diff --git a/plugins/link.py b/plugins/link.py
index d6bdf98..9e1dce0 100644
--- a/plugins/link.py
+++ b/plugins/link.py
@@ -19,7 +19,6 @@ class Link(dotbot.Plugin):
         success = True
         defaults = self._context.defaults().get('link', {})
         for destination, source in links.items():
-            source = os.path.expandvars(source)
             destination = os.path.expandvars(destination)
             relative = defaults.get('relative', False)
             force = defaults.get('force', False)
@@ -31,9 +30,9 @@ class Link(dotbot.Plugin):
                 force = source.get('force', force)
                 relink = source.get('relink', relink)
                 create = source.get('create', create)
-                path = source['path']
+                path = os.path.expandvars(source['path'])
             else:
-                path = source
+                path = os.path.expandvars(source)
             if create:
                 success &= self._create(destination)
             if force or relink:
diff --git a/test/tests/link-environment-variable-expansion-source-extended.bash b/test/tests/link-environment-variable-expansion-source-extended.bash
new file mode 100644
index 0000000..73f6b0c
--- /dev/null
+++ b/test/tests/link-environment-variable-expansion-source-extended.bash
@@ -0,0 +1,20 @@
+test_description='link expands environment variables in extended config syntax'
+. '../test-lib.bash'
+
+test_expect_success 'setup' '
+echo "grape" > ${DOTFILES}/h
+'
+
+test_expect_success 'run' '
+export APPLE="h" &&
+run_dotbot <<EOF
+- link:
+    ~/.i:
+      path: \$APPLE
+      relink: true
+EOF
+'
+
+test_expect_success 'test' '
+grep "grape" ~/.i
+'