diff --git a/src/shadow/npm-base.mts b/src/shadow/npm-base.mts
index edd5cd3c30..0a9b9ac9a9 100644
--- a/src/shadow/npm-base.mts
+++ b/src/shadow/npm-base.mts
@@ -37,6 +37,42 @@ export type ShadowBinResult = {
   spawnPromise: SpawnResult<string, SpawnExtra | undefined>
 }
 
+// Length of the '--node-options=' prefix, used to slice the value out of an
+// npm '--node-options=<value>' argument.
+const NODE_OPTIONS_FLAG_PREFIX_LENGTH = '--node-options='.length
+
+/**
+ * Build the '--node-options=<value>' argument passed to npm so its lifecycle
+ * scripts run with our Node permission flags.
+ *
+ * npm assigns this value to NODE_OPTIONS for the scripts it runs, REPLACING any
+ * inherited NODE_OPTIONS. To avoid clobbering the user's configuration we merge,
+ * in order, the caller's existing process.env.NODE_OPTIONS and any
+ * '--node-options=<value>' npm argument ahead of our permission flags (issue
+ * #1036).
+ *
+ * The value is intentionally NOT wrapped in quotes. shadowNpmBase spawns npm
+ * without a shell, so any quotes would be passed literally to npm and become
+ * part of the NODE_OPTIONS value. Consumers that re-tokenize NODE_OPTIONS on
+ * whitespace (e.g. Next.js) then strip the leading quote off '--permission',
+ * dropping it while keeping the '--allow-*' flags, which crashes Node >= 24
+ * with ERR_MISSING_OPTION (issue #1160).
+ */
+export function buildNpmNodeOptionsArg(
+  envNodeOptions: string | undefined,
+  nodeOptionsArg: string | undefined,
+  permArgs: string[] | readonly string[],
+): string {
+  const value = [
+    envNodeOptions,
+    nodeOptionsArg ? nodeOptionsArg.slice(NODE_OPTIONS_FLAG_PREFIX_LENGTH) : '',
+    cmdFlagsToString(permArgs),
+  ]
+    .filter(Boolean)
+    .join(' ')
+  return `--node-options=${value}`
+}
+
 export default async function shadowNpmBase(
   binName: typeof NPM | typeof NPX,
   args: string[] | readonly string[] = process.argv.slice(2),
@@ -113,7 +149,11 @@ export default async function shadowNpmBase(
       ...noAuditArgs,
       ...(useNodeOptions
         ? [
-            `--node-options='${nodeOptionsArg ? nodeOptionsArg.slice(15) : ''}${cmdFlagsToString(permArgs)}'`,
+            buildNpmNodeOptionsArg(
+              process.env['NODE_OPTIONS'],
+              nodeOptionsArg,
+              permArgs,
+            ),
           ]
         : []),
       '--no-fund',
diff --git a/src/shadow/npm-base.test.mts b/src/shadow/npm-base.test.mts
new file mode 100644
index 0000000000..f528e2c4ae
--- /dev/null
+++ b/src/shadow/npm-base.test.mts
@@ -0,0 +1,88 @@
+import { describe, expect, it } from 'vitest'
+
+import { buildNpmNodeOptionsArg } from './npm-base.mts'
+
+// The permission flags shadowNpmBase injects on Node versions that support
+// --permission. Mirrors the array built in npm-base.mts.
+const permArgs = [
+  '--permission',
+  '--allow-child-process',
+  '--allow-fs-read=*',
+  '--allow-fs-write=/project/*',
+]
+
+describe('buildNpmNodeOptionsArg', () => {
+  it('does not wrap the value in quotes (issue #1160)', () => {
+    // Literal quotes survive spawn() (no shell) and get re-tokenized by
+    // consumers like Next.js, which strips the leading quote off --permission
+    // and crashes Node >= 24 with ERR_MISSING_OPTION.
+    const result = buildNpmNodeOptionsArg(undefined, undefined, permArgs)
+
+    expect(result).not.toContain("'")
+    expect(result).not.toContain('"')
+    expect(result).toBe(
+      '--node-options=--permission --allow-child-process --allow-fs-read=* --allow-fs-write=/project/*',
+    )
+    // The NODE_OPTIONS value must keep --permission as a clean, standalone
+    // token so a whitespace re-tokenizer (Next.js) doesn't orphan the
+    // --allow-* flags.
+    const value = result.slice('--node-options='.length)
+    expect(value.split(' ')).toContain('--permission')
+  })
+
+  it('merges an inherited NODE_OPTIONS env value ahead of perm flags (issue #1036)', () => {
+    const result = buildNpmNodeOptionsArg(
+      '--max-old-space-size=4096',
+      undefined,
+      permArgs,
+    )
+
+    expect(result).toBe(
+      '--node-options=--max-old-space-size=4096 --permission --allow-child-process --allow-fs-read=* --allow-fs-write=/project/*',
+    )
+  })
+
+  it('preserves the inherited NODE_OPTIONS even when there are no perm flags', () => {
+    const result = buildNpmNodeOptionsArg('--enable-source-maps', undefined, [])
+
+    expect(result).toBe('--node-options=--enable-source-maps')
+  })
+
+  it('strips the --node-options= prefix from an npm --node-options arg', () => {
+    const result = buildNpmNodeOptionsArg(
+      undefined,
+      '--node-options=--trace-warnings',
+      permArgs,
+    )
+
+    expect(result).toBe(
+      '--node-options=--trace-warnings --permission --allow-child-process --allow-fs-read=* --allow-fs-write=/project/*',
+    )
+  })
+
+  it('merges env NODE_OPTIONS, the npm --node-options arg, and perm flags in order', () => {
+    const result = buildNpmNodeOptionsArg(
+      '--enable-source-maps',
+      '--node-options=--trace-warnings',
+      permArgs,
+    )
+
+    expect(result).toBe(
+      '--node-options=--enable-source-maps --trace-warnings --permission --allow-child-process --allow-fs-read=* --allow-fs-write=/project/*',
+    )
+  })
+
+  it('emits an empty value when nothing is provided', () => {
+    const result = buildNpmNodeOptionsArg(undefined, undefined, [])
+
+    expect(result).toBe('--node-options=')
+  })
+
+  it('drops an empty-string env NODE_OPTIONS instead of adding a stray space', () => {
+    const result = buildNpmNodeOptionsArg('', undefined, permArgs)
+
+    expect(result).toBe(
+      '--node-options=--permission --allow-child-process --allow-fs-read=* --allow-fs-write=/project/*',
+    )
+  })
+})