diff --git a/pkg/tools/shell.go b/pkg/tools/shell.go
index 587827251..e2bff3658 100644
--- a/pkg/tools/shell.go
+++ b/pkg/tools/shell.go
@@ -24,7 +24,7 @@ type ExecTool struct {
 	allowPatterns       []*regexp.Regexp
 	customAllowPatterns []*regexp.Regexp
 	restrictToWorkspace bool
-	cachedEnv           []string // cached sanitized env from os.Environ() at init
+	cachedEnv           map[string]string // cached sanitized env map from os.Environ() at init
 }
 
 var (
@@ -151,6 +151,15 @@ func NewExecToolWithConfig(workingDir string, restrict bool, config *config.Conf
 	// Ensure PICOCLAW_* vars are set for child processes
 	envSet = shell.WithPicoclawEnvVars(envSet, workingDir)
 
+	// Build cached env: filter inherited env by allowlist, then merge with config envSet
+	filteredBase := shell.FilterByAllowlist(os.Environ(), envAllowlist)
+	// Pre-merge envSet into cachedEnv so PICOCLAW_* vars are preserved
+	// (MergeEnvVars returns []string, so we merge maps manually)
+	cachedEnv := filteredBase
+	for k, v := range envSet {
+		cachedEnv[k] = v
+	}
+
 	return &ExecTool{
 		workingDir:          workingDir,
 		timeout:             timeout,
@@ -158,7 +167,7 @@ func NewExecToolWithConfig(workingDir string, restrict bool, config *config.Conf
 		allowPatterns:       nil,
 		customAllowPatterns: customAllowPatterns,
 		restrictToWorkspace: restrict,
-		cachedEnv:           shell.BuildSanitizedEnv(os.Environ(), envAllowlist, envSet, nil),
+		cachedEnv:           cachedEnv,
 	}, nil
 }
 
@@ -258,9 +267,9 @@ func (t *ExecTool) Execute(ctx context.Context, args map[string]any) *ToolResult
 		"PICOCLAW_EXEC_TIMEOUT": t.timeout.String(),
 	}
 
-	// Use sanitized environment - strips secrets, prevents env-based attacks
-	// Pass extraEnv from LLM to apply blocklist filtering
-	cmd.Env = shell.BuildSanitizedEnv(t.cachedEnv, nil, execTimeEnv, extraEnv)
+	// Use sanitized environment - merge cached env with exec time vars and LLM extra env
+	// Note: cachedEnv is NOT re-filtered - PICOCLAW_* vars are preserved
+	cmd.Env = shell.MergeEnvVars(t.cachedEnv, execTimeEnv, extraEnv)
 
 	if cwd != "" {
 		cmd.Dir = cwd
diff --git a/pkg/tools/shell/env.go b/pkg/tools/shell/env.go
index 3abd5c499..a716078e1 100644
--- a/pkg/tools/shell/env.go
+++ b/pkg/tools/shell/env.go
@@ -78,6 +78,77 @@ var windowsEnvAllowlist = map[string]bool{
 	"HOMEPATH":    true,
 }
 
+// FilterByAllowlist filters the inherited environment to only allowlisted variables.
+// This should only be used at init time to create the cached environment.
+func FilterByAllowlist(baseEnv []string, extraAllowlist []string) map[string]string {
+	if baseEnv == nil {
+		baseEnv = os.Environ()
+	}
+
+	allowed := make(map[string]bool, len(DefaultEnvAllowlist)+len(extraAllowlist)+len(windowsEnvAllowlist))
+	for k := range DefaultEnvAllowlist {
+		allowed[envKey(k)] = true
+	}
+	if runtime.GOOS == "windows" {
+		for k := range windowsEnvAllowlist {
+			allowed[envKey(k)] = true
+		}
+	}
+	for _, k := range extraAllowlist {
+		allowed[envKey(k)] = true
+	}
+
+	vars := make(map[string]string)
+	for _, entry := range baseEnv {
+		k, v, ok := strings.Cut(entry, "=")
+		if !ok {
+			continue
+		}
+		norm := envKey(k)
+		if allowed[norm] || isAllowedPrefix(norm) {
+			vars[norm] = v
+		}
+	}
+	return vars
+}
+
+// MergeEnvVars merges multiple env sources into a final []string for exec.Cmd.Env.
+// baseEnv is NOT filtered - it's assumed to already be sanitized (e.g., cachedEnv).
+// envSet provides explicit key=value pairs (config, not filtered).
+// extraEnv provides additional key=value pairs from LLM (filtered by blocklist).
+func MergeEnvVars(baseEnv map[string]string, envSet, extraEnv map[string]string) []string {
+	vars := make(map[string]string, len(baseEnv)+len(envSet)+len(extraEnv))
+
+	// Start with base env (already sanitized)
+	for k, v := range baseEnv {
+		vars[envKey(k)] = v
+	}
+
+	// Add envSet (config-provided, not filtered)
+	if envSet != nil {
+		for k, v := range envSet {
+			vars[envKey(k)] = v
+		}
+	}
+
+	// Merge extraEnv (LLM-provided) - filtered by blocklist
+	if extraEnv != nil {
+		for k, v := range extraEnv {
+			if LLMBlocklist[envKey(k)] {
+				continue // Skip blocked vars
+			}
+			vars[envKey(k)] = v
+		}
+	}
+
+	// Convert to []string for exec.Cmd.Env
+	result := make([]string, 0, len(vars))
+	for k, v := range vars {
+		result = append(result, k+"="+v)
+	}
+	return result
+}
+
 // BuildSanitizedEnv constructs a sanitized environment []string suitable for
 // exec.Cmd.Env. It filters the inherited environment to only allowlisted variables.
 //