diff --git a/client/src/components/__tests__/Sidebar.test.tsx b/client/src/components/__tests__/Sidebar.test.tsx
new file mode 100644
index 0000000..765de2f
--- /dev/null
+++ b/client/src/components/__tests__/Sidebar.test.tsx
@@ -0,0 +1,278 @@
+import { render, screen, fireEvent } from '@testing-library/react';
+import { describe, it, beforeEach, jest } from '@jest/globals';
+import Sidebar from '../Sidebar';
+
+// Mock theme hook
+jest.mock('../../lib/useTheme', () => ({
+  __esModule: true,
+  default: () => ['light', jest.fn()],
+}));
+
+describe('Sidebar Environment Variables', () => {
+  const defaultProps = {
+    connectionStatus: 'disconnected' as const,
+    transportType: 'stdio' as const,
+    setTransportType: jest.fn(),
+    command: '',
+    setCommand: jest.fn(),
+    args: '',
+    setArgs: jest.fn(),
+    sseUrl: '',
+    setSseUrl: jest.fn(),
+    env: {},
+    setEnv: jest.fn(),
+    bearerToken: '',
+    setBearerToken: jest.fn(),
+    onConnect: jest.fn(),
+    stdErrNotifications: [],
+    logLevel: 'info' as const,
+    sendLogLevelRequest: jest.fn(),
+    loggingSupported: true,
+  };
+
+  const renderSidebar = (props = {}) => {
+    return render(<Sidebar {...defaultProps} {...props} />);
+  };
+
+  const openEnvVarsSection = () => {
+    const button = screen.getByText('Environment Variables');
+    fireEvent.click(button);
+  };
+
+  beforeEach(() => {
+    jest.clearAllMocks();
+  });
+
+  describe('Basic Operations', () => {
+    it('should add a new environment variable', () => {
+      const setEnv = jest.fn();
+      renderSidebar({ env: {}, setEnv });
+      
+      openEnvVarsSection();
+      
+      const addButton = screen.getByText('Add Environment Variable');
+      fireEvent.click(addButton);
+      
+      expect(setEnv).toHaveBeenCalledWith({ '': '' });
+    });
+
+    it('should remove an environment variable', () => {
+      const setEnv = jest.fn();
+      const initialEnv = { TEST_KEY: 'test_value' };
+      renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      const removeButton = screen.getByRole('button', { name: '×' });
+      fireEvent.click(removeButton);
+      
+      expect(setEnv).toHaveBeenCalledWith({});
+    });
+
+    it('should update environment variable value', () => {
+      const setEnv = jest.fn();
+      const initialEnv = { TEST_KEY: 'test_value' };
+      renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      const valueInput = screen.getByDisplayValue('test_value');
+      fireEvent.change(valueInput, { target: { value: 'new_value' } });
+      
+      expect(setEnv).toHaveBeenCalledWith({ TEST_KEY: 'new_value' });
+    });
+
+    it('should toggle value visibility', () => {
+      const initialEnv = { TEST_KEY: 'test_value' };
+      renderSidebar({ env: initialEnv });
+      
+      openEnvVarsSection();
+      
+      const valueInput = screen.getByDisplayValue('test_value');
+      expect(valueInput).toHaveProperty('type', 'password');
+      
+      const toggleButton = screen.getByRole('button', { name: /show value/i });
+      fireEvent.click(toggleButton);
+      
+      expect(valueInput).toHaveProperty('type', 'text');
+    });
+  });
+
+  describe('Key Editing', () => {
+    it('should maintain order when editing first key', () => {
+      const setEnv = jest.fn();
+      const initialEnv = {
+        FIRST_KEY: 'first_value',
+        SECOND_KEY: 'second_value',
+        THIRD_KEY: 'third_value',
+      };
+      renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      const firstKeyInput = screen.getByDisplayValue('FIRST_KEY');
+      fireEvent.change(firstKeyInput, { target: { value: 'NEW_FIRST_KEY' } });
+      
+      expect(setEnv).toHaveBeenCalledWith({
+        NEW_FIRST_KEY: 'first_value',
+        SECOND_KEY: 'second_value',
+        THIRD_KEY: 'third_value',
+      });
+    });
+
+    it('should maintain order when editing middle key', () => {
+      const setEnv = jest.fn();
+      const initialEnv = {
+        FIRST_KEY: 'first_value',
+        SECOND_KEY: 'second_value',
+        THIRD_KEY: 'third_value',
+      };
+      renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      const middleKeyInput = screen.getByDisplayValue('SECOND_KEY');
+      fireEvent.change(middleKeyInput, { target: { value: 'NEW_SECOND_KEY' } });
+      
+      expect(setEnv).toHaveBeenCalledWith({
+        FIRST_KEY: 'first_value',
+        NEW_SECOND_KEY: 'second_value',
+        THIRD_KEY: 'third_value',
+      });
+    });
+
+    it('should maintain order when editing last key', () => {
