diff --git a/docs/setup/env-file.md b/docs/setup/env-file.md
new file mode 100644
index 0000000..2cdc2c0
--- /dev/null
+++ b/docs/setup/env-file.md
@@ -0,0 +1,29 @@
+# Environment file syntax
+
+CareGuard loads `.env` before the unified server imports application code. If the file cannot be parsed, startup prints `Failed to parse .env: <message>` and exits with status `1`.
+
+## Supported lines
+
+```bash
+# Comments and blank lines are ignored.
+KEY=value
+KEY = value
+export KEY=value
+SERVICE_URL: http://localhost:3001
+QUOTED_VALUE="value with spaces"
+```
+
+- Keys may contain letters, numbers, underscores, periods, and dashes.
+- Values may be unquoted or quoted with matching single quotes, double quotes, or backticks.
+- A UTF-8 byte order mark at the start of the file is ignored.
+- Existing process environment variables are kept unless the loader is called with override mode.
+
+## Unsupported lines
+
+Raw multiline values are not accepted in `.env`. Encode newlines as `\n` inside a quoted value instead.
+
+```bash
+PRIVATE_KEY="line one\nline two"
+```
+
+Every non-comment line must be a complete assignment. For example, `LLM_API_KEY="unterminated` fails with a clear parse error instead of a low-level runtime crash.
diff --git a/server.ts b/server.ts
index 3a1d6a3..74266e5 100644
--- a/server.ts
+++ b/server.ts
@@ -8,7 +8,7 @@
  * For production: use `npm start` (this file)
  */
 
-import "dotenv/config";
+import "./shared/load-env.ts";
 import { createHash } from "crypto";
 import express from "express";
 import { Keypair, Horizon } from "@stellar/stellar-sdk";
diff --git a/shared/__tests__/env-file.test.ts b/shared/__tests__/env-file.test.ts
new file mode 100644
index 0000000..21fbf6e
--- /dev/null
+++ b/shared/__tests__/env-file.test.ts
@@ -0,0 +1,87 @@
+import { mkdtempSync, rmSync, writeFileSync } from "fs";
+import { tmpdir } from "os";
+import { join } from "path";
+import { afterEach, describe, expect, it, vi } from "vitest";
+import { loadEnvFile, loadEnvFileOrExit } from "../env-file.ts";
+
+function writeTempEnv(contents: string): { dir: string; path: string } {
+  const dir = mkdtempSync(join(tmpdir(), "careguard-env-"));
+  const path = join(dir, ".env");
+  writeFileSync(path, contents);
+  return { dir, path };
+}
+
+describe("env-file", () => {
+  afterEach(() => {
+    vi.restoreAllMocks();
+  });
+
+  it("loads valid .env values without overwriting existing variables", () => {
+    const { dir, path } = writeTempEnv([
+      "# local config",
+      "LLM_API_KEY=from-file",
+      "PHARMACY_API_URL: http://localhost:3001",
+      "export BILL_AUDIT_API_URL=http://localhost:3002",
+    ].join("\n"));
+    const env = {
+      LLM_API_KEY: "already-set",
+    } as NodeJS.ProcessEnv;
+
+    try {
+      const result = loadEnvFile({ path, env });
+
+      expect(result).toMatchObject({ loaded: true, path });
+      expect(result.error).toBeUndefined();
+      expect(env.LLM_API_KEY).toBe("already-set");
+      expect(env.PHARMACY_API_URL).toBe("http://localhost:3001");
+      expect(env.BILL_AUDIT_API_URL).toBe("http://localhost:3002");
+    } finally {
+      rmSync(dir, { recursive: true, force: true });
+    }
+  });
+
+  it("accepts files with a UTF-8 BOM", () => {
+    const { dir, path } = writeTempEnv("\uFEFFLLM_API_KEY=from-file\n");
+    const env = {} as NodeJS.ProcessEnv;
+
+    try {
+      const result = loadEnvFile({ path, env });
+
+      expect(result.error).toBeUndefined();
+      expect(env.LLM_API_KEY).toBe("from-file");
+    } finally {
+      rmSync(dir, { recursive: true, force: true });
+    }
+  });
+
+  it("returns a clear parse error for malformed .env syntax", () => {
+    const { dir, path } = writeTempEnv('LLM_API_KEY="unterminated\n');
