diff --git a/pkg/sqlcmd/commands.go b/pkg/sqlcmd/commands.go
index 6a258e49..31c2d9c0 100644
--- a/pkg/sqlcmd/commands.go
+++ b/pkg/sqlcmd/commands.go
@@ -264,13 +264,18 @@ func outCommand(s *Sqlcmd, args []string, line uint) error {
 	if len(args) == 0 || args[0] == "" {
 		return InvalidCommandError("OUT", line)
 	}
+	filePath, err := resolveArgumentVariables(s, []rune(args[0]), true)
+	if err != nil {
+		return err
+	}
+
 	switch {
-	case strings.EqualFold(args[0], "stdout"):
+	case strings.EqualFold(filePath, "stdout"):
 		s.SetOutput(os.Stdout)
-	case strings.EqualFold(args[0], "stderr"):
+	case strings.EqualFold(filePath, "stderr"):
 		s.SetOutput(os.Stderr)
 	default:
-		o, err := os.OpenFile(args[0], os.O_TRUNC|os.O_CREATE|os.O_WRONLY, 0o644)
+		o, err := os.OpenFile(filePath, os.O_TRUNC|os.O_CREATE|os.O_WRONLY, 0o644)
 		if err != nil {
 			return InvalidFileError(err, args[0])
 		}
@@ -290,15 +295,19 @@ func outCommand(s *Sqlcmd, args []string, line uint) error {
 // errorCommand changes the error writer to use a file
 func errorCommand(s *Sqlcmd, args []string, line uint) error {
 	if len(args) == 0 || args[0] == "" {
-		return InvalidCommandError("OUT", line)
+		return InvalidCommandError("ERROR", line)
+	}
+	filePath, err := resolveArgumentVariables(s, []rune(args[0]), true)
+	if err != nil {
+		return err
 	}
 	switch {
-	case strings.EqualFold(args[0], "stderr"):
+	case strings.EqualFold(filePath, "stderr"):
 		s.SetError(os.Stderr)
-	case strings.EqualFold(args[0], "stdout"):
+	case strings.EqualFold(filePath, "stdout"):
 		s.SetError(os.Stdout)
 	default:
-		o, err := os.OpenFile(args[0], os.O_TRUNC|os.O_CREATE|os.O_WRONLY, 0o644)
+		o, err := os.OpenFile(filePath, os.O_TRUNC|os.O_CREATE|os.O_WRONLY, 0o644)
 		if err != nil {
 			return InvalidFileError(err, args[0])
 		}
@@ -549,7 +558,7 @@ func xmlCommand(s *Sqlcmd, args []string, line uint) error {
 func resolveArgumentVariables(s *Sqlcmd, arg []rune, failOnUnresolved bool) (string, error) {
 	var b *strings.Builder
 	end := len(arg)
-	for i := 0; i < end; {
+	for i := 0; i < end && !s.Connect.DisableVariableSubstitution; {
 		c, next := arg[i], grab(arg, i+1, end)
 		switch {
 		case c == '$' && next == '(':
diff --git a/pkg/sqlcmd/commands_test.go b/pkg/sqlcmd/commands_test.go
index 94caeb2e..7a9e8f3f 100644
--- a/pkg/sqlcmd/commands_test.go
+++ b/pkg/sqlcmd/commands_test.go
@@ -246,6 +246,7 @@ func TestConnectCommand(t *testing.T) {
 
 func TestErrorCommand(t *testing.T) {
 	s, buf := setupSqlCmdWithMemoryOutput(t)
+	defer s.SetError(nil)
 	defer buf.Close()
 	file, err := os.CreateTemp("", "sqlcmderr")
 	assert.NoError(t, err, "os.CreateTemp")
@@ -253,17 +254,20 @@ func TestErrorCommand(t *testing.T) {
 	fileName := file.Name()
 	_ = file.Close()
 	err = errorCommand(s, []string{""}, 1)
-	assert.EqualError(t, err, InvalidCommandError("OUT", 1).Error(), "errorCommand with empty file name")
+	assert.EqualError(t, err, InvalidCommandError("ERROR", 1).Error(), "errorCommand with empty file name")
 	err = errorCommand(s, []string{fileName}, 1)
 	assert.NoError(t, err, "errorCommand")
 	// Only some error kinds go to the error output
 	err = runSqlCmd(t, s, []string{"print N'message'", "RAISERROR(N'Error', 16, 1)", "SELECT 1", ":SETVAR 1", "GO"})
 	assert.NoError(t, err, "runSqlCmd")
-	s.SetError(nil)
 	errText, err := os.ReadFile(file.Name())
 	if assert.NoError(t, err, "ReadFile") {
 		assert.Regexp(t, "Msg 50000, Level 16, State 1, Server .*, Line 2"+SqlcmdEol+"Error"+SqlcmdEol, string(errText), "Error file contents: "+string(errText))
 	}
+	s.vars.Set("myvar", "stdout")
+	err = errorCommand(s, []string{"$(myvar)"}, 1)
+	assert.NoError(t, err, "errorCommand with a variable")
+	assert.Equal(t, os.Stdout, s.err, "error set to stdout using a variable")
 }
 
 func TestOnErrorCommand(t *testing.T) {
@@ -320,6 +324,11 @@ func TestResolveArgumentVariables(t *testing.T) {
 	if assert.ErrorContains(t, err, UndefinedVariable("var2").Error(), "fail on unresolved variable") {
 		assert.Empty(t, actual, "fail on unresolved variable")
 	}
+	s.Connect.DisableVariableSubstitution = true
+	input := "$(var1) notvar"
+	actual, err = resolveArgumentVariables(s, []rune(input), true)
+	assert.NoError(t, err)
+	assert.Equal(t, input, actual, "resolveArgumentVariables when DisableVariableSubstitution is false")
 }
 
 func TestExecCommand(t *testing.T) {