.ssh/config: "Bad configuration option: UseKeychain" on Mac OS Sierra 10.12.6

Try to specify another option, namely IgnoreUnknown like below:

Host *
  IgnoreUnknown UseKeychain
  UseKeychain yes

You can find more info about this here.

If you already have an IgnoreUnknown value, use comma separated values

Host *
  IgnoreUnknown AddKeysToAgent,UseKeychain
  AddKeysToAgent yes
  UseKeychain yes

If you have multiple Host configs that use the UseKeychain option, make sure to put

Host *
  IgnoreUnknown UseKeychain

before the first host that uses the the option, e.g. put it at the top of the file.

The accepted answer helped me but did not completely solve my problem because I had multiple options that were bad. Here is an example of what it might look like if you have this issue:

Host *
  IgnoreUnknown AddKeysToAgent,UseKeychain
  AddKeysToAgent yes
  UseKeychain yes
  IdentityFile ~/.ssh/id_rsa

Instead of ssh-add type ‘open .ssh/id_rsa’ and add it to the keychain

The UseKeychain option never appeared as bad on my config, but I have in the beginning, before any other host, the following

Host *
UseKeychain yes 

Host (...)