A custom connector needs an API secret that differs in each environment. The secret must not be stored in the solution, in the connector definition or as plain text in Dataverse, and it already lives in Azure Key Vault in the same tenant. What should the developer use?
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Short Explanation
Think of a Secret environment variable as a claim ticket for a locked safe: your solution carries the ticket, never the cash. Key Vault keeps the real secret and Power Platform fetches it when needed. The trap is the Text variable, which just puts the cash in an envelope.
Full Explanation
Environment variables of type Secret reference secrets stored in Azure Key Vault. The variable records the subscription, resource group, vault and secret name, while the secret value stays in Key Vault, so neither the solution nor Dataverse stores it in plain text. Each environment can reference a different secret or vault, and Microsoft documents secret environment variables as usable in Power Automate flows, Copilot Studio agents and custom connectors. Setup requires the Microsoft.PowerPlatform resource provider registered in the subscription, the Key Vault Secrets User role for users who create the variable and for the Dataverse service principal, and a vault in the same tenant. A Text environment variable stores its value in Dataverse as plain text, which the stem forbids, and the value can travel in solution exports. Typing the secret into a connector definition embeds it in a solution component and forces separate connectors per environment, breaking both security and ALM. A Dataverse column protected by field security still stores the secret in Dataverse, and connectors do not read configuration from arbitrary columns at run time. Exam caveat: secret values are not retrievable generally through the API, so this pattern suits connectors and flows rather than arbitrary custom code. Operational check: create the variable, confirm it validates against Key Vault, and test the connector in each environment.