diff --git a/src/components/editor/ProjectSettingsModal.tsx b/src/components/editor/ProjectSettingsModal.tsx
index e8b5360..4add2f7 100644
--- a/src/components/editor/ProjectSettingsModal.tsx
+++ b/src/components/editor/ProjectSettingsModal.tsx
@@ -373,49 +373,345 @@ function CharacterForm({ formData, formError, onChange, onSave, onCancel, saveLa
   )
 }
 
-// Variables Tab (placeholder for US-057)
+// Variables Tab
 type VariablesTabProps = {
   variables: Variable[]
   onChange: (variables: Variable[]) => void
   getUsageCount: (variableId: string) => number
 }
 
-function VariablesTab({ variables }: VariablesTabProps) {
+type VariableType = 'numeric' | 'string' | 'boolean'
+
+type VariableFormData = {
+  name: string
+  type: VariableType
+  initialValue: string
+  description: string
+}
+
+const defaultInitialValues: Record<VariableType, string> = {
+  numeric: '0',
+  string: '',
+  boolean: 'false',
+}
+
+function parseInitialValue(type: VariableType, raw: string): number | string | boolean {
+  switch (type) {
+    case 'numeric':
+      return Number(raw) || 0
+    case 'boolean':
+      return raw === 'true'
+    case 'string':
+      return raw
+  }
+}
+
+function VariablesTab({ variables, onChange, getUsageCount }: VariablesTabProps) {
+  const [isAdding, setIsAdding] = useState(false)
+  const [editingId, setEditingId] = useState<string | null>(null)
+  const [formData, setFormData] = useState<VariableFormData>({ name: '', type: 'numeric', initialValue: '0', description: '' })
+  const [formError, setFormError] = useState<string | null>(null)
+  const [deleteConfirm, setDeleteConfirm] = useState<string | null>(null)
+
+  const resetForm = () => {
+    setFormData({ name: '', type: 'numeric', initialValue: '0', description: '' })
+    setFormError(null)
+  }
+
+  const validateName = (name: string, excludeId?: string): boolean => {
+    if (!name.trim()) {
+      setFormError('Name is required')
+      return false
+    }
+    const duplicate = variables.find(
+      (v) => v.name.toLowerCase() === name.trim().toLowerCase() && v.id !== excludeId
+    )
+    if (duplicate) {
+      setFormError('A variable with this name already exists')
+      return false
+    }
+    setFormError(null)
+    return true
+  }
+
+  const handleAdd = () => {
+    if (!validateName(formData.name)) return
+    const newVariable: Variable = {
+      id: nanoid(),
+      name: formData.name.trim(),
+      type: formData.type,
+      initialValue: parseInitialValue(formData.type, formData.initialValue),
+      description: formData.description.trim() || undefined,
+    }
+    onChange([...variables, newVariable])
+    setIsAdding(false)
+    resetForm()
+  }
+
+  const handleEdit = (variable: Variable) => {
+    setEditingId(variable.id)
+    setFormData({
+      name: variable.name,
+      type: variable.type,
+      initialValue: String(variable.initialValue),
+      description: variable.description || '',
+    })
+    setFormError(null)
+    setIsAdding(false)
+  }
+
+  const handleSaveEdit = () => {
+    if (!editingId) return
+    if (!validateName(formData.name, editingId)) return
+    onChange(
+      variables.map((v) =>
+        v.id === editingId
+          ? {
+              ...v,
+              name: formData.name.trim(),
+              type: formData.type,
+              initialValue: parseInitialValue(formData.type, formData.initialValue),
+              description: formData.description.trim() || undefined,
+            }
+          : v
+      )
+    )
+    setEditingId(null)
+    resetForm()
+  }
+
+  const handleDelete = (id: string) => {
+    const usageCount = getUsageCount(id)
+    if (usageCount > 0 && deleteConfirm !== id) {
+      setDeleteConfirm(id)
+      return
+    }
+    onChange(variables.filter((v) => v.id !== id))
+    setDeleteConfirm(null)
+  }
+
+  const handleCancelForm = () => {
+    setIsAdding(false)
+    setEditingId(null)
+    resetForm()
+  }
+
   return (
     <div>
-      <p className="text-sm text-zinc-600 dark:text-zinc-400">
-        Define variables that can be referenced in variable nodes and edge conditions.
-      </p>
-      {variables.length === 0 ? (
-        <p className="py-8 text-center text-sm text-zinc-400 dark:text-zinc-500">
-          No variables defined yet. Variable management will be available in a future update.
+      <div className="mb-4 flex items-center justify-between">
+        <p className="text-sm text-zinc-600 dark:text-zinc-400">
+          Define variables that can be referenced in variable nodes and edge conditions.
