diff --git a/NEWS b/NEWS
index 16c67059..4d635820 100644
--- a/NEWS
+++ b/NEWS
@@ -36,7 +36,8 @@ https://sv.gnu.org/bugs/index.php?group=make&report_id=111&fix_release_id=109&se
 * WARNING: Backward-incompatibility!
   Previously makefile variables marked as export were not exported to commands
   started by the $(shell ...) function.  Now, all exported variables are
-  exported to $(shell ...).
+  exported to $(shell ...).  If this leads to recursion during expansion, then
+  for backward-compatibility the value from the original environment is used.
   To detect this change search for 'shell-export' in the .FEATURES variable.
 
 * WARNING: New build requirement
diff --git a/doc/make.texi b/doc/make.texi
index 6fb8bb8c..1598ef65 100644
--- a/doc/make.texi
+++ b/doc/make.texi
@@ -8629,21 +8629,25 @@ The @code{shell} function is unlike any other function other than the
 (@pxref{Wildcard Function, ,The Function @code{wildcard}}) in that it
 communicates with the world outside of @code{make}.
 
-The @code{shell} function performs the same function that backquotes
-(@samp{`}) perform in most shells: it does @dfn{command expansion}.
-This means that it takes as an argument a shell command and evaluates
-to the output of the command.  The only processing @code{make} does on
-the result is to convert each newline (or carriage-return / newline
-pair) to a single space.  If there is a trailing (carriage-return
-and) newline it will simply be removed.@refill
+The @code{shell} function provides for @code{make} the same facility that
+backquotes (@samp{`}) provide in most shells: it does @dfn{command expansion}.
+This means that it takes as an argument a shell command and expands to the
+output of the command.  The only processing @code{make} does on the result is
+to convert each newline (or carriage-return / newline pair) to a single space.
+If there is a trailing (carriage-return and) newline it will simply be
+removed.
 
 The commands run by calls to the @code{shell} function are run when the
-function calls are expanded (@pxref{Reading Makefiles, , How
-@code{make} Reads a Makefile}).  Because this function involves
-spawning a new shell, you should carefully consider the performance
-implications of using the @code{shell} function within recursively
-expanded variables vs.@: simply expanded variables (@pxref{Flavors, ,The
-Two Flavors of Variables}).
+function calls are expanded (@pxref{Reading Makefiles, , How @code{make} Reads
+a Makefile}).  Because this function involves spawning a new shell, you should
+carefully consider the performance implications of using the @code{shell}
+function within recursively expanded variables vs.@: simply expanded variables
+(@pxref{Flavors, ,The Two Flavors of Variables}).
+
+An alternative to the @code{shell} function is the @samp{!=} assignment
+operator; it provides a similar behavior but has subtle differences
+(@pxref{Setting, , Setting Variables}).  The @samp{!=} assignment operator is
+included in newer POSIX standards.
 
 @vindex .SHELLSTATUS
 After the @code{shell} function or @samp{!=} assignment operator is
@@ -8682,9 +8686,17 @@ When @code{make} wants to run the recipe it must add the variable @var{HI} to
 the environment; to do so it must be expanded.  The value of this variable
 requires an invocation of the @code{shell} function, and to invoke it we must
 create its environment.  Since @var{HI} is exported, we need to expand it to
-create its environment.  And so on.  In this obscure case @code{make} will not
-add recursively-expanded variables to the @code{shell} environment rather than
-fail with an error.
+create its environment.  And so on.  In this obscure case @code{make} will use
+the value of the variable from the environment provided to @code{make}, or
+else the empty string if there was none, rather than looping or issuing an
+error.  This is often what you want; for example:
+
+@example
+export PATH = $(shell echo /usr/local/bin:$$PATH)
+@end example
+
+However, it would be simpler and more efficient to use a simply-expanded
+variable here (@samp{:=}) in the first place.
 
 @node Guile Function,  , Shell Function, Functions
 @section The @code{guile} Function
diff --git a/src/expand.c b/src/expand.c
index 2acb32c5..95e66ec6 100644
--- a/src/expand.c
+++ b/src/expand.c
@@ -103,12 +103,25 @@ recursively_expand_for_file (struct variable *v, struct file *file)
   int set_reading = 0;
 
   /* If we're expanding to put into the environment of a shell function then
-     ignore any recursion issues.  */
+     ignore any recursion issues: for backward-compatibility we will use
+     the value of the environment variable we were started with.  */
   if (v->expanding && env_recursion)
     {
+      size_t nl = strlen (v->name);
+      char **ep;
       DB (DB_VERBOSE,
           (_("%s:%lu: not recursively expanding %s to export to shell function\n"),
            v->fileinfo.filenm, v->fileinfo.lineno, v->name));
+
+      /* We could create a hash for the original environment for speed, but a
+         reasonably written makefile shouldn't hit this situation...  */
+      for (ep = environ; *ep != 0; ++ep)
+        if ((*ep)[nl] == '=' && strncmp (*ep, v->name, nl) == 0)
+          return xstrdup ((*ep) + nl + 1);
+
+      /* If there's nothing in the parent environment, use the empty string.
+         This isn't quite correct since the variable should not exist at all,
+         but getting that to work would be involved. */
       return xstrdup ("");
     }
 
diff --git a/tests/scripts/functions/shell b/tests/scripts/functions/shell
index a5bd5ddc..e889b5f7 100644
--- a/tests/scripts/functions/shell
+++ b/tests/scripts/functions/shell
@@ -98,6 +98,22 @@ all:; : $(HI)
 ',
               '',": hi");
 
+$ENV{HI} = 'outer';
+run_make_test('
+export HI = $(shell echo $$HI)
+.PHONY: all
+all:; @echo $$HI
+',
+              '',"outer");
+
+$ENV{HI} = 'outer';
+run_make_test('
+export HI = $(shell echo $$HI)
+.PHONY: all
+all:; : $(HI)
+',
+              '',": outer");
+
 if ($port_type ne 'W32') {
     # Test shell errors in recipes including offset
     # This needs to be ported to Windows, or else Windows error messages