diff --git a/resource-managers/yarn/src/main/scala/org/apache/spark/deploy/yarn/Client.scala b/resource-managers/yarn/src/main/scala/org/apache/spark/deploy/yarn/Client.scala
index caccfac5ef13..4ff636110bbd 100644
--- a/resource-managers/yarn/src/main/scala/org/apache/spark/deploy/yarn/Client.scala
+++ b/resource-managers/yarn/src/main/scala/org/apache/spark/deploy/yarn/Client.scala
@@ -29,6 +29,7 @@ import scala.collection.JavaConverters._
 import scala.collection.immutable.{Map => IMap}
 import scala.collection.mutable.{ArrayBuffer, HashMap, HashSet, ListBuffer, Map}
 import scala.util.control.NonFatal
+import scala.util.matching.Regex
 
 import com.google.common.base.Objects
 import org.apache.hadoop.conf.Configuration
@@ -37,7 +38,7 @@ import org.apache.hadoop.fs.permission.FsPermission
 import org.apache.hadoop.io.Text
 import org.apache.hadoop.mapreduce.MRJobConfig
 import org.apache.hadoop.security.UserGroupInformation
-import org.apache.hadoop.util.StringUtils
+import org.apache.hadoop.util.{Shell, StringUtils}
 import org.apache.hadoop.yarn.api._
 import org.apache.hadoop.yarn.api.ApplicationConstants.Environment
 import org.apache.hadoop.yarn.api.protocolrecords._
@@ -1473,7 +1474,7 @@ private[spark] object Client extends Logging {
   /**
    * Returns a list of local, absolute file URLs representing the user classpath. Note that this
    * must be executed on the same host which will access the URLs, as it will resolve relative
-   * paths based on the current working directory.
+   * paths based on the current working directory, as well as environment variables.
    *
    * @param conf Spark configuration.
    * @param useClusterPath Whether to use the 'cluster' path when resolving paths with the
@@ -1492,10 +1493,51 @@ private[spark] object Client extends Logging {
           "getUserClasspath should only return 'file' or 'local' URIs but found: " + uri)
         inputPath
       }
-      Paths.get(replacedFilePath).toAbsolutePath.toUri.toURL
+      val envVarResolvedFilePath = replaceEnvVars(replacedFilePath, sys.env)
+      Paths.get(envVarResolvedFilePath).toAbsolutePath.toUri.toURL
     }
   }
 
+  /**
+   * Replace environment variables in a string according to the same rules [[Environment]]:
+   * `$VAR_NAME` for Unix, `%VAR_NAME%` for Windows, and `{{VAR_NAME}}` for all OS.
+   * Note that this won't properly support escapes for `$` and `%` characters, e.g.
+   * `\$VAR_NAME` when `VAR_NAME=foo` will resolve to `\foo` (whereas in an actual shell it would
+   * be `$VAR_NAME` due to the backslash).
+   *
+   * @param unresolvedString The unresolved string which may contain variable references.
+   * @param env The System environment
+   * @param isWindows True iff running in a Windows environment
+   * @return The input string with variables replaced with their values from `env`
+   */
+  def replaceEnvVars(
+      unresolvedString: String,
+      env: IMap[String, String],
+      isWindows: Boolean = Shell.WINDOWS): String = {
+    val osSpecificPatterns = if (isWindows) {
+      Seq(
+        // Environment variables can contain pretty much anything
+        // Ref: https://docs.microsoft.com/en-us/windows/win32/procthread/environment-variables
+        "%([^=%]+)%".r("varname")
+      )
+    } else {
+      Seq(
+        // Environment variables are alphanumeric plus underscore, case-sensitive, can't start with
+        // a digit, based on Shell and Utilities volume of IEEE Std 1003.1-2001
+        // Ref: https://pubs.opengroup.org/onlinepubs/000095399/basedefs/xbd_chap08.html
+        "\\$([A-z_][A-z_0-9]*)".r("varname"),
+        "\\$\\{([A-z_][A-z_0-9]*)}".r("varname"),
+      )
+    }
+    // {{...}} is a YARN thing and not OS-specific. Follow Unix shell naming conventions
+    (osSpecificPatterns :+ "\\{\\{([A-z_][A-z_0-9]*)}}".r("varname"))
+      .foldLeft(unresolvedString) { (inputStr, pattern) =>
+        pattern.replaceSomeIn(inputStr, { m =>
+          Some(Regex.quoteReplacement(env.getOrElse(m.group("varname"), "")))
+        })
+      }
+  }
+
   private def getMainJarUri(mainJar: Option[String]): Option[URI] = {
     mainJar.flatMap { path =>
       val uri = Utils.resolveURI(path)
diff --git a/resource-managers/yarn/src/test/scala/org/apache/spark/deploy/yarn/ClientSuite.scala b/resource-managers/yarn/src/test/scala/org/apache/spark/deploy/yarn/ClientSuite.scala
index 1650ea2e4491..d374e18d2ca9 100644
--- a/resource-managers/yarn/src/test/scala/org/apache/spark/deploy/yarn/ClientSuite.scala
+++ b/resource-managers/yarn/src/test/scala/org/apache/spark/deploy/yarn/ClientSuite.scala
@@ -618,6 +618,44 @@ class ClientSuite extends SparkFunSuite with Matchers {
     assertUserClasspathUrls(cluster = true, replacementRootPath)
   }
 
