diff --git a/distribution/src/bin/elasticsearch b/distribution/src/bin/elasticsearch
index b7ed2b648b76f..53329cc6bad41 100755
--- a/distribution/src/bin/elasticsearch
+++ b/distribution/src/bin/elasticsearch
@@ -21,8 +21,7 @@ if [ -z "$ES_TMPDIR" ]; then
 fi
 
 ES_JVM_OPTIONS="$ES_PATH_CONF"/jvm.options
-JVM_OPTIONS=`"$JAVA" -cp "$ES_CLASSPATH" org.elasticsearch.tools.launchers.JvmOptionsParser "$ES_JVM_OPTIONS"`
-ES_JAVA_OPTS="${JVM_OPTIONS//\$\{ES_TMPDIR\}/$ES_TMPDIR}"
+ES_JAVA_OPTS=`export ES_TMPDIR; "$JAVA" -cp "$ES_CLASSPATH" org.elasticsearch.tools.launchers.JvmOptionsParser "$ES_JVM_OPTIONS"`
 
 # manual parsing to find out, if process should be detached
 if ! echo $* | grep -E '(^-d |-d$| -d |--daemonize$|--daemonize )' > /dev/null; then
diff --git a/distribution/src/bin/elasticsearch-service.bat b/distribution/src/bin/elasticsearch-service.bat
index fd4d4b666dba8..3b1478110692e 100644
--- a/distribution/src/bin/elasticsearch-service.bat
+++ b/distribution/src/bin/elasticsearch-service.bat
@@ -115,8 +115,8 @@ set ES_JVM_OPTIONS=%ES_PATH_CONF%\jvm.options
 if not "%ES_JAVA_OPTS%" == "" set ES_JAVA_OPTS=%ES_JAVA_OPTS: =;%
 
 @setlocal
-for /F "usebackq delims=" %%a in (`"%JAVA% -cp "!ES_CLASSPATH!" "org.elasticsearch.tools.launchers.JvmOptionsParser" "!ES_JVM_OPTIONS!" || echo jvm_options_parser_failed"`) do set JVM_OPTIONS=%%a
-@endlocal & set "MAYBE_JVM_OPTIONS_PARSER_FAILED=%JVM_OPTIONS%" & set ES_JAVA_OPTS=%JVM_OPTIONS:${ES_TMPDIR}=!ES_TMPDIR!%
+for /F "usebackq delims=" %%a in (`"%JAVA% -cp "!ES_CLASSPATH!" "org.elasticsearch.tools.launchers.JvmOptionsParser" "!ES_JVM_OPTIONS!" || echo jvm_options_parser_failed"`) do set ES_JAVA_OPTS=%%a
+@endlocal & set "MAYBE_JVM_OPTIONS_PARSER_FAILED=%ES_JAVA_OPTS%" & set ES_JAVA_OPTS=%ES_JAVA_OPTS%
 
 if "%MAYBE_JVM_OPTIONS_PARSER_FAILED%" == "jvm_options_parser_failed" (
   exit /b 1
diff --git a/distribution/src/bin/elasticsearch.bat b/distribution/src/bin/elasticsearch.bat
index 03dc48728d52c..9460554f81f41 100644
--- a/distribution/src/bin/elasticsearch.bat
+++ b/distribution/src/bin/elasticsearch.bat
@@ -47,8 +47,8 @@ if not defined ES_TMPDIR (
 
 set ES_JVM_OPTIONS=%ES_PATH_CONF%\jvm.options
 @setlocal
-for /F "usebackq delims=" %%a in (`CALL %JAVA% -cp "!ES_CLASSPATH!" "org.elasticsearch.tools.launchers.JvmOptionsParser" "!ES_JVM_OPTIONS!" ^|^| echo jvm_options_parser_failed`) do set JVM_OPTIONS=%%a
-@endlocal & set "MAYBE_JVM_OPTIONS_PARSER_FAILED=%JVM_OPTIONS%" & set ES_JAVA_OPTS=%JVM_OPTIONS:${ES_TMPDIR}=!ES_TMPDIR!%
+for /F "usebackq delims=" %%a in (`CALL %JAVA% -cp "!ES_CLASSPATH!" "org.elasticsearch.tools.launchers.JvmOptionsParser" "!ES_JVM_OPTIONS!" ^|^| echo jvm_options_parser_failed`) do set ES_JAVA_OPTS=%%a
+@endlocal & set "MAYBE_JVM_OPTIONS_PARSER_FAILED=%ES_JAVA_OPTS%" & set ES_JAVA_OPTS=%ES_JAVA_OPTS%
 
