diff --git a/doc/manual/nix-build.xml b/doc/manual/nix-build.xml
index f9530dc4b..6640898b4 100644
--- a/doc/manual/nix-build.xml
+++ b/doc/manual/nix-build.xml
@@ -79,8 +79,9 @@ or renamed.  So don’t rename the symlink.</para></warning>
 the dependencies of the derivation, but not the derivation itself.  It
 will then start an interactive shell in which all environment
 variables defined by the derivation have been set to their
-corresponding values.  This is useful for reproducing the environment
-of a derivation for development.</para>
+corresponding values, and the script <literal>$stdenv/setup</literal>
+has been sourced.  This is useful for reproducing the environment of a
+derivation for development.</para>
 
 </refsection>
 
@@ -144,9 +145,9 @@ also <xref linkend="sec-common-options" />.</phrase></para>
 
   <varlistentry><term><option>--command</option> <replaceable>cmd</replaceable></term>
 
-    <listitem><para>In the environment of the derivation, executeq the
-    command <replaceable>cmd</replaceable> instead of the default
-    interactive shell.</para></listitem>
+    <listitem><para>In the environment of the derivation, run the
+    shell command <replaceable>cmd</replaceable> instead of starting
+    an interactive shell.</para></listitem>
 
   </varlistentry>
 
@@ -181,10 +182,10 @@ interactive shell in which to build it:
 
 <screen>
 $ nix-build '&lt;nixpkgs>' --run-env -A pan
-$ tar xf $src
+$ unpackPhase
 $ cd pan-*
-$ ./configure
-$ make
+$ configurePhase
+$ buildPhase
 $ ./pan/gui/pan
 </screen>
 
diff --git a/scripts/nix-build.in b/scripts/nix-build.in
index 76dffd253..4ceec4df6 100755
--- a/scripts/nix-build.in
+++ b/scripts/nix-build.in
@@ -3,6 +3,7 @@
 use strict;
 use Nix::Config;
 use Nix::Store;
+use Nix::Utils;
 use File::Temp qw(tempdir);
 
 
@@ -15,7 +16,7 @@ my @buildArgs = ();
 my @exprs = ();
 
 my $shell = $ENV{SHELL} || "/bin/sh";
-my $envCommand = "p=\$PATH; source \$stdenv/setup; PATH=\$PATH:\$p; exec $shell";
+my $envCommand = ""; # interactive shell
 my @envExclude = ();
 
 
@@ -124,7 +125,7 @@ for (my $n = 0; $n < scalar @ARGV; $n++) {
     elsif ($arg eq "--command") {
         $n++;
         die "$0: `$arg' requires an argument\n" unless $n < scalar @ARGV;
-        $envCommand = $ARGV[$n];
+        $envCommand = "$ARGV[$n]\nexit $!";
     }
 
     elsif ($arg eq "--exclude") {
@@ -169,15 +170,23 @@ foreach my $expr (@exprs) {
 
         # Set the environment.
         $ENV{'NIX_BUILD_TOP'} = $ENV{'TMPDIR'} || "/tmp";
-        foreach (keys %{$drv->{env}}) {
-            $ENV{$_} = $drv->{env}->{$_};
-        }
+        $ENV{$_} = $drv->{env}->{$_} foreach keys %{$drv->{env}};
 
         # Run a shell using the derivation's environment.  For
         # convenience, source $stdenv/setup to setup additional
-        # environment variables.  Also don't lose the current $PATH
-        # directories.
-        exec($ENV{SHELL}, "-c", $envCommand);
+        # environment variables and shell functions.  Also don't lose
+        # the current $PATH directories.
+        my $rcfile = "$tmpDir/rc";
+        writeFile(
+            $rcfile,
+            '[ -e ~/.bashrc ] && source ~/.bashrc; ' .
+            'p=$PATH; ' .
+            '[ -e $stdenv/setup ] && source $stdenv/setup; ' .
+            'PATH=$PATH:$p; ' .
+            'set +e; ' .
+            'PS1="\n\[\033[1;32m\][nix-build:\w]$\[\033[0m\] "; ' .
+            $envCommand);
+        exec($ENV{SHELL}, "--rcfile", $rcfile);
         die;
     }