Variables within app.config/web.config

A slightly more complicated, but far more flexible, alternative is to create a class that represents a configuration section. In your app.config / web.config file, you can have this:

<?xml version="1.0" encoding="utf-8" ?>
<configuration>
    <!-- This section must be the first section within the <configuration> node -->
    <configSections>
        <section name="DirectoryInfo" type="MyProjectNamespace.DirectoryInfoConfigSection, MyProjectAssemblyName" />
    </configSections>

    <DirectoryInfo>
        <Directory MyBaseDir="C:\MyBase" Dir1="Dir1" Dir2="Dir2" />
    </DirectoryInfo>
</configuration>

Then, in your .NET code (I'll use C# in my example), you can create two classes like this:

using System;
using System.Configuration;

namespace MyProjectNamespace {

    public class DirectoryInfoConfigSection : ConfigurationSection {

        [ConfigurationProperty("Directory")]
        public DirectoryConfigElement Directory {
            get {
                return (DirectoryConfigElement)base["Directory"];
            }
    }

    public class DirectoryConfigElement : ConfigurationElement {

        [ConfigurationProperty("MyBaseDir")]
        public String BaseDirectory {
            get {
                return (String)base["MyBaseDir"];
            }
        }

        [ConfigurationProperty("Dir1")]
        public String Directory1 {
            get {
                return (String)base["Dir1"];
            }
        }

        [ConfigurationProperty("Dir2")]
        public String Directory2 {
            get {
                return (String)base["Dir2"];
            }
        }
        // You can make custom properties to combine your directory names.
        public String Directory1Resolved {
            get {
                return System.IO.Path.Combine(BaseDirectory, Directory1);
            }
        }
    }
}

Finally, in your program code, you can access your app.config variables, using your new classes, in this manner:

DirectoryInfoConfigSection config =
  (DirectoryInfoConfigSection)ConfigurationManager.GetSection("DirectoryInfo");
String dir1Path = config.Directory.Directory1Resolved;  // This value will equal "C:\MyBase\Dir1"

You can accomplish using my library Expansive. Also available on nuget here.

It was designed with this as a primary use-case.

Moderate Example (using AppSettings as default source for token expansion)

In app.config:

<configuration>
    <appSettings>
        <add key="Domain" value="mycompany.com"/>
        <add key="ServerName" value="db01.{Domain}"/>
    </appSettings>
    <connectionStrings>
        <add name="Default" connectionString="server={ServerName};uid=uid;pwd=pwd;Initial Catalog=master;" provider="System.Data.SqlClient" />
    </connectionStrings>
</configuration>

Use the .Expand() extension method on the string to be expanded:

var connectionString = ConfigurationManager.ConnectionStrings["Default"].ConnectionString;
connectionString.Expand() // returns "server=db01.mycompany.com;uid=uid;pwd=pwd;Initial Catalog=master;"

or

Use the Dynamic ConfigurationManager wrapper "Config" as follows (Explicit call to Expand() not necessary):

var serverName = Config.AppSettings.ServerName;
// returns "db01.mycompany.com"

var connectionString = Config.ConnectionStrings.Default;
// returns "server=db01.mycompany.com;uid=uid;pwd=pwd;Initial Catalog=master;"

Advanced Example 1 (using AppSettings as default source for token expansion)

In app.config:

<configuration>
    <appSettings>
        <add key="Environment" value="dev"/>
        <add key="Domain" value="mycompany.com"/>
        <add key="UserId" value="uid"/>
        <add key="Password" value="pwd"/>
        <add key="ServerName" value="db01-{Environment}.{Domain}"/>
        <add key="ReportPath" value="\\{ServerName}\SomeFileShare"/>
    </appSettings>
    <connectionStrings>
        <add name="Default" connectionString="server={ServerName};uid={UserId};pwd={Password};Initial Catalog=master;" provider="System.Data.SqlClient" />
    </connectionStrings>
</configuration>

Use the .Expand() extension method on the string to be expanded:

var connectionString = ConfigurationManager.ConnectionStrings["Default"].ConnectionString;
connectionString.Expand() // returns "server=db01-dev.mycompany.com;uid=uid;pwd=pwd;Initial Catalog=master;"