+  test("SPARK-35672: test replaceEnvVars in Unix mode") {
+    Map(
+      "F_O_O$FOO$BAR" -> "F_O_OBAR",
+      "$FOO" -> "BAR",
+      "$F_O_O$FOO" -> "BarBAR",
+      "${FOO}" -> "BAR",
+      "$FOO.$BAR" -> "BAR.",
+      "{{FOO}}" -> "BAR",
+      "{{FOO}}$FOO" -> "BARBAR",
+      "%FOO%" -> "%FOO%",
+    ).foreach { case (input, expected) =>
+      withClue(s"input string `$input`: ") {
+        assert(Client.replaceEnvVars(input, Map(
+          "F_O_O" -> "Bar",
+          "FOO" -> "BAR"
+        ), isWindows = false) === expected)
+      }
+    }
+  }
+
+  test("SPARK-35672: test replaceEnvVars in Windows mode") {
+    Map(
+      "Foo%FOO%%BAR%" -> "FooBAR",
+      "%FOO%" -> "BAR",
+      "%Foo%%FOO%" -> "BarBAR",
+      "{{FOO}}%FOO%" -> "BARBAR",
+      "$FOO" -> "$FOO",
+      "${FOO}" -> "${FOO}",
+    ).foreach { case (input, expected) =>
+      withClue(s"input string `$input`: ") {
+        assert(Client.replaceEnvVars(input, Map(
+          "Foo" -> "Bar",
+          "FOO" -> "BAR"
+        ), isWindows = true) === expected)
+      }
+    }
+  }
+
   private val matching = Seq(
     ("files URI match test1", "file:///file1", "file:///file2"),
     ("files URI match test2", "file:///c:file1", "file://c:file2"),
diff --git a/resource-managers/yarn/src/test/scala/org/apache/spark/deploy/yarn/YarnClusterSuite.scala b/resource-managers/yarn/src/test/scala/org/apache/spark/deploy/yarn/YarnClusterSuite.scala
index 6bd9c4d6deee..f959aba7739b 100644
--- a/resource-managers/yarn/src/test/scala/org/apache/spark/deploy/yarn/YarnClusterSuite.scala
+++ b/resource-managers/yarn/src/test/scala/org/apache/spark/deploy/yarn/YarnClusterSuite.scala
@@ -188,6 +188,20 @@ class YarnClusterSuite extends BaseYarnClusterSuite {
     }))
   }
 
+  test("SPARK-35672: run Spark in yarn-client mode with additional jar using URI scheme 'local' " +
+    "and gateway-replacement path containing an environment variable") {
+    // Set up the replacement path to point to the correct path, but suffixed with some
+    // nonexistent environment variable. If environment variable replacement takes place, then
+    // the var will be replaced with an empty string, and the path will be correct again
+    def urlToParentPath(url: URL): String = Paths.get(url.toURI).getParent.toString
+    testWithAddJar(clientMode = true, "local", Some(jarUrl => {
+      (jarUrl.getPath, Map(
+        GATEWAY_ROOT_PATH.key -> urlToParentPath(jarUrl),
+        REPLACEMENT_ROOT_PATH.key -> s"${urlToParentPath(jarUrl)}{{NO_SUCH_ENV_VAR___}}"
+      ))
+    }))
+  }
+
   test("SPARK-35672: run Spark in yarn-client mode with additional jar using URI scheme 'file'") {
     testWithAddJar(clientMode = true, "file")
   }