diff --git a/Lib/posixpath.py b/Lib/posixpath.py
index d65dc75..0378004 100644
--- a/Lib/posixpath.py
+++ b/Lib/posixpath.py
@@ -285,28 +285,43 @@
 # Non-existent variables are left unchanged.
 
 _varprog = None
+_uvarprog = None
 
 def expandvars(path):
     """Expand shell variables of form $var and ${var}.  Unknown variables
     are left unchanged."""
-    global _varprog
+    global _varprog, _uvarprog
     if '$' not in path:
         return path
-    if not _varprog:
-        import re
-        _varprog = re.compile(r'\$(\w+|\{[^}]*\})')
+    if isinstance(path, _unicode):
+        if not _varprog:
+            import re
+            _varprog = re.compile(r'\$(\w+|\{[^}]*\})')
+        varprog = _varprog
+        encoding = sys.getfilesystemencoding()
+    else:
+        if not _uvarprog:
+            import re
+            _uvarprog = re.compile(_unicode(r'\$(\w+|\{[^}]*\})'), re.UNICODE)
+        varprog = _uvarprog
+        encoding = None
     i = 0
     while True:
-        m = _varprog.search(path, i)
+        m = varprog.search(path, i)
         if not m:
             break
         i, j = m.span(0)
         name = m.group(1)
         if name.startswith('{') and name.endswith('}'):
             name = name[1:-1]
+        if encoding:
+            name = name.encode(encoding)
         if name in os.environ:
             tail = path[j:]
-            path = path[:i] + os.environ[name]
+            value = os.environ[name]
+            if encoding:
+                value = value.decode(encoding)
+            path = path[:i] + value
             i = len(path)
             path += tail
         else: