diff --git a/menuinst/platforms/linux.py b/menuinst/platforms/linux.py
index 27373651..ed24c519 100644
--- a/menuinst/platforms/linux.py
+++ b/menuinst/platforms/linux.py
@@ -254,7 +254,7 @@ def _write_desktop_file(self):
 
         working_dir = self.render_key("working_dir")
         if working_dir:
-            Path(working_dir).mkdir(parents=True, exist_ok=True)
+            Path(os.path.expandvars(working_dir)).mkdir(parents=True, exist_ok=True)
             lines.append(f"Path={working_dir}")
 
         for key in menuitem_defaults["platforms"]["linux"]:
diff --git a/menuinst/platforms/osx.py b/menuinst/platforms/osx.py
index 783d3b42..5f23ee1b 100644
--- a/menuinst/platforms/osx.py
+++ b/menuinst/platforms/osx.py
@@ -194,7 +194,7 @@ def _command(self) -> str:
 
         working_dir = self.render_key("working_dir")
         if working_dir:
-            Path(working_dir).mkdir(parents=True, exist_ok=True)
+            Path(os.path.expandvars(working_dir)).mkdir(parents=True, exist_ok=True)
             lines.append(f'cd "{working_dir}"')
 
         precommand = self.render_key("precommand")
diff --git a/menuinst/platforms/win.py b/menuinst/platforms/win.py
index e31c4a65..2bff6390 100644
--- a/menuinst/platforms/win.py
+++ b/menuinst/platforms/win.py
@@ -159,9 +159,15 @@ def create(self) -> Tuple[Path, ...]:
             target_path, *arguments = self._process_command()
             working_dir = self.render_key("working_dir")
             if working_dir:
-                Path(working_dir).mkdir(parents=True, exist_ok=True)
+                Path(os.path.expandvars(working_dir)).mkdir(parents=True, exist_ok=True)
+            # There are two possible interpretations of HOME on Windows:
+            # `%USERPROFILE%` and `%HOMEDRIVE%%HOMEPATH%`.
+            # Follow os.path.expanduser logic here, but keep the variables
+            # so that Windows can resolve them at runtime in case the drives change.
+            elif "USERPROFILE" in os.environ:
+                working_dir = "%USERPROFILE%"
             else:
-                working_dir = "%HOMEPATH%"
+                working_dir = "%HOMEDRIVE%%HOMEPATH%"
 
             icon = self.render_key("icon") or ""
 
diff --git a/news/212-improve-working-dir-handling b/news/212-improve-working-dir-handling
new file mode 100644
index 00000000..563406a0
--- /dev/null
+++ b/news/212-improve-working-dir-handling
@@ -0,0 +1,19 @@
+### Enhancements
+
+* <news item>
+
+### Bug fixes
+
+* Expand variables when creating `working_dir` and use `os.path.expanduser` logic for default `working_dir` on Windows. (#211 via #212)
+
+### Deprecations
+
+* <news item>
+
+### Docs
+
+* <news item>
+
+### Other
+
+* <news item>
diff --git a/tests/data/jsons/working-dir.json b/tests/data/jsons/working-dir.json
new file mode 100644
index 00000000..6d68b21c
--- /dev/null
+++ b/tests/data/jsons/working-dir.json
@@ -0,0 +1,35 @@
+{
+    "$schema": "https://json-schema.org/draft-07/schema",
+    "$id": "https://schemas.conda.io/menuinst-1.schema.json",
+    "menu_name": "Sys.Prefix {{ DISTRIBUTION_NAME }}",
+    "menu_items": [
+        {
+            "name": "Sys.Prefix",
+            "description": "This will install to Windows and Linux with default options. MacOS has a custom option.",
+            "icon": null,
+            "command": [
+                "{{ PYTHON }}",
+                "-c",
+                "import sys; print(sys.prefix)"
+            ],
+            "platforms": {
+                "win": {
+                    "command": [
+                        "{{ PYTHON }}",
+                        "-c",
+                        "import sys; f = open(r'__OUTPUT_FILE__', 'w'); f.write(sys.prefix); f.close()"
+                    ],
+                    "description": "Note how __OUTPUT_FILE__ is using raw-strings. Otherwise the backslashes are not properly escaped.",
+		    "working_dir": "%TEMP%/working_dir_test"
+                },
+                "linux": {
+		    "working_dir": "${TMP}/working_dir_test"
+		},
+                "osx": {
+                    "CFBundleName": "Sys Prefix",
+		    "working_dir": "${TMPDIR}/working_dir_test"
+                }
+            }
+        }
+    ]
+}
diff --git a/tests/test_api.py b/tests/test_api.py
index 08659698..495b7bd0 100644
--- a/tests/test_api.py
+++ b/tests/test_api.py
@@ -396,3 +396,21 @@ def test_name_dictionary(target_env_is_base):
         assert item_names == expected
     finally:
         remove(abs_json_path, target_prefix=tmp_target_path, base_prefix=tmp_base_path)
+
+
+def test_vars_in_working_dir(tmp_path, monkeypatch, delete_files):
+    if PLATFORM == "win":
+        expected_directory = Path(os.environ["TEMP"], "working_dir_test")
+    elif PLATFORM == "osx":
+        expected_directory = Path(os.environ["TMPDIR"], "working_dir_test")
+    else:
+        # Linux often does not have an environment variable for the tmp directory
+        monkeypatch.setenv("TMP", "/tmp")
+        expected_directory = Path("/tmp/working_dir_test")
+    delete_files.append(expected_directory)
+    datafile = str(DATA / "jsons" / "working-dir.json")
+    try:
+        install(datafile, base_prefix=tmp_path, target_prefix=tmp_path)
+        assert expected_directory.exists()
+    finally:
+        remove(datafile, base_prefix=tmp_path, target_prefix=tmp_path)