diff --git a/web/packages/teleterm/src/mainProcess/fixtures/mocks.ts b/web/packages/teleterm/src/mainProcess/fixtures/mocks.ts
index 41b7471326b72..2e5290ea59b56 100644
--- a/web/packages/teleterm/src/mainProcess/fixtures/mocks.ts
+++ b/web/packages/teleterm/src/mainProcess/fixtures/mocks.ts
@@ -232,6 +232,7 @@ export const makeRuntimeSettings = (
   insecure: true,
   userDataDir: '',
   sessionDataDir: '',
+  homeDir: '',
   tempDataDir: '',
   agentBinaryPath: '',
   binDir: '',
diff --git a/web/packages/teleterm/src/mainProcess/runtimeSettings.ts b/web/packages/teleterm/src/mainProcess/runtimeSettings.ts
index 843d6c76ebe15..4a8980e612cb3 100644
--- a/web/packages/teleterm/src/mainProcess/runtimeSettings.ts
+++ b/web/packages/teleterm/src/mainProcess/runtimeSettings.ts
@@ -57,6 +57,7 @@ const insecure =
   (dev && !!env.CONNECT_INSECURE);
 
 export async function getRuntimeSettings(): Promise<RuntimeSettings> {
+  const homeDir = app.getPath('home');
   const userDataDir = app.getPath('userData');
   const sessionDataDir = app.getPath('sessionData');
   const tempDataDir = app.getPath('temp');
@@ -106,6 +107,7 @@ export async function getRuntimeSettings(): Promise<RuntimeSettings> {
     tshd,
     sharedProcess,
     tshdEvents,
+    homeDir,
     userDataDir,
     sessionDataDir,
     tempDataDir,
diff --git a/web/packages/teleterm/src/mainProcess/types.ts b/web/packages/teleterm/src/mainProcess/types.ts
index 439ea54ab21bd..abddc9aad3e2a 100644
--- a/web/packages/teleterm/src/mainProcess/types.ts
+++ b/web/packages/teleterm/src/mainProcess/types.ts
@@ -57,6 +57,8 @@ export type RuntimeSettings = {
    * - Starting the app in dev mode with the CONNECT_INSECURE env var.
    */
   insecure: boolean;
+  /** User's home directory. */
+  homeDir: string;
   userDataDir: string;
   sessionDataDir: string;
   tempDataDir: string;
diff --git a/web/packages/teleterm/src/services/config/appConfigSchema.ts b/web/packages/teleterm/src/services/config/appConfigSchema.ts
index e7600ae054886..1f5489cd2f958 100644
--- a/web/packages/teleterm/src/services/config/appConfigSchema.ts
+++ b/web/packages/teleterm/src/services/config/appConfigSchema.ts
@@ -50,6 +50,7 @@ export const createAppConfigSchema = (settings: RuntimeSettings) => {
     CUSTOM_SHELL_ID,
   ];
 
+  const pathSchema = tildeExpandingPathSchema(settings.homeDir);
   const shortcutSchema = createKeyboardShortcutSchema(settings.platform);
 
   // `keymap.` prefix is used in `initUi.ts` in a predicate function.
@@ -70,10 +71,10 @@ export const createAppConfigSchema = (settings: RuntimeSettings) => {
       .describe(
         'Keeps the app running in the menu bar/system tray even when the main window is closed. On Linux, displaying the system tray icon may require installing shell extensions.'
       ),
-    tshHome: z
-      .string()
-      .default(settings.tshd.defaultHomeDir)
-      .describe('Home location for tsh configuration and data.'),
+    tshHome: pathSchema({
+      defaultPath: settings.tshd.defaultHomeDir,
+      description: 'Home location for tsh configuration and data.',
+    }),
     /**
      * This value can be provided by the user and is unsanitized. This means that it cannot be directly interpolated
      * in a styled component or used in CSS, as it may inject malicious CSS code.
@@ -112,12 +113,11 @@ export const createAppConfigSchema = (settings: RuntimeSettings) => {
             `Cannot find the shell "${iss.input}". Available options are: ${availableShellIdsWithCustom.join(', ')}. Using platform default.`,
         }
       ),
-    'terminal.customShell': z
-      .string()
-      .default('')
-      .describe(
-        'Path to the custom shell that is used when `terminal.shell` is set to `custom`. It is best to configure it through UI (right click on a terminal tab > Custom Shell…).'
-      ),
+    'terminal.customShell': pathSchema({
+      defaultPath: '',
+      description:
+        'Path to the custom shell that is used when `terminal.shell` is set to `custom`. It is best to configure it through UI (right click on a terminal tab > Custom Shell…).',
+    }),
     'terminal.rightClick': z
       .enum(['paste', 'copyPaste', 'menu'])
       .default(settings.platform === 'win32' ? 'copyPaste' : 'menu')
@@ -375,3 +375,22 @@ z.config({
     }
   },
 });
+
+/**
+ * Creates a Zod string schema for filesystem paths that automatically expand
+ * leading "~" to the provided home directory.
+ */
+function tildeExpandingPathSchema(homeDir: string) {
+  return ({
+    defaultPath,
+    description,
+  }: {
+    defaultPath: string;
+    description: string;
+  }) =>
+    z
+      .string()
+      .default(defaultPath)
+      .describe(description)
+      .transform(p => p.replace(/^~/, homeDir));
+}
diff --git a/web/packages/teleterm/src/services/config/configService.test.ts b/web/packages/teleterm/src/services/config/configService.test.ts
index a211c48dcd567..10a2f67392ef4 100644
--- a/web/packages/teleterm/src/services/config/configService.test.ts
+++ b/web/packages/teleterm/src/services/config/configService.test.ts
@@ -177,3 +177,18 @@ test(`enum validation`, () => {
     path: expect.arrayContaining(['theme']),
   });
 });
+
+test('tilde expanding in path schema', () => {
+  const configFile = createMockFileStorage();
+  configFile.replace({
+    tshHome: '~/.~tsh-dev',
+  });
+  const configService = createConfigService({
+    configFile,
+    jsonSchemaFile: createMockFileStorage(),
+    settings: makeRuntimeSettings({ homeDir: '/Users/testuser' }),
+  });
+  expect(configService.get('tshHome')).toMatchObject({
+    value: '/Users/testuser/.~tsh-dev',
+  });
+});