diff --git a/src/modules/EnvironmentVariables/EnvironmentVariables/Helpers/EnvironmentVariablesHelper.cs b/src/modules/EnvironmentVariables/EnvironmentVariables/Helpers/EnvironmentVariablesHelper.cs
index 4933050e82..1979e9b14f 100644
--- a/src/modules/EnvironmentVariables/EnvironmentVariables/Helpers/EnvironmentVariablesHelper.cs
+++ b/src/modules/EnvironmentVariables/EnvironmentVariables/Helpers/EnvironmentVariablesHelper.cs
@@ -65,6 +65,9 @@ namespace EnvironmentVariables.Helpers
             return baseKey.OpenSubKey(keyName, writable: writable);
         }
 
+        // Code taken from https://github.com/dotnet/runtime/blob/main/src/libraries/System.Private.CoreLib/src/System/Environment.Win32.cs
+        // Set variables directly to registry instead of using Environment API - Environment.SetEnvironmentVariable() has 1 second timeout for SendNotifyMessage(WM_SETTINGSCHANGED).
+        // When applying profile, this would take num_of_variables * 1s to propagate the changes. We do manually SendNotifyMessage with no timeout where needed.
         private static void SetEnvironmentVariableFromRegistryWithoutNotify(string variable, string value, bool fromMachine)
         {
             const int MaxUserEnvVariableLength = 255; // User-wide env vars stored in the registry have names limited to 255 chars
@@ -84,7 +87,15 @@ namespace EnvironmentVariables.Helpers
                     }
                     else
                     {
-                        environmentKey.SetValue(variable, value);
+                        // If a variable contains %, we save it as a REG_EXPAND_SZ, which is the same behavior as the Windows default environment variables editor.
+                        if (value.Contains('%'))
+                        {
+                            environmentKey.SetValue(variable, value, RegistryValueKind.ExpandString);
+                        }
+                        else
+                        {
+                            environmentKey.SetValue(variable, value, RegistryValueKind.String);
+                        }
                     }
                 }
             }
@@ -102,23 +113,32 @@ namespace EnvironmentVariables.Helpers
             }
         }
 
+        // Code taken from https://github.com/dotnet/runtime/blob/main/src/libraries/System.Private.CoreLib/src/System/Environment.Win32.cs
+        // Reading variables from registry instead of using Environment API, because Environment API expands variables by default.
         internal static void GetVariables(EnvironmentVariableTarget target, VariablesSet set)
         {
-            var variables = Environment.GetEnvironmentVariables(target);
             var sortedList = new SortedList<string, Variable>();
 
-            foreach (DictionaryEntry variable in variables)
+            bool fromMachine = target == EnvironmentVariableTarget.Machine ? true : false;
+
+            using (RegistryKey environmentKey = OpenEnvironmentKeyIfExists(fromMachine, writable: false))
             {
-                string key = variable.Key as string;
-                string value = variable.Value as string;
-
-                if (string.IsNullOrEmpty(key))
+                if (environmentKey != null)
                 {
-                    continue;
+                    foreach (string name in environmentKey.GetValueNames())
+                    {
+                        string value = environmentKey.GetValue(name, string.Empty, RegistryValueOptions.DoNotExpandEnvironmentNames).ToString();
+                        try
+                        {
+                            Variable entry = new Variable(name, value, set.Type);
+                            sortedList.Add(name, entry);
+                        }
+                        catch (ArgumentException)
+                        {
+                            // Throw and catch intentionally to provide non-fatal notification about corrupted environment block
+                        }
+                    }
                 }
-
-                Variable entry = new Variable(key, value, set.Type);
-                sortedList.Add(key, entry);
             }
 
             set.Variables = new System.Collections.ObjectModel.ObservableCollection<Variable>(sortedList.Values);
diff --git a/src/modules/EnvironmentVariables/EnvironmentVariables/ViewModels/MainViewModel.cs b/src/modules/EnvironmentVariables/EnvironmentVariables/ViewModels/MainViewModel.cs
index 164325b4bb..428d3db517 100644
--- a/src/modules/EnvironmentVariables/EnvironmentVariables/ViewModels/MainViewModel.cs
+++ b/src/modules/EnvironmentVariables/EnvironmentVariables/ViewModels/MainViewModel.cs
@@ -132,10 +132,13 @@ namespace EnvironmentVariables.ViewModels
             var variables = new List<Variable>();
             if (AppliedProfile != null)
             {
-                variables = variables.Concat(AppliedProfile.Variables.OrderBy(x => x.Name)).ToList();
+                variables = variables.Concat(AppliedProfile.Variables.Select(x => new Variable(x.Name, Environment.ExpandEnvironmentVariables(x.Values), VariablesSetType.Profile)).OrderBy(x => x.Name)).ToList();
             }
 
-            variables = variables.Concat(UserDefaultSet.Variables.OrderBy(x => x.Name)).Concat(SystemDefaultSet.Variables.OrderBy(x => x.Name)).ToList();
+            // Variables are expanded to be shown in the applied variables section, so the user sees their actual values.
+            variables = variables.Concat(UserDefaultSet.Variables.Select(x => new Variable(x.Name, Environment.ExpandEnvironmentVariables(x.Values), VariablesSetType.User)).OrderBy(x => x.Name))
+                                 .Concat(SystemDefaultSet.Variables.Select(x => new Variable(x.Name, Environment.ExpandEnvironmentVariables(x.Values), VariablesSetType.System)).OrderBy(x => x.Name))
+                                 .ToList();
 
             // Handle PATH variable - add USER value to the end of the SYSTEM value
             var profilePath = variables.Where(x => x.Name.Equals("PATH", StringComparison.OrdinalIgnoreCase) && x.ParentType == VariablesSetType.Profile).FirstOrDefault();