diff --git a/packages/core/src/core/prompts.test.ts b/packages/core/src/core/prompts.test.ts
index b994de98..99cf76c4 100644
--- a/packages/core/src/core/prompts.test.ts
+++ b/packages/core/src/core/prompts.test.ts
@@ -4,9 +4,13 @@
  * SPDX-License-Identifier: Apache-2.0
  */
 
-import { describe, it, expect, vi } from 'vitest';
+import { describe, it, expect, vi, beforeEach } from 'vitest';
 import { getCoreSystemPrompt } from './prompts.js';
 import { isGitRepository } from '../utils/gitUtils.js';
+import fs from 'node:fs';
+import os from 'node:os';
+import path from 'node:path';
+import { GEMINI_CONFIG_DIR } from '../tools/memoryTool.js';
 
 // Mock tool names if they are dynamically generated or complex
 vi.mock('../tools/ls', () => ({ LSTool: { Name: 'list_directory' } }));
@@ -26,8 +30,15 @@ vi.mock('../tools/write-file', () => ({
 vi.mock('../utils/gitUtils', () => ({
   isGitRepository: vi.fn(),
 }));
+vi.mock('node:fs');
 
 describe('Core System Prompt (prompts.ts)', () => {
+  beforeEach(() => {
+    vi.resetAllMocks();
+    vi.stubEnv('GEMINI_SYSTEM_MD', undefined);
+    vi.stubEnv('GEMINI_WRITE_SYSTEM_MD', undefined);
+  });
+
   it('should return the base prompt when no userMemory is provided', () => {
     vi.stubEnv('SANDBOX', undefined);
     const prompt = getCoreSystemPrompt();
@@ -105,4 +116,157 @@ describe('Core System Prompt (prompts.ts)', () => {
     expect(prompt).not.toContain('# Git Repository');
     expect(prompt).toMatchSnapshot();
   });
+
+  describe('GEMINI_SYSTEM_MD environment variable', () => {
+    it('should use default prompt when GEMINI_SYSTEM_MD is "false"', () => {
+      vi.stubEnv('GEMINI_SYSTEM_MD', 'false');
+      const prompt = getCoreSystemPrompt();
+      expect(fs.readFileSync).not.toHaveBeenCalled();
+      expect(prompt).not.toContain('custom system prompt');
+    });
+
+    it('should use default prompt when GEMINI_SYSTEM_MD is "0"', () => {
+      vi.stubEnv('GEMINI_SYSTEM_MD', '0');
+      const prompt = getCoreSystemPrompt();
+      expect(fs.readFileSync).not.toHaveBeenCalled();
+      expect(prompt).not.toContain('custom system prompt');
+    });
+
+    it('should throw error if GEMINI_SYSTEM_MD points to a non-existent file', () => {
+      const customPath = '/non/existent/path/system.md';
+      vi.stubEnv('GEMINI_SYSTEM_MD', customPath);
+      vi.mocked(fs.existsSync).mockReturnValue(false);
+      expect(() => getCoreSystemPrompt()).toThrow(
+        `missing system prompt file '${path.resolve(customPath)}'`,
+      );
+    });
+
+    it('should read from default path when GEMINI_SYSTEM_MD is "true"', () => {
+      const defaultPath = path.resolve(
+        path.join(GEMINI_CONFIG_DIR, 'system.md'),
+      );
+      vi.stubEnv('GEMINI_SYSTEM_MD', 'true');
+      vi.mocked(fs.existsSync).mockReturnValue(true);
+      vi.mocked(fs.readFileSync).mockReturnValue('custom system prompt');
+
+      const prompt = getCoreSystemPrompt();
+      expect(fs.readFileSync).toHaveBeenCalledWith(defaultPath, 'utf8');
+      expect(prompt).toBe('custom system prompt');
+    });
+
+    it('should read from default path when GEMINI_SYSTEM_MD is "1"', () => {
+      const defaultPath = path.resolve(
+        path.join(GEMINI_CONFIG_DIR, 'system.md'),
+      );
+      vi.stubEnv('GEMINI_SYSTEM_MD', '1');
+      vi.mocked(fs.existsSync).mockReturnValue(true);
+      vi.mocked(fs.readFileSync).mockReturnValue('custom system prompt');
+
+      const prompt = getCoreSystemPrompt();
+      expect(fs.readFileSync).toHaveBeenCalledWith(defaultPath, 'utf8');
+      expect(prompt).toBe('custom system prompt');
+    });
+
+    it('should read from custom path when GEMINI_SYSTEM_MD provides one, preserving case', () => {
+      const customPath = path.resolve('/custom/path/SyStEm.Md');
+      vi.stubEnv('GEMINI_SYSTEM_MD', customPath);
+      vi.mocked(fs.existsSync).mockReturnValue(true);
