diff --git a/pipenv/environments.py b/pipenv/environments.py
index 915c058e..ca65ee0e 100644
--- a/pipenv/environments.py
+++ b/pipenv/environments.py
@@ -42,7 +42,10 @@ PIPENV_MAX_DEPTH = int(os.environ.get('PIPENV_MAX_DEPTH', '3')) + 1
 PIPENV_USE_SYSTEM = False
 if 'PIPENV_ACTIVE' not in os.environ:
     if 'PIPENV_IGNORE_VIRTUALENVS' not in os.environ:
-        PIPENV_USE_SYSTEM = os.environ.get('VIRTUAL_ENV')
+        PIPENV_VIRTUALENV = os.environ.get('VIRTUAL_ENV')
+        PIPENV_USE_SYSTEM = bool(os.environ.get('VIRTUAL_ENV'))
+else:
+    PIPENV_VIRTUALENV = None
 
 # Tells Pipenv to use hashing mode.
 PIPENV_USE_HASHES = True
diff --git a/pipenv/project.py b/pipenv/project.py
index 0c040dd4..00ea33a6 100644
--- a/pipenv/project.py
+++ b/pipenv/project.py
@@ -16,7 +16,7 @@ from .utils import (
     find_requirements, is_file, is_vcs, python_version
 )
 from .environments import PIPENV_MAX_DEPTH, PIPENV_VENV_IN_PROJECT
-from .environments import PIPENV_USE_SYSTEM, PIPENV_PIPFILE
+from .environments import PIPENV_VIRTUALENV, PIPENV_PIPFILE
 
 if PIPENV_PIPFILE:
     if not os.path.isfile(PIPENV_PIPFILE):
@@ -110,8 +110,8 @@ class Project(object):
     def virtualenv_location(self):
 
         # if VIRTUAL_ENV is set, use that.
-        if PIPENV_USE_SYSTEM:
-            return PIPENV_USE_SYSTEM
+        if PIPENV_VIRTUALENV:
+            return PIPENV_VIRTUALENV
 
         # Use cached version, if available.
         if self._virtualenv_location: