diff --git a/bin/stow.in b/bin/stow.in
index 024b152..5e4da93 100755
--- a/bin/stow.in
+++ b/bin/stow.in
@@ -460,6 +460,7 @@ require 5.006_001;
 use POSIX qw(getcwd);
 use Getopt::Long qw(GetOptionsFromArray);
 use Scalar::Util qw(reftype);
+use Text::ParseWords qw(shellwords);
 
 @USE_LIB_PMDIR@
 use Stow;
@@ -581,19 +582,19 @@ sub parse_options {
         'ignore=s' =>
         sub {
             my $regex = $_[1];
-            push @{$options{ignore}}, qr($regex\z);
+            push @{$options{ignore}}, qr{($regex)\z};
         },
 
         'override=s' =>
         sub {
             my $regex = $_[1];
-            push @{$options{override}}, qr(\A$regex);
+            push @{$options{override}}, qr{\A($regex)};
         },
 
         'defer=s' =>
         sub {
             my $regex = $_[1];
-            push @{$options{defer}}, qr(\A$regex);
+            push @{$options{defer}}, qr{\A($regex)};
         },
 
         # a little craziness so we can do different actions on the same line:
@@ -683,7 +684,7 @@ sub get_config_file_options {
                 or die "Could not open $file for reading\n";
             while (my $line = <$FILE>){
                 chomp $line;
-                push @defaults, split " ", $line;
+                push @defaults, shellwords($line);
             }
             close $FILE or die "Could not close open file: $file\n";
         }
diff --git a/doc/stow.texi b/doc/stow.texi
index a875308..6eba53e 100644
--- a/doc/stow.texi
+++ b/doc/stow.texi
@@ -1016,7 +1016,11 @@ For options that take a file path, environment variables and the tilde
 character (@command{~}) are expanded. An environment variable can be
 given in either the @command{$VAR} or @command{$@{VAR@}} form. To
 prevent expansion, escape the @command{$} or @command{~} with a
-backslash.
+backslash.  Since these values are first subject to standard shell
+quoting rules, if you want special characters such as @command{\b} or
+@command{$} to be treated as regular expression assertions then they
+will need extra escaping, i.e. @command{\\b} and @command{\\\$}
+respectively.
 
 The options @command{-D}, @command{-S}, and @command{-R} are ignored in
 resource files. This is also true of any package names given in the
diff --git a/t/cli_options.t b/t/cli_options.t
index 8b73bf5..7c8a253 100755
--- a/t/cli_options.t
+++ b/t/cli_options.t
@@ -73,7 +73,7 @@ local @ARGV = (
     'dummy'
 );
 ($options, $pkgs_to_delete, $pkgs_to_stow) = process_options();
-is_deeply($options->{defer}, [ qr(\Aman), qr(\Ainfo) ] => 'defer man and info');
+is_deeply($options->{defer}, [ qr{\A(man)}, qr{\A(info)} ] => 'defer man and info');
 
 #
 # Check setting override paths
@@ -84,7 +84,7 @@ local @ARGV = (
     'dummy'
 );
 ($options, $pkgs_to_delete, $pkgs_to_stow) = process_options();
-is_deeply($options->{override}, [qr(\Aman), qr(\Ainfo)] => 'override man and info');
+is_deeply($options->{override}, [qr{\A(man)}, qr{\A(info)}] => 'override man and info');
 
 #
 # Check setting ignored paths
@@ -95,7 +95,7 @@ local @ARGV = (
     'dummy'
 );
 ($options, $pkgs_to_delete, $pkgs_to_stow) = process_options();
-is_deeply($options->{ignore}, [ qr(~\z), qr(\.#.*\z) ] => 'ignore temp files');
+is_deeply($options->{ignore}, [ qr{(~)\z}, qr{(\.#.*)\z} ] => 'ignore temp files');
 
 #
 # Check that expansion not applied.
diff --git a/t/rc_options.t b/t/rc_options.t
index cbbbee2..ef00ead 100755
--- a/t/rc_options.t
+++ b/t/rc_options.t
@@ -22,7 +22,7 @@
 use strict;
 use warnings;
 
-use Test::More tests => 34;
+use Test::More tests => 35;
 
 use testutil;
 
@@ -102,7 +102,7 @@ HERE
 
 ($options, $pkgs_to_delete, $pkgs_to_stow) = process_options();
 is($options->{target},  "../target", "--target from \$HOME/.stowrc");
-is($options->{dir}, "../stow", "-d from \$HOME/.stowrc");
+is($options->{dir}, "../stow", "-d ../stow from \$HOME/.stowrc");
 
 #
 # Test ~/.stowrc file with one absolute option per line.
@@ -117,7 +117,20 @@ HERE
 is($options->{target},  "$ABS_TEST_DIR/target"
    => "--target from \$HOME/.stowrc");
 is($options->{dir}, "$ABS_TEST_DIR/stow"
-   => "-d from \$HOME/.stowrc");
+   => "-d $ABS_TEST_DIR/stow from \$HOME/.stowrc");
+
+#
+# Test ~/.stowrc file with with options with paths containing spaces.
+#
+local @ARGV = ('dummy');
+make_file($HOME_RC_FILE, <<HERE);
+    -d "$ABS_TEST_DIR/stow directory"
+    --target "$ABS_TEST_DIR/target"
+HERE
+
+($options, $pkgs_to_delete, $pkgs_to_stow) = process_options();
+is($options->{dir},  "$ABS_TEST_DIR/stow directory",
+   => "-d from \$HOME/.stowrc with spaces");
 
