Which issue(s) does this change fix?

#1355

How does it address the issue?

The --env-vars option now auto-detects the file format. When a file is provided:

1. It first attempts to parse the file as JSON (existing behavior, backward compatible)
2. If JSON parsing fails, it falls back to .env format using the python-dotenv library
3. Variables from .env files are treated as global parameters (wrapped in {"Parameters": {...}} structure)
4. If the file is neither valid JSON nor valid .env (no key-value pairs found), an error is raised

Example usage:
bash

JSON still works as before

sam local invoke MyFunction --env-vars env.json

.env files now also work

sam local invoke MyFunction --env-vars .env

Note: .env files only support global variables (applied to all functions). For function-specific variables, continue using JSON format.

What side effects does this change have?

• Adds python-dotenv~=1.0.0 as a new dependency
• Files that previously failed as invalid JSON may now succeed if they are valid .env format. This is intentional and more permissive behavior.
• No breaking changes — existing JSON files work exactly as before

Mandatory Checklist

PRs will only be reviewed after checklist is complete

• Review the generative AI contribution guidelines
• Add input/output type hints to new functions/methods
• Write design document if needed (Do I need to write a design document?)
• Write/update unit tests
• Write/update integration tests
• Write/update functional tests if needed
• make pr passes
• make update-reproducible-reqs if dependencies were changed
• Write documentation

By submitting this pull request, I confirm that my contribution is made under the terms of the Apache 2.0 license.