diff --git a/src/vs/workbench/services/configurationResolver/common/configurationResolverExpression.ts b/src/vs/workbench/services/configurationResolver/common/configurationResolverExpression.ts
index 1cabb263d78..25d505123e9 100644
--- a/src/vs/workbench/services/configurationResolver/common/configurationResolverExpression.ts
+++ b/src/vs/workbench/services/configurationResolver/common/configurationResolverExpression.ts
@@ -65,7 +65,7 @@ interface IReplacementLocation {
 export class ConfigurationResolverExpression<T> implements IConfigurationResolverExpression<T> {
 	public static readonly VARIABLE_LHS = '${';
 
-	private locations = new Map<string, IReplacementLocation>();
+	private readonly locations = new Map<string, IReplacementLocation>();
 	private root: T;
 	private stringRoot: boolean;
 	/**
@@ -173,17 +173,14 @@ export class ConfigurationResolverExpression<T> implements IConfigurationResolve
 		}
 
 		for (const [key, value] of Object.entries(obj)) {
+			this.parseString(obj, key, key, true); // parse key
+
 			if (typeof value === 'string') {
 				this.parseString(obj, key, value);
 			} else {
 				this.parseObject(value);
 			}
 		}
-
-		// only after all values are marked for replacement, we can collect keys that have to be replaced
-		for (const [key] of Object.entries(obj)) {
-			this.parseString(obj, key, key, true);
-		}
 	}
 
 	private parseString(object: any, propertyName: string | number, value: string, replaceKeyName?: boolean, replacementPath?: string[]): void {
@@ -281,15 +278,26 @@ export class ConfigurationResolverExpression<T> implements IConfigurationResolve
 			const newKey = propertyName.replaceAll(replacement.id, data.value);
 			delete object[propertyName];
 			object[newKey] = value;
+			this._renameKeyInLocations(object, propertyName, newKey);
 			this.parseString(object, newKey, data.value, true, path);
 		} else {
-			this.parseString(object, propertyName, data.value, false, path);
 			object[propertyName] = object[propertyName].replaceAll(replacement.id, data.value);
+			this.parseString(object, propertyName, data.value, false, path);
 		}
 
 		path.pop();
 	}
 
+	private _renameKeyInLocations(obj: object, oldKey: string, newKey: string) {
+		for (const location of this.locations.values()) {
+			for (const loc of location.locations) {
+				if (loc.object === obj && loc.propertyName === oldKey) {
+					loc.propertyName = newKey;
+				}
+			}
+		}
+	}
+
 	public toObject(): T {
 		// If we wrapped a string, unwrap it
 		if (this.stringRoot) {
diff --git a/src/vs/workbench/services/configurationResolver/test/electron-sandbox/configurationResolverService.test.ts b/src/vs/workbench/services/configurationResolver/test/electron-sandbox/configurationResolverService.test.ts
index 68d24b67cf9..e5afb8970b9 100644
--- a/src/vs/workbench/services/configurationResolver/test/electron-sandbox/configurationResolverService.test.ts
+++ b/src/vs/workbench/services/configurationResolver/test/electron-sandbox/configurationResolverService.test.ts
@@ -1010,4 +1010,53 @@ suite('ConfigurationResolverExpression', () => {
 			'key that is username: testuser': 'cool!'
 		});
 	});
+
+	test('resolves nested values 2 (#245798)', () => {
+		const expr = ConfigurationResolverExpression.parse({
+			env: {
+				SITE: "${input:site}",
+				TLD: "${input:tld}",
+				HOST: "${input:host}",
+			},
+		});
+
+		for (const r of expr.unresolved()) {
+			if (r.arg === 'site') {
+				expr.resolve(r, 'example');
+			} else if (r.arg === 'tld') {
+				expr.resolve(r, 'com');
+			} else if (r.arg === 'host') {
+				expr.resolve(r, 'local.${input:site}.${input:tld}');
+			}
+		}
+
+		assert.deepStrictEqual(expr.toObject(), {
+			env: {
+				SITE: 'example',
+				TLD: 'com',
+				HOST: 'local.example.com'
+			}
+		});
+	});
+
+	test('out-of-order key resolution (#248550)', () => {
+		const expr = ConfigurationResolverExpression.parse({
+			'${input:key}': "${input:value}",
+		});
+
+		for (const r of expr.unresolved()) {
+			if (r.arg === 'key') {
+				expr.resolve(r, 'the-key');
+			}
+		}
+		for (const r of expr.unresolved()) {
+			if (r.arg === 'value') {
+				expr.resolve(r, 'the-value');
+			}
+		}
+
+		assert.deepStrictEqual(expr.toObject(), {
+			'the-key': 'the-value'
+		});
+	});
 });