diff --git a/src/Paket.Core/Versioning/PackageSources.fs b/src/Paket.Core/Versioning/PackageSources.fs
index c32f11de41..328fcf0747 100644
--- a/src/Paket.Core/Versioning/PackageSources.fs
+++ b/src/Paket.Core/Versioning/PackageSources.fs
@@ -126,16 +126,21 @@ type PackageSource =
     static member Parse(line : string) =
         let sourceRegex = Regex("source[ ]*[\"]([^\"]*)[\"]", RegexOptions.IgnoreCase)
         let parts = line.Split ' '
+
         let source =
             if sourceRegex.IsMatch line then
                 sourceRegex.Match(line).Groups.[1].Value.TrimEnd([| '/' |])
             else
                 parts.[1].Replace("\"","").TrimEnd([| '/' |])
 
-        let feed = normalizeFeedUrl source
-        PackageSource.Parse(feed, parseAuth(line, feed))
+        match EnvironmentVariable.Create(source) with
+        | None ->
+            let feed = normalizeFeedUrl source
+            PackageSource.Parse(feed, parseAuth(line, feed))
+        | Some var ->
+            PackageSource.Parse ("source " + var.Value)
 
-    static member Parse(source,auth) =
+    static member Parse(source, auth) =
         match tryParseWindowsStyleNetworkPath source with
         | Some path -> PackageSource.Parse(path)
         | _ ->
diff --git a/tests/Paket.Tests/DependenciesFile/ParserSpecs.fs b/tests/Paket.Tests/DependenciesFile/ParserSpecs.fs
index 1a5914bc7b..966083bce9 100644
--- a/tests/Paket.Tests/DependenciesFile/ParserSpecs.fs
+++ b/tests/Paket.Tests/DependenciesFile/ParserSpecs.fs
@@ -750,7 +750,7 @@ nuget Rx-Main
 let ``should read config with password in env variable``() = 
     Environment.SetEnvironmentVariable("FEED_USERNAME", "user XYZ", EnvironmentVariableTarget.Process)
     Environment.SetEnvironmentVariable("FEED_PASSWORD", "pw Love", EnvironmentVariableTarget.Process)
-    let cfg = DependenciesFile.FromSource( configWithPasswordInEnvVariable)
+    let cfg = DependenciesFile.FromSource(configWithPasswordInEnvVariable)
     
     cfg.Groups.[Constants.MainDependencyGroup].Sources 
     |> shouldEqual [ 
@@ -769,7 +769,7 @@ nuget Rx-Main
 let ``should read config with password in env variable and auth type specified``() = 
     Environment.SetEnvironmentVariable("FEED_USERNAME", "user XYZ", EnvironmentVariableTarget.Process)
     Environment.SetEnvironmentVariable("FEED_PASSWORD", "pw Love", EnvironmentVariableTarget.Process)
-    let cfg = DependenciesFile.FromSource( configWithPasswordInEnvVariableAndAuthType)
+    let cfg = DependenciesFile.FromSource(configWithPasswordInEnvVariableAndAuthType)
     
     cfg.Groups.[Constants.MainDependencyGroup].Sources 
     |> shouldEqual [ 
@@ -779,6 +779,43 @@ let ``should read config with password in env variable and auth type specified``
     cfg.Groups.[Constants.MainDependencyGroup].Sources.Head.Auth.Retrieve true
         |> shouldEqual (Some (Credentials{ Username = "user XYZ"; Password = "pw Love"; Type = NetUtils.AuthType.NTLM}))
 
+let configWithSourceInEnvVariable = """
+source %FEED_URL%
+nuget Rx-Main
+"""
+
+[<Test>]
+let ``should read config with source in env variable``() = 
+    Environment.SetEnvironmentVariable("FEED_URL", "http://www.nuget.org/api/v2", EnvironmentVariableTarget.Process)
+    let cfg = DependenciesFile.FromSource(configWithSourceInEnvVariable)
+    
+    cfg.Groups.[Constants.MainDependencyGroup].Sources 
+    |> shouldEqual [ 
+        PackageSource.NuGetV2 { 
+            Url = "http://www.nuget.org/api/v2"
+            Authentication = AuthProvider.empty} ]
+
+
+let configWithSourceAndCredentialsInEnvVariable = """
+source %FEED_URL%
+nuget Rx-Main
+"""
+
+[<Test>]
+let ``should read config with source and credentials in env variable``() = 
+    Environment.SetEnvironmentVariable("FEED_USERNAME", "user XYZ", EnvironmentVariableTarget.Process)
+    Environment.SetEnvironmentVariable("FEED_PASSWORD", "pw Love", EnvironmentVariableTarget.Process)
+    Environment.SetEnvironmentVariable("FEED_URL", "http://www.nuget.org/api/v2 username: \"%FEED_USERNAME%\" password: \"%FEED_PASSWORD%\" authtype: \"nTlM\"", EnvironmentVariableTarget.Process)
+    let cfg = DependenciesFile.FromSource(configWithSourceAndCredentialsInEnvVariable)
+    
+    cfg.Groups.[Constants.MainDependencyGroup].Sources 
+    |> shouldEqual [ 
+        PackageSource.NuGetV2 { 
+            Url = "http://www.nuget.org/api/v2"
+            Authentication = AuthProvider.empty} ]
+    cfg.Groups.[Constants.MainDependencyGroup].Sources.Head.Auth.Retrieve true
+        |> shouldEqual (Some (Credentials{ Username = "user XYZ"; Password = "pw Love"; Type = NetUtils.AuthType.NTLM}))
+
 let configWithExplicitVersions = """
 source "http://www.nuget.org/api/v2"