diff --git a/crates/task/src/lib.rs b/crates/task/src/lib.rs
index b1cb80fa4b..ccd39fb688 100644
--- a/crates/task/src/lib.rs
+++ b/crates/task/src/lib.rs
@@ -121,6 +121,9 @@ impl ResolvedTask {
 }
 
 /// Variables, available for use in [`TaskContext`] when a Zed's [`TaskTemplate`] gets resolved into a [`ResolvedTask`].
+/// Name of the variable must be a valid shell variable identifier, which generally means that it is
+/// a word  consisting only  of alphanumeric characters and underscores,
+/// and beginning with an alphabetic character or an  underscore.
 #[derive(Debug, Clone, PartialEq, Eq, Hash, Serialize)]
 pub enum VariableName {
     /// An absolute path of the currently opened file.
@@ -146,19 +149,14 @@ pub enum VariableName {
     /// The symbol selected by the symbol tagging system, specifically the @run capture in a runnables.scm
     RunnableSymbol,
     /// Custom variable, provided by the plugin or other external source.
-    /// Will be printed with `ZED_` prefix to avoid potential conflicts with other variables.
+    /// Will be printed with `CUSTOM_` prefix to avoid potential conflicts with other variables.
     Custom(Cow<'static, str>),
 }
 
 impl VariableName {
     /// Generates a `$VARIABLE`-like string value to be used in templates.
-    /// Custom variables are wrapped in `${}` to avoid substitution issues with whitespaces.
     pub fn template_value(&self) -> String {
-        if matches!(self, Self::Custom(_)) {
-            format!("${{{self}}}")
-        } else {
-            format!("${self}")
-        }
+        format!("${self}")
     }
 }
 
diff --git a/crates/task/src/task_template.rs b/crates/task/src/task_template.rs
index 78643f14c1..fda245b4c5 100644
--- a/crates/task/src/task_template.rs
+++ b/crates/task/src/task_template.rs
@@ -469,14 +469,14 @@ mod tests {
                 (
                     "env_key_2".to_string(),
                     format!(
-                        "env_var_2_{}_{}",
+                        "env_var_2 {} {}",
                         custom_variable_1.template_value(),
                         custom_variable_2.template_value()
                     ),
                 ),
                 (
                     "env_key_3".to_string(),
-                    format!("env_var_3_{}", VariableName::Symbol.template_value()),
+                    format!("env_var_3 {}", VariableName::Symbol.template_value()),
                 ),
             ]),
             ..TaskTemplate::default()
@@ -559,11 +559,11 @@ mod tests {
             );
             assert_eq!(
                 spawn_in_terminal.env.get("env_key_2").map(|s| s.as_str()),
-                Some("env_var_2_test_custom_variable_1_test_custom_variable_2")
+                Some("env_var_2 test_custom_variable_1 test_custom_variable_2")
             );
             assert_eq!(
                 spawn_in_terminal.env.get("env_key_3"),
-                Some(&format!("env_var_3_{long_value}")),
+                Some(&format!("env_var_3 {long_value}")),
                 "Env vars should be substituted with variables and those should not be shortened"
             );
         }