+
+    try {
+      const result = loadEnvFile({ path, env: {} as NodeJS.ProcessEnv });
+
+      expect(result.loaded).toBe(false);
+      expect(result.error?.message).toBe('line 1: unbalanced " quote');
+    } finally {
+      rmSync(dir, { recursive: true, force: true });
+    }
+  });
+
+  it("prints a clean parse message and exits on malformed .env files", () => {
+    const { dir, path } = writeTempEnv("not valid dotenv syntax\n");
+    const errorSpy = vi.spyOn(console, "error").mockImplementation(() => undefined);
+    const exitSpy = vi.spyOn(process, "exit").mockImplementation(((code?: number | string | null) => {
+      throw new Error(`exit:${code}`);
+    }) as never);
+
+    try {
+      expect(() => loadEnvFileOrExit({ path })).toThrow("exit:1");
+      expect(errorSpy).toHaveBeenCalledWith(
+        "Failed to parse .env: line 1: expected KEY=value",
+      );
+      expect(exitSpy).toHaveBeenCalledWith(1);
+    } finally {
+      rmSync(dir, { recursive: true, force: true });
+    }
+  });
+});
diff --git a/shared/env-file.ts b/shared/env-file.ts
new file mode 100644
index 0000000..828e667
--- /dev/null
+++ b/shared/env-file.ts
@@ -0,0 +1,85 @@
+import { existsSync, readFileSync } from "fs";
+import { resolve } from "path";
+import * as dotenv from "dotenv";
+
+export interface EnvFileLoadOptions {
+  path?: string;
+  override?: boolean;
+  env?: NodeJS.ProcessEnv;
+}
+
+export interface EnvFileLoadResult {
+  loaded: boolean;
+  path: string;
+  error?: Error;
+}
+
+function normalizeEnvText(text: string): string {
+  return text.replace(/^\uFEFF/, "");
+}
+
+function validateEnvText(text: string): Error | null {
+  const lines = normalizeEnvText(text).split(/\n/);
+
+  for (let index = 0; index < lines.length; index += 1) {
+    const line = lines[index].replace(/\r$/, "");
+    const trimmed = line.trim();
+    if (!trimmed || trimmed.startsWith("#")) continue;
+
+    const match = trimmed.match(/^(?:export\s+)?([\w.-]+)(?:\s*=\s*|:\s+)(.*)$/);
+    if (!match) {
+      return new Error(`line ${index + 1}: expected KEY=value`);
+    }
+
+    const rawValue = match[2].trim();
+    const quote = rawValue[0];
+    if ((quote === '"' || quote === "'" || quote === "`") && !rawValue.endsWith(quote)) {
+      return new Error(`line ${index + 1}: unbalanced ${quote} quote`);
+    }
+  }
+
+  return null;
+}
+
+export function loadEnvFile(options: EnvFileLoadOptions = {}): EnvFileLoadResult {
+  const path = resolve(options.path ?? ".env");
+  const env = options.env ?? process.env;
+
+  if (!existsSync(path)) {
+    return { loaded: false, path };
+  }
+
+  try {
+    const raw = readFileSync(path, "utf8");
+    const validationError = validateEnvText(raw);
+    if (validationError) {
+      return { loaded: false, path, error: validationError };
+    }
+
+    const parsed = dotenv.parse(normalizeEnvText(raw));
+    for (const [key, value] of Object.entries(parsed)) {
+      if (options.override || env[key] === undefined) {
+        env[key] = value;
+      }
+    }
+
+    return { loaded: true, path };
+  } catch (error) {
+    return {
+      loaded: false,
+      path,
+      error: error instanceof Error ? error : new Error(String(error)),
+    };
+  }
+}
+
+export function loadEnvFileOrExit(options: EnvFileLoadOptions = {}): EnvFileLoadResult {
+  const result = loadEnvFile(options);
+
+  if (result.error) {
+    console.error(`Failed to parse .env: ${result.error.message}`);
+    process.exit(1);
+  }
+
+  return result;
+}
diff --git a/shared/load-env.ts b/shared/load-env.ts
new file mode 100644
index 0000000..bf86e42
--- /dev/null
+++ b/shared/load-env.ts
@@ -0,0 +1,3 @@
+import { loadEnvFileOrExit } from "./env-file.ts";
+
+loadEnvFileOrExit();