 if "%MAYBE_JVM_OPTIONS_PARSER_FAILED%" == "jvm_options_parser_failed" (
   exit /b 1
diff --git a/distribution/tools/launchers/src/main/java/org/elasticsearch/tools/launchers/JvmOptionsParser.java b/distribution/tools/launchers/src/main/java/org/elasticsearch/tools/launchers/JvmOptionsParser.java
index 7894cab72a1ee..757a1b3987f24 100644
--- a/distribution/tools/launchers/src/main/java/org/elasticsearch/tools/launchers/JvmOptionsParser.java
+++ b/distribution/tools/launchers/src/main/java/org/elasticsearch/tools/launchers/JvmOptionsParser.java
@@ -87,9 +87,11 @@ public void accept(final int lineNumber, final String line) {
                         .filter(Predicate.not(String::isBlank))
                         .collect(Collectors.toUnmodifiableList()));
             }
-            final List<String> ergonomicJvmOptions = JvmErgonomics.choose(jvmOptions);
-            jvmOptions.addAll(ergonomicJvmOptions);
-            final String spaceDelimitedJvmOptions = spaceDelimitJvmOptions(jvmOptions);
+            final List<String> substitutedJvmOptions =
+                substitutePlaceholders(jvmOptions, Map.of("ES_TMPDIR", System.getenv("ES_TMPDIR")));
+            final List<String> ergonomicJvmOptions = JvmErgonomics.choose(substitutedJvmOptions);
+            substitutedJvmOptions.addAll(ergonomicJvmOptions);
+            final String spaceDelimitedJvmOptions = spaceDelimitJvmOptions(substitutedJvmOptions);
             Launchers.outPrintln(spaceDelimitedJvmOptions);
             Launchers.exit(0);
         } else {
@@ -115,6 +117,24 @@ public void accept(final int lineNumber, final String line) {
         }
     }
 
+    static List<String> substitutePlaceholders(final List<String> jvmOptions, final Map<String, String> substitutions) {
+        final Map<String, String> placeholderSubstitutions =
+            substitutions.entrySet().stream().collect(Collectors.toMap(e -> "${" + e.getKey() + "}", Map.Entry::getValue));
+        return jvmOptions.stream()
+            .map(
+                jvmOption -> {
+                    String actualJvmOption = jvmOption;
+                    int start = jvmOption.indexOf("${");
+                    if (start >= 0 && jvmOption.indexOf('}', start) > 0) {
+                        for (final Map.Entry<String, String> placeholderSubstitution : placeholderSubstitutions.entrySet()) {
+                            actualJvmOption = actualJvmOption.replace(placeholderSubstitution.getKey(), placeholderSubstitution.getValue());
+                        }
+                    }
+                    return actualJvmOption;
+                })
+            .collect(Collectors.toList());
+    }
+
     /**
      * Callback for valid JVM options.
      */
diff --git a/distribution/tools/launchers/src/test/java/org/elasticsearch/tools/launchers/JvmOptionsParserTests.java b/distribution/tools/launchers/src/test/java/org/elasticsearch/tools/launchers/JvmOptionsParserTests.java
index 1433d19e8bb65..41a2b71847e2d 100644
--- a/distribution/tools/launchers/src/test/java/org/elasticsearch/tools/launchers/JvmOptionsParserTests.java
+++ b/distribution/tools/launchers/src/test/java/org/elasticsearch/tools/launchers/JvmOptionsParserTests.java
@@ -30,6 +30,7 @@
 import java.util.Map;
 import java.util.concurrent.atomic.AtomicBoolean;
 
+import static org.hamcrest.Matchers.contains;
 import static org.hamcrest.Matchers.equalTo;
 import static org.junit.Assert.assertFalse;
 import static org.junit.Assert.assertNull;
@@ -39,6 +40,12 @@
 
 public class JvmOptionsParserTests extends LaunchersTestCase {
 
+    public void testSubstitution() {
+        final List<String> jvmOptions =
+            JvmOptionsParser.substitutePlaceholders(List.of("-Djava.io.tmpdir=${ES_TMPDIR}"), Map.of("ES_TMPDIR", "/tmp/elasticsearch"));
+        assertThat(jvmOptions, contains("-Djava.io.tmpdir=/tmp/elasticsearch"));
+    }
+
     public void testUnversionedOptions() throws IOException {
         try (StringReader sr = new StringReader("-Xms1g\n-Xmx1g");
              BufferedReader br = new BufferedReader(sr)) {