diff --git a/crates/nu-parser/src/parse.rs b/crates/nu-parser/src/parse.rs
index e57a31b3a4..7d9173b34e 100644
--- a/crates/nu-parser/src/parse.rs
+++ b/crates/nu-parser/src/parse.rs
@@ -730,7 +730,9 @@ fn parse_external_arg(
     lite_arg: &Spanned<String>,
     scope: &dyn ParserScope,
 ) -> (SpannedExpression, Option<ParseError>) {
-    if lite_arg.item.starts_with('$') || lite_arg.item.starts_with('(') {
+    if lite_arg.item.starts_with('$') {
+        parse_dollar_expr(lite_arg, scope)
+    } else if lite_arg.item.starts_with('(') {
         parse_full_column_path(lite_arg, scope)
     } else {
         (
diff --git a/tests/shell/pipeline/commands/external.rs b/tests/shell/pipeline/commands/external.rs
index 6813a7a4aa..35fe51c5f3 100644
--- a/tests/shell/pipeline/commands/external.rs
+++ b/tests/shell/pipeline/commands/external.rs
@@ -368,4 +368,25 @@ mod external_command_arguments {
             },
         )
     }
+
+    #[test]
+    fn string_interpolation_with_an_external_command() {
+        Playground::setup(
+            "string_interpolation_with_an_external_command",
+            |dirs, sandbox| {
+                sandbox.mkdir("cd");
+
+                sandbox.with_files(vec![EmptyFile("cd/jonathan_likes_cake.txt")]);
+
+                let actual = nu!(
+                cwd: dirs.test(), pipeline(
+                r#"
+                    ^ls $"(pwd)/cd"
+                "#
+                ));
+
+                assert_eq!(actual.out, "jonathan_likes_cake.txt");
+            },
+        )
+    }
 }