diff --git a/src/common/settings.ts b/src/common/settings.ts
index f08d09d6..fbb2ca9d 100644
--- a/src/common/settings.ts
+++ b/src/common/settings.ts
@@ -42,10 +42,12 @@ function resolveVariables(
     const home = process.env.HOME || process.env.USERPROFILE;
     if (home) {
         substitutions.set('${userHome}', home);
+        substitutions.set('~', home);
     }
     if (workspace) {
         substitutions.set('${workspaceFolder}', workspace.uri.fsPath);
     }
+
     substitutions.set('${cwd}', process.cwd());
     getWorkspaceFolders().forEach((w) => {
         substitutions.set('${workspaceFolder:' + w.name + '}', w.uri.fsPath);
diff --git a/src/test/ts_tests/tests/common/settings.unit.test.ts b/src/test/ts_tests/tests/common/settings.unit.test.ts
index 714f82dc..32685300 100644
--- a/src/test/ts_tests/tests/common/settings.unit.test.ts
+++ b/src/test/ts_tests/tests/common/settings.unit.test.ts
@@ -262,6 +262,7 @@ suite('Settings Tests', () => {
                     '${workspaceFolder}/lib/python',
                     '${workspaceFolder:workspace1}/lib/python',
                     '${cwd}/lib/python',
+                    '~/lib/python',
                 ])
                 .verifiable(TypeMoq.Times.atLeastOnce());
             pythonConfigMock
@@ -286,6 +287,7 @@ suite('Settings Tests', () => {
                 `${workspace1.uri.fsPath}/lib/python`,
                 `${workspace1.uri.fsPath}/lib/python`,
                 `${process.cwd()}/lib/python`,
+                `${process.env.HOME || process.env.USERPROFILE}/lib/python`,
             ]);
 
             configMock.verifyAll();