diff --git a/src/libexpr/eval.cc b/src/libexpr/eval.cc
index c927db2c10..76bace1d4b 100644
--- a/src/libexpr/eval.cc
+++ b/src/libexpr/eval.cc
@@ -310,6 +310,10 @@ inline Value * EvalState::lookupVar(Env * env, const VarRef & var)
     
     if (var.fromWith) {
         while (1) {
+            if (env->values[0] == NULL) {
+                env->values[0] = allocValue();
+                evalAttrs(*env->up, env->withAttrs, *env->values[0]);
+            }
             Bindings::iterator j = env->values[0]->attrs->find(var.name);
             if (j != env->values[0]->attrs->end()) {
                 if (countCalls && j->pos) attrSelects[*j->pos]++;
@@ -337,7 +341,7 @@ Env & EvalState::allocEnv(unsigned int size)
     nrValuesInEnvs += size;
     Env * env = (Env *) GC_MALLOC(sizeof(Env) + size * sizeof(Value *));
 
-    /* Clear the values because maybeThunk() expects this. */
+    /* Clear the values because maybeThunk() and lookupVar fromWith expects this. */
     for (unsigned i = 0; i < size; ++i)
         env->values[i] = 0;
     
@@ -405,10 +409,12 @@ unsigned long nrAvoided = 0;
 
 Value * ExprVar::maybeThunk(EvalState & state, Env & env)
 {
-    Value * v = state.lookupVar(&env, info);
-    /* The value might not be initialised in the environment yet.
-       In that case, ignore it. */
-    if (v) { nrAvoided++; return v; }
+    if (!info.fromWith) {
+        Value * v = state.lookupVar(&env, info);
+        /* The value might not be initialised in the environment yet.
+           In that case, ignore it. */
+        if (v) { nrAvoided++; return v; }
+    }
     return Expr::maybeThunk(state, env);
 }
 
@@ -825,8 +831,7 @@ void ExprWith::eval(EvalState & state, Env & env, Value & v)
     env2.up = &env;
     env2.prevWith = prevWith;
 
-    env2.values[0] = state.allocValue();
-    state.evalAttrs(env, attrs, *env2.values[0]);
+    env2.withAttrs = attrs;
 
     body->eval(state, env2, v);
 }
diff --git a/src/libexpr/eval.hh b/src/libexpr/eval.hh
index a57efa08f1..0e4ad3db23 100644
--- a/src/libexpr/eval.hh
+++ b/src/libexpr/eval.hh
@@ -53,6 +53,7 @@ struct Env
 {
     Env * up;
     unsigned int prevWith; // nr of levels up to next `with' environment
+    Expr * withAttrs;
     Value * values[0];
 };
 
diff --git a/tests/lang/eval-okay-delayed-with.exp b/tests/lang/eval-okay-delayed-with.exp
new file mode 100644
index 0000000000..eaacb55c1a
--- /dev/null
+++ b/tests/lang/eval-okay-delayed-with.exp
@@ -0,0 +1 @@
+"b-overridden"
diff --git a/tests/lang/eval-okay-delayed-with.nix b/tests/lang/eval-okay-delayed-with.nix
new file mode 100644
index 0000000000..82934d6a9d
--- /dev/null
+++ b/tests/lang/eval-okay-delayed-with.nix
@@ -0,0 +1,26 @@
+let
+  pkgs_ = with pkgs; {
+    a = derivation {
+      name = "a";
+      system = builtins.currentSystem;
+      builder = "/bin/sh";
+      args = [ "-c" "touch $out" ];
+      inherit b;
+    };
+
+    b = derivation {
+      name = "b";
+      system = builtins.currentSystem;
+      builder = "/bin/sh";
+      args = [ "-c" "touch $out" ];
+    };
+
+    c = b;
+  };
+
+  packageOverrides = p: {
+    b = derivation (p.b.drvAttrs // { name = "b-overridden"; });
+  };
+
+  pkgs = pkgs_ // (packageOverrides pkgs_);
+in pkgs.a.b.name