diff --git a/litellm/proxy/_experimental/mcp_server/mcp_server_manager.py b/litellm/proxy/_experimental/mcp_server/mcp_server_manager.py
index 4c860f792cd..1c41df70a5f 100644
--- a/litellm/proxy/_experimental/mcp_server/mcp_server_manager.py
+++ b/litellm/proxy/_experimental/mcp_server/mcp_server_manager.py
@@ -904,10 +904,10 @@ class MCPServerManager:
         self,
         mcp_server: LiteLLM_MCPServerTable,
         *,
-        credentials_are_encrypted: bool,
+        env_vars_are_encrypted: bool,
     ) -> Optional[List[Dict[str, Any]]]:
         env_vars_list = _deserialize_json_list(getattr(mcp_server, "env_vars", None))
-        if credentials_are_encrypted:
+        if env_vars_are_encrypted:
             from litellm.proxy._experimental.mcp_server.db import (  # noqa: PLC0415
                 decrypt_global_env_var_values,
             )
@@ -920,6 +920,7 @@ class MCPServerManager:
         mcp_server: LiteLLM_MCPServerTable,
         *,
         credentials_are_encrypted: bool = True,
+        env_vars_are_encrypted: Optional[bool] = None,
     ) -> MCPServer:
         _mcp_info: MCPInfo = mcp_server.mcp_info or {}
         env_dict = _deserialize_json_dict(getattr(mcp_server, "env", None))
@@ -927,7 +928,12 @@ class MCPServerManager:
             getattr(mcp_server, "static_headers", None)
         )
         env_vars_list = self._resolve_env_vars_list(
-            mcp_server, credentials_are_encrypted=credentials_are_encrypted
+            mcp_server,
+            env_vars_are_encrypted=(
+                credentials_are_encrypted
+                if env_vars_are_encrypted is None
+                else env_vars_are_encrypted
+            ),
         )
         credentials_dict = _deserialize_json_dict(
             getattr(mcp_server, "credentials", None)
@@ -1126,7 +1132,14 @@ class MCPServerManager:
             return
         try:
             if mcp_server.server_id not in self.registry:
-                new_server = await self.build_mcp_server_from_table(mcp_server)
+                # Callers hand us a record returned by the db.py read/write
+                # helpers, which already decrypt global env var values (the
+                # `credentials` field is the only one still encrypted here).
+                # Re-decrypting plaintext would zero the values, so build with
+                # env_vars_are_encrypted=False.
+                new_server = await self.build_mcp_server_from_table(
+                    mcp_server, env_vars_are_encrypted=False
+                )
                 self._assign_unique_short_prefix(new_server)
                 self.registry[mcp_server.server_id] = new_server
                 await self._maybe_register_openapi_tools(new_server)
@@ -1149,7 +1162,11 @@ class MCPServerManager:
             return
         try:
             if mcp_server.server_id in self.registry:
-                new_server = await self.build_mcp_server_from_table(mcp_server)
+                # See add_server: db.py helpers already decrypted env var
+                # values, so don't decrypt them a second time here.
+                new_server = await self.build_mcp_server_from_table(
+                    mcp_server, env_vars_are_encrypted=False
+                )
                 # Carry the previously-resolved short prefix across so the
                 # tool names stay stable for clients holding cached lists.
                 existing_prefix = self.registry[mcp_server.server_id].short_prefix
diff --git a/tests/test_litellm/proxy/_experimental/mcp_server/test_mcp_env_vars.py b/tests/test_litellm/proxy/_experimental/mcp_server/test_mcp_env_vars.py
index 20854621b91..06c0508cd78 100644
--- a/tests/test_litellm/proxy/_experimental/mcp_server/test_mcp_env_vars.py
+++ b/tests/test_litellm/proxy/_experimental/mcp_server/test_mcp_env_vars.py
@@ -889,6 +889,52 @@ async def test_build_mcp_server_from_table_decrypts_global_env_vars(env_vars_sal
     assert headers == {"X-Db": "s3cr3t-p@ss"}
 
 
+@pytest.mark.asyncio
+async def test_add_server_does_not_double_decrypt_global_env_vars(env_vars_salt_key):
+    """The create/fetch endpoints hand ``add_server`` a record whose global env
+    var values were already decrypted by the db.py helpers (only ``credentials``
+    stays encrypted). Building the registry entry must not decrypt them a second
+    time: a second decrypt of an already-plaintext value (e.g. ``postgresql``)
+    fails and zeroes it, which would forward the raw ``${NAME}`` placeholder
+    upstream instead of the interpolated secret."""
+    import json
+
+    from litellm.proxy._experimental.mcp_server.db import (
+        _prepare_mcp_server_data,
+        decrypt_global_env_var_values,
+    )
+    from litellm.proxy._experimental.mcp_server.mcp_server_manager import (
+        MCPServerManager,
+    )
+    from litellm.proxy._types import LiteLLM_MCPServerTable, MCPEnvVar
+
+    req = _global_env_var_server_request(
+        [MCPEnvVar(name="DB_PASSWORD", value="s3cr3t-p@ss", scope="global")]
+    )
+    env_vars = json.loads(_prepare_mcp_server_data(req)["env_vars"])
+    # Mirror what create_mcp_server / get_mcp_server return to add_server.
+    decrypt_global_env_var_values(env_vars)
+    assert env_vars[0]["value"] == "s3cr3t-p@ss"
+
+    table = LiteLLM_MCPServerTable(
+        server_id="srv-add",
+        alias="echo",
+        url="https://upstream.example.com/mcp",
+        transport="http",
+        auth_type="none",
+        static_headers={"X-Db": "${DB_PASSWORD}"},
+        env_vars=env_vars,
+        approval_status="active",
+    )
+
+    manager = MCPServerManager()
+    await manager.add_server(table)
+
+    server = manager.registry["srv-add"]
+    headers = await manager._resolve_static_headers_with_env_vars(server, None)
+    assert headers == {"X-Db": "s3cr3t-p@ss"}
+
+
 def test_decrypt_global_env_var_drops_undecryptable_value(
     env_vars_salt_key, monkeypatch
 ):