+      vi.mocked(fs.readFileSync).mockReturnValue('custom system prompt');
+
+      const prompt = getCoreSystemPrompt();
+      expect(fs.readFileSync).toHaveBeenCalledWith(customPath, 'utf8');
+      expect(prompt).toBe('custom system prompt');
+    });
+
+    it('should expand tilde in custom path when GEMINI_SYSTEM_MD is set', () => {
+      const homeDir = '/Users/test';
+      vi.spyOn(os, 'homedir').mockReturnValue(homeDir);
+      const customPath = '~/custom/system.md';
+      const expectedPath = path.join(homeDir, 'custom/system.md');
+      vi.stubEnv('GEMINI_SYSTEM_MD', customPath);
+      vi.mocked(fs.existsSync).mockReturnValue(true);
+      vi.mocked(fs.readFileSync).mockReturnValue('custom system prompt');
+
+      const prompt = getCoreSystemPrompt();
+      expect(fs.readFileSync).toHaveBeenCalledWith(
+        path.resolve(expectedPath),
+        'utf8',
+      );
+      expect(prompt).toBe('custom system prompt');
+    });
+  });
+
+  describe('GEMINI_WRITE_SYSTEM_MD environment variable', () => {
+    it('should not write to file when GEMINI_WRITE_SYSTEM_MD is "false"', () => {
+      vi.stubEnv('GEMINI_WRITE_SYSTEM_MD', 'false');
+      getCoreSystemPrompt();
+      expect(fs.writeFileSync).not.toHaveBeenCalled();
+    });
+
+    it('should not write to file when GEMINI_WRITE_SYSTEM_MD is "0"', () => {
+      vi.stubEnv('GEMINI_WRITE_SYSTEM_MD', '0');
+      getCoreSystemPrompt();
+      expect(fs.writeFileSync).not.toHaveBeenCalled();
+    });
+
+    it('should write to default path when GEMINI_WRITE_SYSTEM_MD is "true"', () => {
+      const defaultPath = path.resolve(
+        path.join(GEMINI_CONFIG_DIR, 'system.md'),
+      );
+      vi.stubEnv('GEMINI_WRITE_SYSTEM_MD', 'true');
+      getCoreSystemPrompt();
+      expect(fs.writeFileSync).toHaveBeenCalledWith(
+        defaultPath,
+        expect.any(String),
+      );
+    });
+
+    it('should write to default path when GEMINI_WRITE_SYSTEM_MD is "1"', () => {
+      const defaultPath = path.resolve(
+        path.join(GEMINI_CONFIG_DIR, 'system.md'),
+      );
+      vi.stubEnv('GEMINI_WRITE_SYSTEM_MD', '1');
+      getCoreSystemPrompt();
+      expect(fs.writeFileSync).toHaveBeenCalledWith(
+        defaultPath,
+        expect.any(String),
+      );
+    });
+
+    it('should write to custom path when GEMINI_WRITE_SYSTEM_MD provides one', () => {
+      const customPath = path.resolve('/custom/path/system.md');
+      vi.stubEnv('GEMINI_WRITE_SYSTEM_MD', customPath);
+      getCoreSystemPrompt();
+      expect(fs.writeFileSync).toHaveBeenCalledWith(
+        customPath,
+        expect.any(String),
+      );
+    });
+
+    it('should expand tilde in custom path when GEMINI_WRITE_SYSTEM_MD is set', () => {
+      const homeDir = '/Users/test';
+      vi.spyOn(os, 'homedir').mockReturnValue(homeDir);
+      const customPath = '~/custom/system.md';
+      const expectedPath = path.join(homeDir, 'custom/system.md');
+      vi.stubEnv('GEMINI_WRITE_SYSTEM_MD', customPath);
+      getCoreSystemPrompt();
+      expect(fs.writeFileSync).toHaveBeenCalledWith(
+        path.resolve(expectedPath),
+        expect.any(String),
+      );
+    });
+
+    it('should expand tilde in custom path when GEMINI_WRITE_SYSTEM_MD is just ~', () => {
+      const homeDir = '/Users/test';
+      vi.spyOn(os, 'homedir').mockReturnValue(homeDir);
+      const customPath = '~';
+      const expectedPath = homeDir;
+      vi.stubEnv('GEMINI_WRITE_SYSTEM_MD', customPath);
+      getCoreSystemPrompt();
+      expect(fs.writeFileSync).toHaveBeenCalledWith(
+        path.resolve(expectedPath),
+        expect.any(String),
+      );
+    });
+  });
 });
diff --git a/packages/core/src/core/prompts.ts b/packages/core/src/core/prompts.ts
index 08df3ba2..b97264d7 100644
--- a/packages/core/src/core/prompts.ts
+++ b/packages/core/src/core/prompts.ts
@@ -6,6 +6,7 @@
 
