diff --git a/litellm/proxy/_experimental/mcp_server/mcp_server_manager.py b/litellm/proxy/_experimental/mcp_server/mcp_server_manager.py
index c4ad673b88f..dce63a39caf 100644
--- a/litellm/proxy/_experimental/mcp_server/mcp_server_manager.py
+++ b/litellm/proxy/_experimental/mcp_server/mcp_server_manager.py
@@ -118,6 +118,7 @@ from litellm.proxy.common_utils.encrypt_decrypt_utils import decrypt_value_helpe
 from litellm.proxy.common_utils.user_api_key_cache import get_management_object_ttl
 from litellm.proxy.utils import ProxyLogging, get_server_root_path
 from litellm.repositories.table_repositories import MCPServerRepository
+from litellm.secret_managers.main import get_secret_str
 from litellm.types.llms.custom_http import httpxSpecialProvider
 from litellm.types.mcp import DEFAULT_SUBJECT_TOKEN_TYPE, MCPAuth, MCPStdioConfig
 from litellm.types.mcp_server.mcp_server_manager import (
@@ -536,6 +537,29 @@ def _deserialize_json_dict(data: Any) -> Optional[dict[str, str]]:
         return data
 
 
+def _resolve_os_environ_in_stdio_env(
+    env: Optional[dict[str, str]],
+) -> Optional[dict[str, str]]:
+    """Resolve ``os.environ/VAR`` references in a DB/API-registered stdio ``env`` map.
+
+    config.yaml MCP servers resolve ``os.environ/`` at load via the proxy config
+    loader, but DB-backed servers deserialize ``env`` verbatim, so without this the
+    literal ``os.environ/...`` string reaches the subprocess and upstream auth fails.
+    A reference to an unset variable is dropped rather than forwarded as the literal
+    placeholder.
+    """
+    if not env:
+        return env
+
+    def _resolve(value: str) -> Optional[str]:
+        if value.startswith("os.environ/"):
+            return get_secret_str(value)
+        return value
+
+    resolved = ((key, _resolve(value)) for key, value in env.items())
+    return {key: value for key, value in resolved if value is not None}
+
+
 def _deserialize_json_list(data: Any) -> Optional[list[dict[str, Any]]]:
     """Deserialize a JSON array stored in the DB (``env_vars`` and friends).
 
@@ -1310,7 +1334,7 @@ class MCPServerManager:
         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))
+        env_dict = _resolve_os_environ_in_stdio_env(_deserialize_json_dict(getattr(mcp_server, "env", None)))
         static_headers_dict = _deserialize_json_dict(getattr(mcp_server, "static_headers", None))
         env_vars_list = self._resolve_env_vars_list(
             mcp_server,
diff --git a/tests/test_litellm/proxy/_experimental/mcp_server/test_mcp_server_manager.py b/tests/test_litellm/proxy/_experimental/mcp_server/test_mcp_server_manager.py
index 12e22de195b..f848d00b677 100644
--- a/tests/test_litellm/proxy/_experimental/mcp_server/test_mcp_server_manager.py
+++ b/tests/test_litellm/proxy/_experimental/mcp_server/test_mcp_server_manager.py
@@ -4348,6 +4348,59 @@ class TestMCPServerTimestamps:
         assert mcp_server.created_at == created
         assert mcp_server.updated_at == updated
 
+    @pytest.mark.asyncio
+    async def test_build_mcp_server_from_table_resolves_os_environ_in_stdio_env(self, monkeypatch):
+        """DB/API-registered stdio servers must resolve os.environ/ in the env map (#32677).
+
+        A literal os.environ/VAR reaching the subprocess is the bug: upstream auth fails
+        because the child sees the placeholder string instead of the secret.
+        """
+        monkeypatch.setenv("GITHUB_TOKEN", "ghp_secret_value")
+        manager = MCPServerManager()
+
+        record = LiteLLM_MCPServerTable(
+            server_id="stdio-osenviron-1",
+            server_name="stdio_osenviron",
+            url=None,
+            transport=MCPTransport.stdio,
+            command="npx",
+            args=["-y", "@modelcontextprotocol/server-github"],
+            env={
+                "GITHUB_PERSONAL_ACCESS_TOKEN": "os.environ/GITHUB_TOKEN",
+                "PLAIN": "literal-value",
+            },
+        )
+
+        server = await manager.build_mcp_server_from_table(record, credentials_are_encrypted=False)
+
+        assert server.env == {
+            "GITHUB_PERSONAL_ACCESS_TOKEN": "ghp_secret_value",
+            "PLAIN": "literal-value",
+        }
+
+    @pytest.mark.asyncio
+    async def test_build_mcp_server_from_table_drops_unset_os_environ_stdio_env(self, monkeypatch):
+        """An os.environ/ reference to an unset variable is dropped, never forwarded as the literal placeholder."""
+        monkeypatch.delenv("DEFINITELY_UNSET_MCP_VAR", raising=False)
+        manager = MCPServerManager()
+
+        record = LiteLLM_MCPServerTable(
+            server_id="stdio-osenviron-2",
+            server_name="stdio_osenviron_unset",
+            url=None,
+            transport=MCPTransport.stdio,
+            command="npx",
+            args=["-y", "@modelcontextprotocol/server-github"],
+            env={
+                "MISSING": "os.environ/DEFINITELY_UNSET_MCP_VAR",
+                "PLAIN": "literal-value",
+            },
+        )
+
+        server = await manager.build_mcp_server_from_table(record, credentials_are_encrypted=False)
+
+        assert server.env == {"PLAIN": "literal-value"}
+
     @pytest.mark.asyncio
     async def test_build_mcp_server_from_table_reads_token_endpoint_auth_method(self):
         """token_endpoint_auth_method stored in the credentials JSON is loaded onto the MCPServer (LIT-4091)."""