diff --git a/cmd/olliesrv/internal/session/session.go b/cmd/olliesrv/internal/session/session.go
index ee195d0..8d6e7ea 100644
--- a/cmd/olliesrv/internal/session/session.go
+++ b/cmd/olliesrv/internal/session/session.go
@@ -100,9 +100,10 @@ func (s *Session) Cwd() string {
 }
 
 // SetCwd sets the session working directory.
+// Tilde and environment variables in cwd are expanded before storing.
 func (s *Session) SetCwd(cwd string) {
 	s.mu.Lock()
-	s.cwd = cwd
+	s.cwd = util.ExpandHome(os.ExpandEnv(cwd))
 	s.mu.Unlock()
 	go s.saveSession()
 }
diff --git a/cmd/olliesrv/internal/session/session_test.go b/cmd/olliesrv/internal/session/session_test.go
new file mode 100644
index 0000000..40e8180
--- /dev/null
+++ b/cmd/olliesrv/internal/session/session_test.go
@@ -0,0 +1,43 @@
+package session
+
+import (
+	"os"
+	"testing"
+)
+
+func TestSetCwd_ExpandsTilde(t *testing.T) {
+	home, err := os.UserHomeDir()
+	if err != nil || home == "" {
+		t.Skip("cannot determine home directory")
+	}
+
+	s := &Session{}
+	s.SetCwd("~/projects")
+
+	want := home + "/projects"
+	if got := s.Cwd(); got != want {
+		t.Errorf("SetCwd(~/projects): got %q, want %q", got, want)
+	}
+}
+
+func TestSetCwd_ExpandsEnvVars(t *testing.T) {
+	t.Setenv("OLLIE_TEST_DIR", "/tmp/testdir")
+
+	s := &Session{}
+	s.SetCwd("$OLLIE_TEST_DIR/sub")
+
+	want := "/tmp/testdir/sub"
+	if got := s.Cwd(); got != want {
+		t.Errorf("SetCwd($OLLIE_TEST_DIR/sub): got %q, want %q", got, want)
+	}
+}
+
+func TestSetCwd_AbsolutePathUnchanged(t *testing.T) {
+	s := &Session{}
+	s.SetCwd("/usr/local/bin")
+
+	want := "/usr/local/bin"
+	if got := s.Cwd(); got != want {
+		t.Errorf("SetCwd(/usr/local/bin): got %q, want %q", got, want)
+	}
+}