 #
 # Test that some but not all options ~/.stowrc file are overridden by
@@ -140,7 +153,7 @@ is($options->{target},  "$ABS_TEST_DIR/target"
    => "--target overridden by \$PWD/.stowrc");
 is($options->{dir}, "$ABS_TEST_DIR/stow"
    => "-d overridden \$PWD/.stowrc");
-is_deeply($options->{defer}, [qr(\Ainfo), qr(\Aman)],
+is_deeply($options->{defer}, [qr{\A(info)}, qr{\A(man)}],
           'defer man and info');
 unlink($CWD_RC_FILE) or die "Failed to unlink $CWD_RC_FILE";
 
@@ -166,7 +179,7 @@ make_file($HOME_RC_FILE, <<HERE);
     --defer=info
 HERE
 ($options, $pkgs_to_delete, $pkgs_to_stow) = process_options();
-is_deeply($options->{defer}, [qr(\Ainfo), qr(\Aman)],
+is_deeply($options->{defer}, [qr{\A(info)}, qr{\A(man)}],
           'defer man and info');
 
 # ======== Filepath Expansion Tests ========
@@ -215,26 +228,32 @@ is(expand_tilde('/path/~/here'), '/path/~/here', 'middle ~ not expanded');
 is(expand_tilde('\~/path'), '~/path', 'escaped tilde');
 
 #
-# Test that environment variable expansion is applied.
+# Test that environment variable expansion is applied unless quoted.
+# Include examples from the manual
 #
 make_file($HOME_RC_FILE, <<'HERE');
 --dir=$HOME/stow
---target=$HOME/stow
---ignore=\$HOME
---defer=\$HOME
---override=\$HOME
+--target="$HOME/dir with space in/file with space in"
+--ignore=\\$FOO\\$
+--defer="foo\\b.*bar"
+--defer="\\.jpg\$"
+--override=\\.png\$
+--override=bin|man
+--ignore='perllocal\.pod'
+--ignore='\.packlist'
+--ignore='\.bs'
 HERE
 ($options, $pkgs_to_delete, $pkgs_to_stow) = get_config_file_options();
 is($options->{dir}, "$ABS_TEST_DIR/stow",
-    "apply environment expansion on \$HOME/.stowrc --dir");
-is($options->{target}, "$ABS_TEST_DIR/stow",
-    "apply environment expansion on \$HOME/.stowrc --target");
-is_deeply($options->{ignore}, [qr(\$HOME\z)],
-    "environment expansion not applied on --ignore");
-is_deeply($options->{defer}, [qr(\A\$HOME)],
-    "environment expansion not applied on --defer");
-is_deeply($options->{override}, [qr(\A\$HOME)],
-    "environment expansion not applied on --override");
+    "apply environment expansion on --dir");
+is($options->{target}, "$ABS_TEST_DIR/dir with space in/file with space in",
+    "apply environment expansion on --target");
+is_deeply($options->{ignore}, [qr{(\$FOO\$)\z}, qr{(perllocal\.pod)\z}, qr{(\.packlist)\z}, qr{(\.bs)\z}],
+    'environment expansion not applied on --ignore but backslash removed');
+is_deeply($options->{defer}, [qr{\A(foo\b.*bar)}, qr{\A(\.jpg$)}],
+    'environment expansion not applied on --defer but backslash removed');
+is_deeply($options->{override}, [qr{\A(\.png$)}, qr{\A(bin|man)}],
+    'environment expansion not applied on --override but backslash removed');
 
 #
 # Test that tilde expansion is applied in correct places.
@@ -251,11 +270,11 @@ is($options->{dir}, "$ABS_TEST_DIR/stow",
     "apply tilde expansion on \$HOME/.stowrc --dir");
 is($options->{target}, "$ABS_TEST_DIR/stow",
     "apply tilde expansion on \$HOME/.stowrc --target");
-is_deeply($options->{ignore}, [qr(~/stow\z)],
+is_deeply($options->{ignore}, [qr{(~/stow)\z}],
     "tilde expansion not applied on --ignore");
-is_deeply($options->{defer}, [qr(\A~/stow)],
+is_deeply($options->{defer}, [qr{\A(~/stow)}],
     "tilde expansion not applied on --defer");
-is_deeply($options->{override}, [qr(\A~/stow)],
+is_deeply($options->{override}, [qr{\A(~/stow)}],
     "tilde expansion not applied on --override");
 
 #
@@ -263,4 +282,3 @@ is_deeply($options->{override}, [qr(\A~/stow)],
 #
 unlink $HOME_RC_FILE or die "Unable to clean up $HOME_RC_FILE.\n";
 remove_dir($ABS_TEST_DIR);
-
diff --git a/t/testutil.pm b/t/testutil.pm
index 2b4e097..9fb9862 100755
--- a/t/testutil.pm
+++ b/t/testutil.pm
@@ -56,7 +56,7 @@ sub init_test_dirs {
     # Create a run_from/ subdirectory for tests which want to run
     # from a separate directory outside the Stow directory or
     # target directory.
-    for my $dir ("target", "stow", "run_from") {
+    for my $dir ("target", "stow", "run_from", "stow directory") {
         my $path = "$test_dir/$dir";
         -d $path and remove_tree($path);
         make_path($path);