--- a/tests/test-paths.t	Sat Oct 09 11:55:25 2010 -0500
+++ b/tests/test-paths.t	Sat Oct 09 12:28:16 2010 -0500
@@ -5,6 +5,7 @@
   $ cd a
   $ echo '[paths]' >> .hg/hgrc
   $ echo 'dupe = ../b' >> .hg/hgrc
+  $ echo 'expand = $SOMETHING/bar' >> .hg/hgrc
   $ hg in dupe
   comparing with $TESTTMP/b
   no changes found
@@ -14,3 +15,13 @@
   comparing with $TESTTMP/b
   no changes found
   [1]
+  $ cd a
+  $ hg paths
+  dupe = $TESTTMP/b
+  expand = $TESTTMP/a/$SOMETHING/bar
+  $ SOMETHING=foo hg paths
+  dupe = $TESTTMP/b
+  expand = $TESTTMP/a/foo/bar
+  $ SOMETHING=/foo hg paths
+  dupe = $TESTTMP/b
+  expand = /foo/bar