 import path from 'node:path';
 import fs from 'node:fs';
+import os from 'node:os';
 import { LSTool } from '../tools/ls.js';
 import { EditTool } from '../tools/edit.js';
 import { GlobTool } from '../tools/glob.js';
@@ -23,15 +24,24 @@ export function getCoreSystemPrompt(userMemory?: string): string {
   // default path is .gemini/system.md but can be modified via custom path in GEMINI_SYSTEM_MD
   let systemMdEnabled = false;
   let systemMdPath = path.resolve(path.join(GEMINI_CONFIG_DIR, 'system.md'));
-  const systemMdVar = process.env.GEMINI_SYSTEM_MD?.toLowerCase();
-  if (systemMdVar && !['0', 'false'].includes(systemMdVar)) {
-    systemMdEnabled = true; // enable system prompt override
-    if (!['1', 'true'].includes(systemMdVar)) {
-      systemMdPath = path.resolve(systemMdVar); // use custom path from GEMINI_SYSTEM_MD
-    }
-    // require file to exist when override is enabled
-    if (!fs.existsSync(systemMdPath)) {
-      throw new Error(`missing system prompt file '${systemMdPath}'`);
+  const systemMdVar = process.env.GEMINI_SYSTEM_MD;
+  if (systemMdVar) {
+    const systemMdVarLower = systemMdVar.toLowerCase();
+    if (!['0', 'false'].includes(systemMdVarLower)) {
+      systemMdEnabled = true; // enable system prompt override
+      if (!['1', 'true'].includes(systemMdVarLower)) {
+        let customPath = systemMdVar;
+        if (customPath.startsWith('~/')) {
+          customPath = path.join(os.homedir(), customPath.slice(2));
+        } else if (customPath === '~') {
+          customPath = os.homedir();
+        }
+        systemMdPath = path.resolve(customPath); // use custom path from GEMINI_SYSTEM_MD
+      }
+      // require file to exist when override is enabled
+      if (!fs.existsSync(systemMdPath)) {
+        throw new Error(`missing system prompt file '${systemMdPath}'`);
+      }
     }
   }
   const basePrompt = systemMdEnabled
@@ -256,12 +266,24 @@ Your core function is efficient and safe assistance. Balance extreme conciseness
 `.trim();
 
   // if GEMINI_WRITE_SYSTEM_MD is set (and not 0|false), write base system prompt to file
-  const writeSystemMdVar = process.env.GEMINI_WRITE_SYSTEM_MD?.toLowerCase();
-  if (writeSystemMdVar && !['0', 'false'].includes(writeSystemMdVar)) {
-    if (['1', 'true'].includes(writeSystemMdVar)) {
-      fs.writeFileSync(systemMdPath, basePrompt); // write to default path, can be modified via GEMINI_SYSTEM_MD
-    } else {
-      fs.writeFileSync(path.resolve(writeSystemMdVar), basePrompt); // write to custom path from GEMINI_WRITE_SYSTEM_MD
+  const writeSystemMdVar = process.env.GEMINI_WRITE_SYSTEM_MD;
+  if (writeSystemMdVar) {
+    const writeSystemMdVarLower = writeSystemMdVar.toLowerCase();
+    if (!['0', 'false'].includes(writeSystemMdVarLower)) {
+      if (['1', 'true'].includes(writeSystemMdVarLower)) {
+        fs.mkdirSync(path.dirname(systemMdPath), { recursive: true });
+        fs.writeFileSync(systemMdPath, basePrompt); // write to default path, can be modified via GEMINI_SYSTEM_MD
+      } else {
+        let customPath = writeSystemMdVar;
+        if (customPath.startsWith('~/')) {
+          customPath = path.join(os.homedir(), customPath.slice(2));
+        } else if (customPath === '~') {
+          customPath = os.homedir();
+        }
+        const resolvedPath = path.resolve(customPath);
+        fs.mkdirSync(path.dirname(resolvedPath), { recursive: true });
+        fs.writeFileSync(resolvedPath, basePrompt); // write to custom path from GEMINI_WRITE_SYSTEM_MD
+      }
     }
   }