Can you provide steps to reproduce please. There's a number of ways to supply JVM options that the application plugin's start scripts might be involved in so I'd like narrow it down.

Sure, we just have this in our application's build.gradle

startScripts {
defaultJvmOpts = ['-DinstanceId=$instanceId']
}

Oh, and we create the scripts themselves by running the distTar task, although the same scripts are generated when you run the install distZip and install tasks.

This applies to the 'applicationDefaultJvmArgs'-argument to the application-plugin as well.

applicationDefaultJvmArgs = ['-Ddw.server.applicationConnectors[0].port=$PORT']

renders this result in the generated shell-script:

DEFAULT_JVM_OPTS='"-Ddw.server.applicationConnectors[0].port=\$PORT"'

I created a pull request that should solve this problem for the application plugin
https://github.com/gradle/gradle/pull/422

Any known workarounds? Run some post processing? Replace dollar sign with unicode sequence, maybe?

@Ivan What I do to work around this is

startScripts{
   doLast{
     unixScript.text = unixScript.text.replace('\\', '')
}

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