         </p>
-      ) : (
-        <div className="mt-4 space-y-2">
-          {variables.map((variable) => (
-            <div key={variable.id} className="flex items-center justify-between rounded-lg border border-zinc-200 px-4 py-3 dark:border-zinc-700">
-              <div className="flex items-center gap-3">
-                <span className="rounded bg-zinc-200 px-1.5 py-0.5 text-xs font-medium text-zinc-700 dark:bg-zinc-700 dark:text-zinc-300">
-                  {variable.type}
-                </span>
-                <div>
-                  <span className="text-sm font-medium text-zinc-900 dark:text-zinc-50">
-                    {variable.name}
+        {!isAdding && !editingId && (
+          <button
+            onClick={() => { setIsAdding(true); resetForm(); setDeleteConfirm(null) }}
+            className="rounded bg-blue-500 px-3 py-1.5 text-sm font-medium text-white hover:bg-blue-600 focus:outline-none focus:ring-2 focus:ring-blue-500 focus:ring-offset-2 dark:focus:ring-offset-zinc-800"
+          >
+            Add Variable
+          </button>
+        )}
+      </div>
+
+      {/* Variable List */}
+      <div className="space-y-2">
+        {variables.map((variable) => (
+          <div key={variable.id}>
+            {editingId === variable.id ? (
+              <VariableForm
+                formData={formData}
+                formError={formError}
+                onChange={setFormData}
+                onSave={handleSaveEdit}
+                onCancel={handleCancelForm}
+                saveLabel="Save"
+              />
+            ) : (
+              <div className="flex items-center justify-between rounded-lg border border-zinc-200 px-4 py-3 dark:border-zinc-700">
+                <div className="flex items-center gap-3">
+                  <span className={`rounded px-1.5 py-0.5 text-xs font-medium ${
+                    variable.type === 'numeric'
+                      ? 'bg-blue-100 text-blue-700 dark:bg-blue-900/30 dark:text-blue-300'
+                      : variable.type === 'string'
+                      ? 'bg-green-100 text-green-700 dark:bg-green-900/30 dark:text-green-300'
+                      : 'bg-purple-100 text-purple-700 dark:bg-purple-900/30 dark:text-purple-300'
+                  }`}>
+                    {variable.type}
                   </span>
-                  {variable.description && (
-                    <p className="text-xs text-zinc-500 dark:text-zinc-400">
-                      {variable.description}
-                    </p>
-                  )}
+                  <div>
+                    <span className="text-sm font-medium text-zinc-900 dark:text-zinc-50">
+                      {variable.name}
+                    </span>
+                    {variable.description && (
+                      <p className="text-xs text-zinc-500 dark:text-zinc-400">
+                        {variable.description}
+                      </p>
+                    )}
+                  </div>
+                </div>
+                <div className="flex items-center gap-3">
+                  <span className="text-xs text-zinc-500 dark:text-zinc-400">
+                    Initial: {String(variable.initialValue)}
+                  </span>
+                  <div className="flex items-center gap-2">
+                    {deleteConfirm === variable.id && (
+                      <span className="mr-2 text-xs text-orange-600 dark:text-orange-400">
+                        Used in {getUsageCount(variable.id)} node(s). Delete anyway?
+                      </span>
+                    )}
+                    <button
+                      onClick={() => handleEdit(variable)}
+                      className="rounded px-2 py-1 text-sm text-zinc-600 hover:bg-zinc-100 dark:text-zinc-400 dark:hover:bg-zinc-700"
+                    >
+                      Edit
+                    </button>
+                    <button
+                      onClick={() => handleDelete(variable.id)}
+                      className={`rounded px-2 py-1 text-sm ${
+                        deleteConfirm === variable.id
+                          ? 'text-red-600 hover:bg-red-50 dark:text-red-400 dark:hover:bg-red-900/20'
+                          : 'text-zinc-600 hover:bg-zinc-100 dark:text-zinc-400 dark:hover:bg-zinc-700'
+                      }`}
+                    >
+                      Delete
+                    </button>
+                  </div>
                 </div>
               </div>
-              <span className="text-xs text-zinc-500 dark:text-zinc-400">
-                Initial: {String(variable.initialValue)}
-              </span>
-            </div>
-          ))}
+            )}
+          </div>
+        ))}
+
+        {variables.length === 0 && !isAdding && (
+          <p className="py-8 text-center text-sm text-zinc-400 dark:text-zinc-500">
+            No variables defined yet. Click &quot;Add Variable&quot; to create one.
