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Current Behavior

When using States.Format intrinsic function with escaped curly braces (\{ and \}) to produce literal JSON output, LocalStack throws a KeyError instead of correctly interpreting the escaped braces as literal characters.

The execution fails with:

{
    "status": "FAILED",
    "error": "States.Runtime",
    "cause": "KeyError('\"key\"')"
}

Expected Behavior

According to AWS documentation, escaped curly braces (\{ and \}) should be treated as literal characters in the output string, not as placeholders or variable references.

The execution should succeed and produce: {"result": "{\"key\":\"test123\"}"}

How are you starting LocalStack?

With a docker-compose file

Steps To Reproduce

How are you starting localstack (e.g., bin/localstack command, arguments, or docker-compose.yml)

services:
  localstack:
    image: localstack/localstack-pro
    ports:
      - "4566:4566"
    environment:
      - LOCALSTACK_AUTH_TOKEN=${LOCALSTACK_AUTH_TOKEN}

Client commands (e.g., AWS SDK code snippet, or sequence of "awslocal" commands)

1. Create a simple state machine with States.Format using escaped braces:

{
    "Comment": "Test States.Format with escaped braces",
    "StartAt": "TestFormat",
    "States": {
        "TestFormat": {
            "Type": "Pass",
            "Parameters": {
                "result.$": "States.Format('\\{\"key\":\"{}\"\\}', $.value)"
            },
            "End": true
        }
    }
}

2. Deploy to LocalStack:

awslocal stepfunctions create-state-machine \
  --name "test-format-escape" \
  --definition file://test_sfn.json \
  --role-arn "arn:aws:iam::000000000000:role/step-functions-role"

3. Execute with input:

awslocal stepfunctions start-execution \
  --state-machine-arn "arn:aws:states:us-east-1:000000000000:stateMachine:test-format-escape" \
  --input '{"value": "test123"}'

4. Check execution result:

awslocal stepfunctions describe-execution --execution-arn <execution-arn>

Result shows KeyError('\"key\"') instead of successful execution.

Environment

• OS: Linux (Docker)
• LocalStack:
  LocalStack version: 4.10.1.dev17
  LocalStack Docker image sha: localstack/localstack-pro
  LocalStack build date: 2025-11-10
  LocalStack build git hash: 061cd3109

Anything else?

From LocalStack logs, the error trace shows:

Exception=KeyError, Details=['"key"'] at '(StringFormat| {'name': (StatesFunctionName| {'name': 'orma', 'function_type': <StatesFunctionNameType.Format: 12>}, 'argument_list': (ArgumentList| {'arguments': [(ArgumentLiteral| {'definition_value': '\\\\{"key":"{}"\\\\}'}, ...

The definition_value shows \\\\{ (4 backslashes) instead of the expected \\{ (2 backslashes), suggesting double-escaping is occurring during intrinsic function processing.

Related: PR #12222 mentions that escape sequences in intrinsic functions were not fully addressed.