diff --git a/setup.py b/setup.py
index 61cf811a38c..c8d9aa0b344 100644
--- a/setup.py
+++ b/setup.py
@@ -243,17 +243,31 @@ class PyBuildExt(build_ext):
         add_dir_to_list(self.compiler.include_dirs, '/usr/local/include')
 
         # Add paths specified in the environment variables LDFLAGS and
-        # CPPFLAGS.
+        # CPPFLAGS for header and library files.
         # We must get the values from the Makefile and not the environment
         # directly since an inconsistently reproducible issue comes up where
         # the environment variable is not set even though the value were passed
-        # into configure and stored in the Makefile.
+        # into configure and stored in the Makefile (issue found on OS X 10.3).
         for env_var, arg_name, dir_list in (
                 ('LDFLAGS', '-L', self.compiler.library_dirs),
                 ('CPPFLAGS', '-I', self.compiler.include_dirs)):
             env_val = sysconfig.get_config_var(env_var)
             if env_val:
+                # To prevent optparse from raising an exception about any
+                # options in env_val that is doesn't know about we strip out
+                # all double dashes and any dashes followed by a character
+                # that is not for the option we are dealing with.
+                #
+                # Please note that order of the regex is important!  We must
+                # strip out double-dashes first so that we don't end up with
+                # substituting "--Long" to "-Long" and thus lead to "ong" being
+                # used for a library directory.
+                env_val = re.sub(r'(^|\s+)-(-|(?!%s))' % arg_name[1], '', env_val)
                 parser = optparse.OptionParser()
+                # Make sure that allowing args interspersed with options is
+                # allowed
+                parser.allow_interspersed_args = True
+                parser.error = lambda msg: None
                 parser.add_option(arg_name, dest="dirs", action="append")
                 options = parser.parse_args(env_val.split())[0]
                 for directory in options.dirs: