diff --git a/docs/changelog.rst b/docs/changelog.rst
index b580bd889..ba83b6c32 100644
--- a/docs/changelog.rst
+++ b/docs/changelog.rst
@@ -13,6 +13,8 @@ Changelog
 - Render the text under the cursor in a fixed color, configurable via
   the option :opt:`cursor_text_color` (:iss:`126`)
 
+- Add an option :opt:`env` to set environment variables in child processes
+  from kitty.conf
 
 0.11.3 [2018-07-10]
 ------------------------------
diff --git a/kitty/child.py b/kitty/child.py
index 123ac89a8..e9e62cbfe 100644
--- a/kitty/child.py
+++ b/kitty/child.py
@@ -30,6 +30,20 @@ def remove_cloexec(fd):
     fcntl.fcntl(fd, fcntl.F_SETFD, fcntl.fcntl(fd, fcntl.F_GETFD) & ~fcntl.FD_CLOEXEC)
 
 
+def default_env():
+    try:
+        return default_env.env
+    except AttributeError:
+        return os.environ
+
+
+def set_default_env(val=None):
+    env = os.environ.copy()
+    if val:
+        env.update(val)
+    default_env.env = env
+
+
 class Child:
 
     child_fd = pid = None
@@ -63,7 +77,7 @@ class Child:
             remove_cloexec(stdin_read_fd)
         else:
             stdin_read_fd = stdin_write_fd = -1
-        env = os.environ.copy()
+        env = default_env().copy()
         env.update(self.env)
         env['TERM'] = self.opts.term
         env['COLORTERM'] = 'truecolor'
diff --git a/kitty/config.py b/kitty/config.py
index efc9d9c68..f34edd4c8 100644
--- a/kitty/config.py
+++ b/kitty/config.py
@@ -245,28 +245,68 @@ def parse_send_text(val, key_definitions):
     return parse_key(key_str, key_definitions)
 
 
+special_handlers = {}
+
+
+def special_handler(func):
+    special_handlers[func.__name__.partition('_')[2]] = func
+
+
+@special_handler
+def handle_map(key, val, ans):
+    parse_key(val, ans['key_definitions'])
+
+
+@special_handler
+def handle_symbol_map(key, val, ans):
+    ans['symbol_map'].update(parse_symbol_map(val))
+
+
+@special_handler
+def handle_send_text(key, val, ans):
+    # For legacy compatibility
+    parse_send_text(val, ans['key_definitions'])
+
+
+@special_handler
+def handle_clear_all_shortcuts(key, val, ans):
+    if to_bool(val):
+        ans['key_definitions'] = [None]
+
+
+def expandvars(val, env):
+
+    def sub(m):
+        key = m.group(1)
+        result = env.get(key)
+        if result is None:
+            result = os.environ.get(key)
+        if result is None:
+            result = m.group()
+        return result
+
+    return re.sub(r'$\{(\S+)\}', sub, val)
+
+
+@special_handler
+def handle_env(key, val, ans):
+    key, val = val.partition('=')[::2]
+    key, val = key.strip(), val.strip()
+    ans['env'][key] = expandvars(val, ans['env'])
+
+
 def special_handling(key, val, ans):
-    if key == 'map':
-        parse_key(val, ans['key_definitions'])
+    func = special_handlers.get(key)
+    if func is not None:
+        func(key, val, ans)
         return True
-    if key == 'symbol_map':
-        ans['symbol_map'].update(parse_symbol_map(val))
-        return True
-    if key == 'send_text':
-        # For legacy compatibility
-        parse_send_text(val, ans['key_definitions'])
-        return True
-    if key == 'clear_all_shortcuts':
-        if to_bool(val):
-            ans['key_definitions'] = [None]
-        return
 
 
 defaults = None
 
 
 def parse_config(lines, check_keys=True):
-    ans = {'symbol_map': {}, 'keymap': {}, 'sequence_map': {}, 'key_definitions': []}
+    ans = {'symbol_map': {}, 'keymap': {}, 'sequence_map': {}, 'key_definitions': [], 'env': {}}
     parse_config_base(
         lines,
         defaults,
diff --git a/kitty/config_data.py b/kitty/config_data.py
index 7d171bdd3..8242e1a84 100644
--- a/kitty/config_data.py
+++ b/kitty/config_data.py
@@ -646,6 +646,19 @@ opening new windows, closing windows, reading the content of windows, etc.
 Note that this even works over ssh connections.
 '''))
 
+o(
+    '+env', '',
+    add_to_default=False,
+    long_text=_('''
+Specify environment variables to set in all child processes. Note that
+environment variables are expanded recursively, so if you use::
+
+    env MYVAR1=a
+    env MYVAR2=${MYVAR}/${HOME}/b
+
+The value of MYVAR2 will be :code:`a/<path to home directory>/b`.
+'''))
+
 
 def startup_session(x):
     if x.lower() == 'none':
diff --git a/kitty/main.py b/kitty/main.py
index b967ed56b..f8817f494 100644
--- a/kitty/main.py
+++ b/kitty/main.py
@@ -9,6 +9,7 @@ from contextlib import contextmanager
 
 from .borders import load_borders_program
 from .boss import Boss
+from .child import set_default_env
 from .cli import create_opts, parse_args
 from .config import cached_values_for, initial_window_size_func
 from .constants import (
@@ -202,6 +203,13 @@ def macos_cmdline():
     return ans
 
 
+def setup_environment(opts):
+    extra_env = opts.env.copy()
+    if opts.editor != '.':
+        os.environ['EDITOR'] = opts.editor
+    set_default_env(extra_env)
+
+
 def _main():
     try:
         sys.setswitchinterval(1000.0)  # we have only a single python thread
@@ -256,8 +264,7 @@ def _main():
             return
     init_glfw(args.debug_keyboard)  # needed for parsing native keysyms
     opts = create_opts(args)
-    if opts.editor != '.':
-        os.environ['EDITOR'] = opts.editor
+    setup_environment(opts)
     try:
         with setup_profiling(args):
             # Avoid needing to launch threads to reap zombies