diff --git a/pkgs/development/python-modules/setuptools/default.nix b/pkgs/development/python-modules/setuptools/default.nix
index e0c3e7837b4c..f585d758c2d5 100644
--- a/pkgs/development/python-modules/setuptools/default.nix
+++ b/pkgs/development/python-modules/setuptools/default.nix
@@ -1,4 +1,4 @@
-{ stdenv, fetchurl, python, wrapPython }:
+{ stdenv, fetchurl, python, wrapPython, distutils-cfg }:
 
 stdenv.mkDerivation rec {
   shortName = "setuptools-${version}";
@@ -11,9 +11,12 @@ stdenv.mkDerivation rec {
     sha256 = "09nv5x45y8fgc0kjmmw4gig3hr0is9xlc5rq053vnbmkxr5q5xmi";
   };
 
-  buildInputs = [ python wrapPython ];
+  # see https://bitbucket.org/pypa/setuptools/commits/976b839801a3a181f2e14f305ddbe0b410fa8fc0.patch
+  patches = [ ./fix_python3_egg_fetcher.patch ];
 
-  buildPhase = "${python}/bin/${python.executable} setup.py build --build-base $out";
+  buildInputs = [ python wrapPython distutils-cfg ];
+
+  buildPhase = "${python}/bin/${python.executable} setup.py build";
 
   installPhase =
     ''
diff --git a/pkgs/development/python-modules/setuptools/fix_python3_egg_fetcher.patch b/pkgs/development/python-modules/setuptools/fix_python3_egg_fetcher.patch
new file mode 100644
index 000000000000..17ab473a5022
--- /dev/null
+++ b/pkgs/development/python-modules/setuptools/fix_python3_egg_fetcher.patch
@@ -0,0 +1,28 @@
+diff --git a/CHANGES.txt b/CHANGES.txt
+--- a/CHANGES.txt
++++ b/CHANGES.txt
+@@ -3,6 +3,12 @@
+ =======
+ 
+ -----
++2.0.3
++-----
++
++* Issue #131: Fix RuntimeError when constructing an egg fetcher.
++
++-----
+ 2.0.2
+ -----
+ 
+diff --git a/setuptools/dist.py b/setuptools/dist.py
+--- a/setuptools/dist.py
++++ b/setuptools/dist.py
+@@ -295,7 +295,7 @@
+                 'find_links', 'site_dirs', 'index_url', 'optimize',
+                 'site_dirs', 'allow_hosts'
+             )
+-            for key in opts.keys():
++            for key in list(opts):
+                 if key not in keep:
+                     del opts[key]   # don't use any other settings
+             if self.dependency_links: