diff --git a/changelog/24790.txt b/changelog/24790.txt
new file mode 100644
index 0000000000..14bc913c84
--- /dev/null
+++ b/changelog/24790.txt
@@ -0,0 +1,6 @@
+```release-note:bug
+agent: Fixed incorrect parsing of boolean environment variables for configuration.
+```
+```release-note:bug
+proxy: Fixed incorrect parsing of boolean environment variables for configuration.
+```
\ No newline at end of file
diff --git a/command/agent.go b/command/agent.go
index 87988efaf3..3c1643856f 100644
--- a/command/agent.go
+++ b/command/agent.go
@@ -1027,7 +1027,12 @@ func (c *AgentCommand) setBoolFlag(f *FlagSets, configVal bool, fVar *BoolVar) {
 		// Don't do anything as the flag is already set from the command line
 	case flagEnvSet:
 		// Use value from env var
-		*fVar.Target = flagEnvValue != ""
+		val, err := parseutil.ParseBool(flagEnvValue)
+		if err != nil {
+			c.logger.Error("error parsing bool from environment variable, using default instead", "environment variable", fVar.EnvVar, "provided value", flagEnvValue, "default", fVar.Default, "err", err)
+			val = fVar.Default
+		}
+		*fVar.Target = val
 	case configVal:
 		// Use value from config
 		*fVar.Target = configVal
diff --git a/command/agent_test.go b/command/agent_test.go
index 8d12f6584d..521070736d 100644
--- a/command/agent_test.go
+++ b/command/agent_test.go
@@ -2820,6 +2820,36 @@ func TestAgent_LogFile_Config(t *testing.T) {
 	assert.Equal(t, 1048576, cfg.LogRotateBytes)
 }
 
+// TestAgent_EnvVar_Overrides tests that environment variables are properly
+// parsed and override defaults.
+func TestAgent_EnvVar_Overrides(t *testing.T) {
+	configFile := populateTempFile(t, "agent-config.hcl", BasicHclConfig)
+
+	cfg, err := agentConfig.LoadConfigFile(configFile.Name())
+	if err != nil {
+		t.Fatal("Cannot load config to test update/merge", err)
+	}
+
+	assert.Equal(t, false, cfg.Vault.TLSSkipVerify)
+
+	t.Setenv("VAULT_SKIP_VERIFY", "true")
+	// Parse the cli flags (but we pass in an empty slice)
+	cmd := &AgentCommand{BaseCommand: &BaseCommand{}}
+	f := cmd.Flags()
+	err = f.Parse([]string{})
+	if err != nil {
+		t.Fatal(err)
+	}
+
+	cmd.applyConfigOverrides(f, cfg)
+	assert.Equal(t, true, cfg.Vault.TLSSkipVerify)
+
+	t.Setenv("VAULT_SKIP_VERIFY", "false")
+
+	cmd.applyConfigOverrides(f, cfg)
+	assert.Equal(t, false, cfg.Vault.TLSSkipVerify)
+}
+
 func TestAgent_Config_NewLogger_Default(t *testing.T) {
 	cmd := &AgentCommand{BaseCommand: &BaseCommand{}}
 	cmd.config = agentConfig.NewConfig()
diff --git a/command/proxy.go b/command/proxy.go
index eba9670348..79138d745b 100644
--- a/command/proxy.go
+++ b/command/proxy.go
@@ -939,7 +939,12 @@ func (c *ProxyCommand) setBoolFlag(f *FlagSets, configVal bool, fVar *BoolVar) {
 		// Don't do anything as the flag is already set from the command line
 	case flagEnvSet:
 		// Use value from env var
-		*fVar.Target = flagEnvValue != ""
+		val, err := parseutil.ParseBool(flagEnvValue)
+		if err != nil {
+			c.logger.Error("error parsing bool from environment variable, using default instead", "environment variable", fVar.EnvVar, "provided value", flagEnvValue, "default", fVar.Default, "err", err)
+			val = fVar.Default
+		}
+		*fVar.Target = val
 	case configVal:
 		// Use value from config
 		*fVar.Target = configVal
diff --git a/command/proxy_test.go b/command/proxy_test.go
index 391bee40a0..4e95becc88 100644
--- a/command/proxy_test.go
+++ b/command/proxy_test.go
@@ -2184,6 +2184,36 @@ func TestProxy_LogFile_Config(t *testing.T) {
 	assert.Equal(t, 1048576, cfg.LogRotateBytes)
 }
 
+// TestProxy_EnvVar_Overrides tests that environment variables are properly
+// parsed and override defaults.
+func TestProxy_EnvVar_Overrides(t *testing.T) {
+	configFile := populateTempFile(t, "proxy-config.hcl", BasicHclConfig)
+
+	cfg, err := proxyConfig.LoadConfigFile(configFile.Name())
+	if err != nil {
+		t.Fatal("Cannot load config to test update/merge", err)
+	}
+
+	assert.Equal(t, false, cfg.Vault.TLSSkipVerify)
+
+	t.Setenv("VAULT_SKIP_VERIFY", "true")
+	// Parse the cli flags (but we pass in an empty slice)
+	cmd := &ProxyCommand{BaseCommand: &BaseCommand{}}
+	f := cmd.Flags()
+	err = f.Parse([]string{})
+	if err != nil {
+		t.Fatal(err)
+	}
+
+	cmd.applyConfigOverrides(f, cfg)
+	assert.Equal(t, true, cfg.Vault.TLSSkipVerify)
+
+	t.Setenv("VAULT_SKIP_VERIFY", "false")
+
+	cmd.applyConfigOverrides(f, cfg)
+	assert.Equal(t, false, cfg.Vault.TLSSkipVerify)
+}
+
 // TestProxy_Config_NewLogger_Default Tests defaults for log level and
 // specifically cmd.newLogger()
 func TestProxy_Config_NewLogger_Default(t *testing.T) {