diff --git a/flake.nix b/flake.nix
index f65fd8d9836..7b3c7f9cc39 100644
--- a/flake.nix
+++ b/flake.nix
@@ -415,6 +415,16 @@
                 installCheckPhase = ''
                   export TEST_ROOT=$(mktemp -d)
                   export NIX_STATE_DIR=$TEST_ROOT/var/nix
+                  export NIX_STORE_DIR=$TEST_ROOT/store
+                  export NIX_LOCALSTATE_DIR=$TEST_ROOT/var
+                  export NIX_LOG_DIR=$TEST_ROOT/var/log/nix
+
+                  export NIX_CONF_DIR=$TEST_ROOT/etc
+                  mkdir "$NIX_CONF_DIR"
+                  cat > "$NIX_CONF_DIR"/nix.conf <<EOF
+                  sandbox = false
+                  substituters =
+                  EOF
 
                   export PYTHONPATH=$out/${python.sitePackages}
 
diff --git a/python/src/python-module.cc b/python/src/python-module.cc
index 4ff8ad01f89..3f042cee9c0 100644
--- a/python/src/python-module.cc
+++ b/python/src/python-module.cc
@@ -27,6 +27,11 @@ static struct PyModuleDef nixmodule = {
     NixMethods};
 
 extern "C" _public_ PyObject *PyInit_nix(void) {
+  // By default, Nix sets the build-hook to be "$(readlink /proc/self/exe) __build-remote", expecting the current binary to be Nix itself.
+  // But when we call the Nix library from Python this isn't the case, the current binary is Python then
+  // So we need to change this default, pointing it to the Nix binary instead
+  nix::settings.buildHook = nix::settings.nixBinDir + "/nix __build-remote";
+  // And by setting buildHook before calling initNix, we can override the defaults without overriding the user-provided options from the config files
   nix::initNix();
   nix::initGC();
 
diff --git a/python/tests.py b/python/tests.py
index 9d909e98a73..3855fec65f8 100644
--- a/python/tests.py
+++ b/python/tests.py
@@ -16,5 +16,16 @@ def test_bool(self):
     def test_none(self):
         self.assertEqual(nix.eval("a", vars=dict(a=None)), None)
 
+    def test_ifd(self):
+        expression = """
+        builtins.readFile (derivation {
+          name = "test";
+          args = [ "-c" "echo -n test > $out" ];
+          builder = "/bin/sh";
+          system = builtins.currentSystem;
+        })
+        """
+        self.assertEqual(nix.eval(expression, vars=dict()), "test")
+
 if __name__ == '__main__':
     unittest.main()