+      const setEnv = jest.fn();
+      const initialEnv = {
+        FIRST_KEY: 'first_value',
+        SECOND_KEY: 'second_value',
+        THIRD_KEY: 'third_value',
+      };
+      renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      const lastKeyInput = screen.getByDisplayValue('THIRD_KEY');
+      fireEvent.change(lastKeyInput, { target: { value: 'NEW_THIRD_KEY' } });
+      
+      expect(setEnv).toHaveBeenCalledWith({
+        FIRST_KEY: 'first_value',
+        SECOND_KEY: 'second_value',
+        NEW_THIRD_KEY: 'third_value',
+      });
+    });
+  });
+
+  describe('Multiple Operations', () => {
+    it('should maintain state after multiple key edits', () => {
+      const setEnv = jest.fn();
+      const initialEnv = {
+        FIRST_KEY: 'first_value',
+        SECOND_KEY: 'second_value',
+      };
+      const { rerender } = renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      // First key edit
+      const firstKeyInput = screen.getByDisplayValue('FIRST_KEY');
+      fireEvent.change(firstKeyInput, { target: { value: 'NEW_FIRST_KEY' } });
+      
+      // Get the updated env from the first setEnv call
+      const updatedEnv = (setEnv.mock.calls[0][0] as Record<string, string>);
+      
+      // Rerender with the updated env
+      rerender(<Sidebar {...defaultProps} env={updatedEnv} setEnv={setEnv} />);
+      
+      // Second key edit
+      const secondKeyInput = screen.getByDisplayValue('SECOND_KEY');
+      fireEvent.change(secondKeyInput, { target: { value: 'NEW_SECOND_KEY' } });
+      
+      // Verify the final state matches what we expect
+      expect(setEnv).toHaveBeenLastCalledWith({
+        NEW_FIRST_KEY: 'first_value',
+        NEW_SECOND_KEY: 'second_value',
+      });
+    });
+
+    it('should maintain visibility state after key edit', () => {
+      const initialEnv = { TEST_KEY: 'test_value' };
+      const { rerender } = renderSidebar({ env: initialEnv });
+      
+      openEnvVarsSection();
+      
+      // Show the value
+      const toggleButton = screen.getByRole('button', { name: /show value/i });
+      fireEvent.click(toggleButton);
+      
+      const valueInput = screen.getByDisplayValue('test_value');
+      expect(valueInput).toHaveProperty('type', 'text');
+      
+      // Edit the key
+      const keyInput = screen.getByDisplayValue('TEST_KEY');
+      fireEvent.change(keyInput, { target: { value: 'NEW_KEY' } });
+      
+      // Rerender with updated env
+      rerender(<Sidebar {...defaultProps} env={{ NEW_KEY: 'test_value' }} />);
+      
+      // Value should still be visible
+      const updatedValueInput = screen.getByDisplayValue('test_value');
+      expect(updatedValueInput).toHaveProperty('type', 'text');
+    });
+  });
+
+  describe('Edge Cases', () => {
+    it('should handle empty key', () => {
+      const setEnv = jest.fn();
+      const initialEnv = { TEST_KEY: 'test_value' };
+      renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      const keyInput = screen.getByDisplayValue('TEST_KEY');
+      fireEvent.change(keyInput, { target: { value: '' } });
+      
+      expect(setEnv).toHaveBeenCalledWith({ '': 'test_value' });
+    });
+
+    it('should handle special characters in key', () => {
+      const setEnv = jest.fn();
+      const initialEnv = { TEST_KEY: 'test_value' };
+      renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      const keyInput = screen.getByDisplayValue('TEST_KEY');
+      fireEvent.change(keyInput, { target: { value: 'TEST-KEY@123' } });
+      
+      expect(setEnv).toHaveBeenCalledWith({ 'TEST-KEY@123': 'test_value' });
+    });
+
+    it('should handle unicode characters', () => {
+      const setEnv = jest.fn();
+      const initialEnv = { TEST_KEY: 'test_value' };
+      renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      const keyInput = screen.getByDisplayValue('TEST_KEY');
+      fireEvent.change(keyInput, { target: { value: 'TEST_🔑' } });
+      
+      expect(setEnv).toHaveBeenCalledWith({ 'TEST_🔑': 'test_value' });
+    });
+
+    it('should handle very long key names', () => {
+      const setEnv = jest.fn();
+      const initialEnv = { TEST_KEY: 'test_value' };
+      renderSidebar({ env: initialEnv, setEnv });
+      
+      openEnvVarsSection();
+      
+      const keyInput = screen.getByDisplayValue('TEST_KEY');
+      const longKey = 'A'.repeat(100);
+      fireEvent.change(keyInput, { target: { value: longKey } });
+      
+      expect(setEnv).toHaveBeenCalledWith({ [longKey]: 'test_value' });
+    });
+  });
+});