diff --git a/src/libraries/Microsoft.Extensions.DependencyModel/tests/PackageResolverTest.cs b/src/libraries/Microsoft.Extensions.DependencyModel/tests/PackageResolverTest.cs
index e80d94551935ab..da1c248ea62473 100644
--- a/src/libraries/Microsoft.Extensions.DependencyModel/tests/PackageResolverTest.cs
+++ b/src/libraries/Microsoft.Extensions.DependencyModel/tests/PackageResolverTest.cs
@@ -5,7 +5,6 @@
 using System.Collections.Generic;
 using System.IO;
 using FluentAssertions;
-using Microsoft.DotNet.XUnitExtensions;
 using Microsoft.Extensions.DependencyModel.Resolution;
 using Xunit;
 using F = Microsoft.Extensions.DependencyModel.Tests.TestLibraryFactory;
@@ -28,7 +27,7 @@ public void ShouldUseEnvironmentVariableToGetDefaultLocation()
             result.Should().Contain(PackagesPath);
         }
 
-        [ConditionalFact(typeof(PlatformDetection), nameof(PlatformDetection.IsNotWindowsNanoServer))] // https://github.com/dotnet/runtime/issues/21430
+        [Fact]
         public void ShouldUseNugetUnderUserProfile()
         {
             var environment = EnvironmentMockBuilder.Create()
diff --git a/src/libraries/System.Private.CoreLib/src/System/Environment.Win32.cs b/src/libraries/System.Private.CoreLib/src/System/Environment.Win32.cs
index 01b155d718aed3..70069ba483e1b5 100644
--- a/src/libraries/System.Private.CoreLib/src/System/Environment.Win32.cs
+++ b/src/libraries/System.Private.CoreLib/src/System/Environment.Win32.cs
@@ -217,7 +217,7 @@ private static string GetFolderPathCore(SpecialFolder folder, SpecialFolderOptio
             // The only SpecialFolderOption defines we have are equivalent to KnownFolderFlags.
 
             string folderGuid;
-
+            string? fallbackEnv = null;
             switch (folder)
             {
                 // Special-cased values to not use SHGetFolderPath when we have a more direct option available.
@@ -230,12 +230,15 @@ private static string GetFolderPathCore(SpecialFolder folder, SpecialFolderOptio
                 // Map the SpecialFolder to the appropriate Guid
                 case SpecialFolder.ApplicationData:
                     folderGuid = Interop.Shell32.KnownFolders.RoamingAppData;
+                    fallbackEnv = "APPDATA";
                     break;
                 case SpecialFolder.CommonApplicationData:
                     folderGuid = Interop.Shell32.KnownFolders.ProgramData;
+                    fallbackEnv = "ProgramData";
                     break;
                 case SpecialFolder.LocalApplicationData:
                     folderGuid = Interop.Shell32.KnownFolders.LocalAppData;
+                    fallbackEnv = "LOCALAPPDATA";
                     break;
                 case SpecialFolder.Cookies:
                     folderGuid = Interop.Shell32.KnownFolders.Cookies;
@@ -292,9 +295,11 @@ private static string GetFolderPathCore(SpecialFolder folder, SpecialFolderOptio
                     break;
                 case SpecialFolder.ProgramFiles:
                     folderGuid = Interop.Shell32.KnownFolders.ProgramFiles;
+                    fallbackEnv = "ProgramFiles";
                     break;
                 case SpecialFolder.CommonProgramFiles:
                     folderGuid = Interop.Shell32.KnownFolders.ProgramFilesCommon;
+                    fallbackEnv = "CommonProgramFiles";
                     break;
                 case SpecialFolder.AdminTools:
                     folderGuid = Interop.Shell32.KnownFolders.AdminTools;
@@ -346,12 +351,15 @@ private static string GetFolderPathCore(SpecialFolder folder, SpecialFolderOptio
                     break;
                 case SpecialFolder.UserProfile:
                     folderGuid = Interop.Shell32.KnownFolders.Profile;
+                    fallbackEnv = "USERPROFILE";
                     break;
                 case SpecialFolder.CommonProgramFilesX86:
                     folderGuid = Interop.Shell32.KnownFolders.ProgramFilesCommonX86;
+                    fallbackEnv = "CommonProgramFiles(x86)";
                     break;
                 case SpecialFolder.ProgramFilesX86:
                     folderGuid = Interop.Shell32.KnownFolders.ProgramFilesX86;
+                    fallbackEnv = "ProgramFiles(x86)";
                     break;
                 case SpecialFolder.Resources:
                     folderGuid = Interop.Shell32.KnownFolders.ResourceDir;
@@ -364,18 +372,17 @@ private static string GetFolderPathCore(SpecialFolder folder, SpecialFolderOptio
                     break;
                 case SpecialFolder.Windows:
                     folderGuid = Interop.Shell32.KnownFolders.Windows;
+                    fallbackEnv = "windir";
                     break;
             }
 
             Guid folderId = new Guid(folderGuid);
-
             int hr = Interop.Shell32.SHGetKnownFolderPath(folderId, (uint)option, IntPtr.Zero, out string path);
-            if (hr != 0) // Not S_OK
-            {
-                return string.Empty;
-            }
+            if (hr == 0)
+                return path;
 
-            return path;
+            // Fallback logic if SHGetKnownFolderPath failed (nanoserver)
+            return fallbackEnv != null ? Environment.GetEnvironmentVariable(fallbackEnv) ?? string.Empty : string.Empty;
         }
 
         // Separate type so a .cctor is not created for Environment which then would be triggered during startup