diff --git a/lib/needle.js b/lib/needle.js
index 4635be893..c3e0f686a 100644
--- a/lib/needle.js
+++ b/lib/needle.js
@@ -197,8 +197,9 @@ function should_proxy_to(url) {
   var host, hosts = no_proxy.split(',');
   for (var i in hosts) {
     host = hosts[i];
-    if (host_and_ports_match(host, url))
+    if (host_and_ports_match(host, url)) {
       return false;
+    }
   }
 
   return true;
@@ -339,18 +340,22 @@ Needle.prototype.setup = function(uri, options) {
   if (!config.proxy && env_proxy) config.proxy = env_proxy;
 
   // if proxy is present, set auth header from either url or proxy_user option.
-  if (config.proxy && should_proxy_to(uri)) {
-    if (config.proxy.indexOf('http') === -1)
-      config.proxy = 'http://' + config.proxy;
-
-    if (config.proxy.indexOf('@') !== -1) {
-      var proxy = (url.parse(config.proxy).auth || '').split(':');
-      options.proxy_user = proxy[0];
-      options.proxy_pass = proxy[1];
-    }
+  if (config.proxy) {
+    if (should_proxy_to(uri)) {
+      if (config.proxy.indexOf('http') === -1)
+        config.proxy = 'http://' + config.proxy;
+
+      if (config.proxy.indexOf('@') !== -1) {
+        var proxy = (url.parse(config.proxy).auth || '').split(':');
+        options.proxy_user = proxy[0];
+        options.proxy_pass = proxy[1];
+      }
 
-    if (options.proxy_user)
-      config.headers['proxy-authorization'] = auth.basic(options.proxy_user, options.proxy_pass);
+      if (options.proxy_user)
+        config.headers['proxy-authorization'] = auth.basic(options.proxy_user, options.proxy_pass);
+    } else {
+      delete config.proxy;
+    }
   }
 
   // now that all our headers are set, overwrite them if instructed.
diff --git a/test/proxy_spec.js b/test/proxy_spec.js
index 9526e7f7a..3b7c6009c 100644
--- a/test/proxy_spec.js
+++ b/test/proxy_spec.js
@@ -117,12 +117,41 @@ describe('proxy option', function() {
 
   describe('when valid url is passed', function() {
 
-    it('proxies request', function(done) {
-      send_request({ proxy: nonexisting_host + ':123/done' }, proxied(nonexisting_host, '123', done))
+    describe('without NO_PROXY env var set', function() {
+      it('proxies request', function(done) {
+        send_request({ proxy: nonexisting_host + ':123/done' }, proxied(nonexisting_host, '123', done))
+      })
+
+      it('does not set a Proxy-Authorization header', function(done) {
+        send_request({ proxy: nonexisting_host + ':123/done' }, no_proxy_auth(done));
+      })
     })
 
-    it('does not set a Proxy-Authorization header', function(done) {
-      send_request({ proxy: nonexisting_host + ':123/done' }, no_proxy_auth(done));
+    describe('with NO_PROXY env var set', function() {
+
+      it('proxies request if matching host not found in list', function(done) {
+        process.env.NO_PROXY = 'foo';
+        send_request({ proxy: nonexisting_host + ':123/done' }, proxied(nonexisting_host, '123', function() {
+          delete process.env.NO_PROXY;
+          done();
+        }))
+      })
+
+      it('proxies request if matching host in list but different port', function(done) {
+        process.env.NO_PROXY = 'localhost';
+        send_request({ proxy: nonexisting_host + ':123/done' }, proxied(nonexisting_host, '123', function() {
+          delete process.env.NO_PROXY;
+          done();
+        }))
+      })
+
+      it('does not proxy if matching host found in list', function(done) {
+        process.env.NO_PROXY = 'foo,' + url;
+        send_request({ proxy: nonexisting_host + ':123/done' }, not_proxied(function() {
+          delete process.env.NO_PROXY;
+          done();
+        }))
+      })
     })
 
     describe('and proxy url contains user:pass', function() {