diff --git a/src/System.Management.Automation/engine/CommandDiscovery.cs b/src/System.Management.Automation/engine/CommandDiscovery.cs
index 2dc02351489..3333a3f81f8 100644
--- a/src/System.Management.Automation/engine/CommandDiscovery.cs
+++ b/src/System.Management.Automation/engine/CommandDiscovery.cs
@@ -888,7 +888,7 @@ internal static void AutoloadModulesWithJobSourceAdapters(System.Management.Auto
             It attempts to load modules from a fixed ModulesWithJobSourceAdapters list that currently has only `PSScheduledJob` module that is not PS-Core compatible.
             Because this function does not check the result of a (currently failing) `PSScheduledJob` module autoload, it provides no value.
             After discussion it was decided to comment out this code as it may be useful if ModulesWithJobSourceAdapters list changes in the future.
-                        
+
             if (!context.IsModuleWithJobSourceAdapterLoaded)
             {
                 PSModuleAutoLoadingPreference moduleAutoLoadingPreference = GetCommandDiscoveryPreference(context, SpecialVariables.PSModuleAutoLoadingPreferenceVarPath, "PSModuleAutoLoadingPreference");
@@ -1328,6 +1328,15 @@ internal LookupPathCollection GetLookupDirectoryPaths()
                     foreach (string directory in tokenizedPath)
                     {
                         string tempDir = directory.TrimStart();
+                        if (tempDir.EqualsOrdinalIgnoreCase("~"))
+                        {
+                            tempDir = Environment.GetFolderPath(Environment.SpecialFolder.UserProfile);
+                        }
+                        else if (tempDir.StartsWith("~" + Path.DirectorySeparatorChar))
+                        {
+                            tempDir = Environment.GetFolderPath(Environment.SpecialFolder.UserProfile) + Path.DirectorySeparatorChar + tempDir.Substring(2);
+                        }
+
                         _cachedPath.Add(tempDir);
                         result.Add(tempDir);
                     }
diff --git a/test/powershell/Modules/Microsoft.PowerShell.Utility/Environment-Variables.Tests.ps1 b/test/powershell/Modules/Microsoft.PowerShell.Utility/Environment-Variables.Tests.ps1
index 0d79efbe85b..3760489ebef 100644
--- a/test/powershell/Modules/Microsoft.PowerShell.Utility/Environment-Variables.Tests.ps1
+++ b/test/powershell/Modules/Microsoft.PowerShell.Utility/Environment-Variables.Tests.ps1
@@ -3,44 +3,76 @@
 Describe "Environment-Variables" -Tags "CI" {
 
     It "Should have environment variables" {
-	Get-Item ENV: | Should -Not -BeNullOrEmpty
+        Get-Item ENV: | Should -Not -BeNullOrEmpty
     }
 
     It "Should have a nonempty PATH" {
-	$ENV:PATH | Should -Not -BeNullOrEmpty
+        $ENV:PATH | Should -Not -BeNullOrEmpty
     }
 
     It "Should contain /bin in the PATH" {
-	if ($IsWindows)
-	{
-	    $ENV:PATH | Should -Match "C:"
-	}
-	else
-	{
-	    $ENV:PATH | Should -Match "/bin"
-	}
+        if ($IsWindows) {
+            $ENV:PATH | Should -Match "C:"
+        } else {
+            $ENV:PATH | Should -Match "/bin"
+        }
     }
 
     It "Should have the correct HOME" {
-	if ($IsWindows)
-	{
-	    # \Windows\System32 is found as $env:HOMEPATH for temporary profiles
-	    $expected = "\Users", "\Windows"
-	    Split-Path $ENV:HOMEPATH -Parent | Should -BeIn $expected
-	}
-	else
-	{
-	    $expected = /bin/bash -c "cd ~ && pwd"
-	    $ENV:HOME | Should -Be $expected
-	}
+        if ($IsWindows) {
+            # \Windows\System32 is found as $env:HOMEPATH for temporary profiles
+            $expected = "\Users", "\Windows"
+            Split-Path $ENV:HOMEPATH -Parent | Should -BeIn $expected
+        } else {
+            $expected = /bin/bash -c "cd ~ && pwd"
+            $ENV:HOME | Should -Be $expected
+        }
     }
 
     It "Should be able to set the environment variables" {
-	$expected = "this is a test environment variable"
-	{ $ENV:TESTENVIRONMENTVARIABLE = $expected  } | Should -Not -Throw
+        $expected = "this is a test environment variable"
+        { $ENV:TESTENVIRONMENTVARIABLE = $expected } | Should -Not -Throw
 
-	$ENV:TESTENVIRONMENTVARIABLE | Should -Not -BeNullOrEmpty
-	$ENV:TESTENVIRONMENTVARIABLE | Should -Be $expected
+        $ENV:TESTENVIRONMENTVARIABLE | Should -Not -BeNullOrEmpty
+        $ENV:TESTENVIRONMENTVARIABLE | Should -Be $expected
 
     }
+
+    Context "~ in PATH" {
+        AfterEach {
+            $env:PATH = $oldPath
+        }
+
+        BeforeAll {
+            $oldPath = $env:PATH
+            $pwsh = (Get-Command pwsh | Select-Object -First 1).Source
+            if ($IsWindows) {
+                $pwsh2 = "pwsh2.exe"
+            } else {
+                $pwsh2 = "pwsh2"
+            }
+
+            Copy-Item -Path $pwsh -Destination "~/$pwsh2"
+            $testPath = Join-Path -Path "~" -ChildPath (New-Guid)
+            New-Item -Path $testPath -ItemType Directory > $null
+            Copy-Item -Path $pwsh -Destination "$testPath/$pwsh2"
+        }
+
+        AfterAll {
+            Remove-Item -Path "~/pwsh2" -Force
+            Remove-Item -Path $testPath -Recurse -Force
+        }
+
+        It "Should be able to resolve ~ in PATH" {
+            $env:PATH = "~" + [System.IO.Path]::PathSeparator + $env:PATH
+            $out = Get-Command pwsh2
+            $out.Source | Should -BeExactly (Join-Path -Path ([System.Environment]::GetFolderPath([System.Environment+SpecialFolder]::UserProfile)) -ChildPath $pwsh2)
+        }
+
+        It "Should be able to resolve ~/folder in PATH" {
+            $env:PATH = $testPath + [System.IO.Path]::PathSeparator + $env:PATH
+            $out = Get-Command pwsh2
+            $out.Source | Should -BeExactly (Join-Path -Path (Resolve-Path $testPath) -ChildPath $pwsh2)
+        }
+    }
 }