18,6 @@
 
 ecm_add_test(test_executecompositejob.cpp
     LINK_LIBRARIES Qt5::Test KDev::Util)
+
+ecm_add_test(test_environment.cpp
+    LINK_LIBRARIES Qt5::Test KDev::Util)
diff --git a/util/tests/test_environment.h b/util/tests/test_environment.h
new file mode 100644
--- /dev/null
+++ b/util/tests/test_environment.h
@@ -0,0 +1,35 @@
+/*
+ * This file is part of KDevelop
+ *
+ * Copyright 2015 Artur Puzio <cytadela88@gmail.com>
+ *
+ * This program is free software; you can redistribute it and/or modify
+ * it under the terms of the GNU Library General Public License as
+ * published by the Free Software Foundation; either version 2 of the
+ * License, or (at your option) any later version.
+ *
+ * This program is distributed in the hope that it will be useful,
+ * but WITHOUT ANY WARRANTY; without even the implied warranty of
+ * MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+ * GNU General Public License for more details.
+ *
+ * You should have received a copy of the GNU General Public
+ * License along with this program; if not, write to the
+ * Free Software Foundation, Inc.,
+ * 51 Franklin Street, Fifth Floor, Boston, MA 02110-1301, USA.
+ */
+#ifndef TESTENVIRONMENT_H
+#define TESTENVIRONMENT_H
+
+#include <QObject>
+
+class TestEnvironment : public QObject
+{
+    Q_OBJECT
+    
+private Q_SLOTS:
+    void testBasic_data();
+    void testBasic();
+};
+
+#endif // TESTENVIRONMENT_H
diff --git a/util/tests/test_environment.cpp b/util/tests/test_environment.cpp
new file mode 100644
--- /dev/null
+++ b/util/tests/test_environment.cpp
@@ -0,0 +1,80 @@
+/*
+ * This file is part of KDevelop
+ *
+ * Copyright 2015 Artur Puzio <cytadela88@gmail.com>
+ *
+ * This program is free software; you can redistribute it and/or modify
+ * it under the terms of the GNU Library General Public License as
+ * published by the Free Software Foundation; either version 2 of the
+ * License, or (at your option) any later version.
+ *
+ * This program is distributed in the hope that it will be useful,
+ * but WITHOUT ANY WARRANTY; without even the implied warranty of
+ * MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+ * GNU General Public License for more details.
+ *
+ * You should have received a copy of the GNU General Public
+ * License along with this program; if not, write to the
+ * Free Software Foundation, Inc.,
+ * 51 Franklin Street, Fifth Floor, Boston, MA 02110-1301, USA.
+ */
+
+#include "test_environment.h"
+
+#include "util/environmentgrouplist.h"
+
+#include <QtTest>
+
+QTEST_MAIN(TestEnvironment);
+
+using ProcEnv = QMap<QString,QString>;
+
+void TestEnvironment::testBasic_data()
+{
+    QTest::addColumn<ProcEnv>("test");
+    QTest::addColumn<ProcEnv>("goodAns");
+
+    QTest::newRow("simple variables")           << ProcEnv{
+                                                    {"VAR1","data"},
+                                                    {"Var2","some other data"}
+                                                } << ProcEnv({
+                                                    {"VAR1","data"},
+                                                    {"Var2","some other data"}
+                                                });
+    QTest::newRow("no variables")               << ProcEnv({}) << ProcEnv({});
+    QTest::newRow("PATH append and prepend")    << ProcEnv({
+                                                    {"PATH","/home/usr/bin:$PATH:/home/user/folder"}
+                                                }) << ProcEnv({
+                                                    {"PATH", "/home/usr/bin:/bin:/usr/bin:/home/user/folder"}
+                                                });
+    QTest::newRow("\\$VAR")                     << ProcEnv({
+                                                    {"MY_VAR","\\$PATH something \\$HOME"}
+                                                }) << ProcEnv({
+                                                    {"MY_VAR","$PATH something $HOME"}
+                                                });
+    QTest::newRow("spaces, \\$VAR after $VAR")  << ProcEnv({
+                                                    {"MY_VAR","$PATH:$HOME something \\$HOME"}  
+                                                }) << ProcEnv({
+                                                    {"MY_VAR","/bin:/usr/bin:/home/tom something $HOME"}
+                                                });
+    QTest::newRow("VAR2=$VAR1")                 << ProcEnv({
+                                                    {"VAR1","/some/path"},{"VAR2","$VAR1"}
+                                                }) << ProcEnv({
+                                                    {"VAR1","/some/path"},{"VAR2",""}
+                                                });
+}
+
+void TestEnvironment::testBasic()
+{
+    QProcessEnvironment environment;
+    environment.insert("PATH","/bin:/usr/bin");
+    environment.insert("HOME","/home/tom");
+    QFETCH(ProcEnv, test);
+    QFETCH(ProcEnv, goodAns);
+    
+    KDevelop::expandVariables( test, environment );
+    for (auto it = goodAns.cbegin(); it!= goodAns.cend(); ++it)
+    {
+        QCOMPARE(test.value(it.key()), it.value());
+    }
+}