diff --git a/gunicorn/arbiter.py b/gunicorn/arbiter.py
index 982b5312..7c5a1e52 100644
--- a/gunicorn/arbiter.py
+++ b/gunicorn/arbiter.py
@@ -106,6 +106,11 @@ class Arbiter(object):
                 in sorted(self.cfg.settings.items(),
                           key=lambda setting: setting[1]))))
 
+        # set enviroment' variables
+        if self.cfg.env:
+            for k, v in self.cfg.env.items():
+                os.environ[k] = v
+
         if self.cfg.preload_app:
             self.app.wsgi()
 
@@ -121,11 +126,6 @@ class Arbiter(object):
             self.pidfile.create(self.pid)
         self.cfg.on_starting(self)
 
-        # set enviroment' variables
-        if self.cfg.env:
-            for k, v in self.cfg.env.items():
-                os.environ[k] = v
-
         self.init_signals()
         if not self.LISTENERS:
             self.LISTENERS = create_sockets(self.cfg, self.log)
diff --git a/tests/test_008-arbiter-env.py b/tests/test_008-arbiter-env.py
new file mode 100644
index 00000000..880824d4
--- /dev/null
+++ b/tests/test_008-arbiter-env.py
@@ -0,0 +1,57 @@
+# -*- coding: utf-8 -
+#
+# This file is part of gunicorn released under the MIT license.
+# See the NOTICE for more information.
+
+import t
+import os
+from gunicorn.app.base import BaseApplication
+import gunicorn.arbiter
+
+
+class PreloadedAppWithEnvSettings(BaseApplication):
+    """
+    Simple application that makes use of the 'preload' feature to
+    start the application before spawning worker processes and sets
+    environmental variable configuration settings.
+    """
+
+    def init(self, parser, opts, args):
+        """No-op"""
+        pass
+
+    def load(self):
+        """No-op"""
+        pass
+
+    def load_config(self):
+        """Set the 'preload_app' and 'raw_env' settings in order to verify their
+        interaction below.
+        """
+        self.cfg.set('raw_env', [
+            'SOME_PATH=/tmp/something', 'OTHER_PATH=/tmp/something/else'])
+        self.cfg.set('preload_app', True)
+
+    def wsgi(self):
+        """Assert that the expected environmental variables are set when
+        the main entry point of this application is called as part of a
+        'preloaded' application.
+        """
+        verify_env_vars()
+        return super(PreloadedAppWithEnvSettings, self).wsgi()
+
+
+def verify_env_vars():
+    t.eq(os.getenv('SOME_PATH'), '/tmp/something')
+    t.eq(os.getenv('OTHER_PATH'), '/tmp/something/else')
+
+
+def test_env_vars_available_during_preload():
+    """Ensure that configured environmental variables are set during the
+    initial set up of the application (called from the .setup() method of
+    the Arbiter) such that they are available during the initial loading
+    of the WSGI application.
+    """
+    # Note that we aren't making any assertions here, they are made in the
+    # dummy application object being loaded here instead.
+    gunicorn.arbiter.Arbiter(PreloadedAppWithEnvSettings())