+          </p>
+        )}
+      </div>
+
+      {/* Add Form */}
+      {isAdding && (
+        <div className="mt-4">
+          <VariableForm
+            formData={formData}
+            formError={formError}
+            onChange={setFormData}
+            onSave={handleAdd}
+            onCancel={handleCancelForm}
+            saveLabel="Add"
+          />
         </div>
       )}
     </div>
   )
 }
+
+// Variable Form
+type VariableFormProps = {
+  formData: VariableFormData
+  formError: string | null
+  onChange: (data: VariableFormData) => void
+  onSave: () => void
+  onCancel: () => void
+  saveLabel: string
+}
+
+function VariableForm({ formData, formError, onChange, onSave, onCancel, saveLabel }: VariableFormProps) {
+  const handleTypeChange = (newType: VariableType) => {
+    onChange({ ...formData, type: newType, initialValue: defaultInitialValues[newType] })
+  }
+
+  return (
+    <div className="rounded-lg border border-zinc-200 bg-zinc-50 p-4 dark:border-zinc-700 dark:bg-zinc-900">
+      <div className="space-y-3">
+        <div className="flex items-center gap-3">
+          <div className="flex-1">
+            <label className="mb-1 block text-xs font-medium text-zinc-700 dark:text-zinc-300">
+              Name *
+            </label>
+            <input
+              type="text"
+              value={formData.name}
+              onChange={(e) => onChange({ ...formData, name: e.target.value })}
+              placeholder="Variable name"
+              autoFocus
+              className="block w-full rounded-md border border-zinc-300 bg-white px-3 py-1.5 text-sm text-zinc-900 placeholder-zinc-400 focus:border-blue-500 focus:outline-none focus:ring-1 focus:ring-blue-500 dark:border-zinc-600 dark:bg-zinc-800 dark:text-zinc-50 dark:placeholder-zinc-500"
+            />
+          </div>
+          <div>
+            <label className="mb-1 block text-xs font-medium text-zinc-700 dark:text-zinc-300">
+              Type *
+            </label>
+            <select
+              value={formData.type}
+              onChange={(e) => handleTypeChange(e.target.value as VariableType)}
+              className="block rounded-md border border-zinc-300 bg-white px-3 py-1.5 text-sm text-zinc-900 focus:border-blue-500 focus:outline-none focus:ring-1 focus:ring-blue-500 dark:border-zinc-600 dark:bg-zinc-800 dark:text-zinc-50"
+            >
+              <option value="numeric">Numeric</option>
+              <option value="string">String</option>
+              <option value="boolean">Boolean</option>
+            </select>
+          </div>
+        </div>
+        <div>
+          <label className="mb-1 block text-xs font-medium text-zinc-700 dark:text-zinc-300">
+            Initial Value *
+          </label>
+          {formData.type === 'boolean' ? (
+            <select
+              value={formData.initialValue}
+              onChange={(e) => onChange({ ...formData, initialValue: e.target.value })}
+              className="block w-full rounded-md border border-zinc-300 bg-white px-3 py-1.5 text-sm text-zinc-900 focus:border-blue-500 focus:outline-none focus:ring-1 focus:ring-blue-500 dark:border-zinc-600 dark:bg-zinc-800 dark:text-zinc-50"
+            >
+              <option value="false">false</option>
+              <option value="true">true</option>
+            </select>
+          ) : formData.type === 'numeric' ? (
+            <input
+              type="number"
+              value={formData.initialValue}
+              onChange={(e) => onChange({ ...formData, initialValue: e.target.value })}
+              className="block w-full rounded-md border border-zinc-300 bg-white px-3 py-1.5 text-sm text-zinc-900 placeholder-zinc-400 focus:border-blue-500 focus:outline-none focus:ring-1 focus:ring-blue-500 dark:border-zinc-600 dark:bg-zinc-800 dark:text-zinc-50 dark:placeholder-zinc-500"
+            />
+          ) : (
+            <input
+              type="text"
+              value={formData.initialValue}
+              onChange={(e) => onChange({ ...formData, initialValue: e.target.value })}
+              placeholder="Initial value"
+              className="block w-full rounded-md border border-zinc-300 bg-white px-3 py-1.5 text-sm text-zinc-900 placeholder-zinc-400 focus:border-blue-500 focus:outline-none focus:ring-1 focus:ring-blue-500 dark:border-zinc-600 dark:bg-zinc-800 dark:text-zinc-50 dark:placeholder-zinc-500"
+            />
+          )}
+        </div>
+        <div>
+          <label className="mb-1 block text-xs font-medium text-zinc-700 dark:text-zinc-300">
+            Description
+          </label>
+          <input
+            type="text"
+            value={formData.description}
+            onChange={(e) => onChange({ ...formData, description: e.target.value })}
+            placeholder="Optional description"
+            className="block w-full rounded-md border border-zinc-300 bg-white px-3 py-1.5 text-sm text-zinc-900 placeholder-zinc-400 focus:border-blue-500 focus:outline-none focus:ring-1 focus:ring-blue-500 dark:border-zinc-600 dark:bg-zinc-800 dark:text-zinc-50 dark:placeholder-zinc-500"
+          />
+        </div>
+        {formError && (
+          <p className="text-sm text-red-600 dark:text-red-400">{formError}</p>
+        )}
+        <div className="flex justify-end gap-2">
+          <button
+            onClick={onCancel}
+            className="rounded-md border border-zinc-300 bg-white px-3 py-1.5 text-sm font-medium text-zinc-700 hover:bg-zinc-50 dark:border-zinc-600 dark:bg-zinc-700 dark:text-zinc-300 dark:hover:bg-zinc-600"
+          >
+            Cancel
+          </button>
+          <button
+            onClick={onSave}
+            className="rounded-md bg-blue-500 px-3 py-1.5 text-sm font-medium text-white hover:bg-blue-600 focus:outline-none focus:ring-2 focus:ring-blue-500 focus:ring-offset-2 dark:focus:ring-offset-zinc-800"
+          >
+            {saveLabel}
+          </button>
+        </div>
+      </div>
+    </div>
+  )
+}