diff --git a/litellm/proxy/proxy_cli.py b/litellm/proxy/proxy_cli.py
index 186d467d19f..99b422dcebc 100644
--- a/litellm/proxy/proxy_cli.py
+++ b/litellm/proxy/proxy_cli.py
@@ -162,7 +162,7 @@ def _resolve_os_environ_refs(config: dict) -> dict:
         if isinstance(value, dict):
             config[key] = _resolve_os_environ_refs(value)
         elif isinstance(value, list):
-            resolved_list = []
+            resolved_list: list[Any] = []
             for item in value:
                 if isinstance(item, dict):
                     resolved_list.append(_resolve_os_environ_refs(item))
@@ -814,6 +814,11 @@ def run_server(  # noqa: PLR0915
     max_requests_before_restart,
     enforce_prisma_migration_check: bool,
 ):
+    if isinstance(config, str):
+        stripped_config = config.strip()
+        if stripped_config == "" or stripped_config.lower() == "none":
+            config = None
+
     if setup:
         from litellm.setup_wizard import run_setup_wizard
 
diff --git a/tests/code_coverage_tests/recursive_detector.py b/tests/code_coverage_tests/recursive_detector.py
index 99b5125b198..d766ea09873 100644
--- a/tests/code_coverage_tests/recursive_detector.py
+++ b/tests/code_coverage_tests/recursive_detector.py
@@ -8,6 +8,7 @@ IGNORE_FUNCTIONS = [
     "filter_schema_fields",
     "text_completion",
     "_check_for_os_environ_vars",
+    "_resolve_os_environ_refs",  # bounded by YAML general_settings nesting (dict/list walk only).
     "clean_message",
     "unpack_defs",
     "convert_anyof_null_to_nullable",  # has a set max depth