diff --git a/runtime/doc/options.txt b/runtime/doc/options.txt
index 75e4f97..e584b3d 100644
--- a/runtime/doc/options.txt
+++ b/runtime/doc/options.txt
@@ -6630,14 +6630,21 @@
 	It is allowed to give an argument to the command, e.g.  "csh -f".
 	See |option-backslash| about including spaces and backslashes.
 	Environment variables are expanded |:set_env|.
+
 	If the name of the shell contains a space, you might need to enclose
-	it in quotes.  Example: >
+	it in quotes or escape the space.  Example with quotes: >
 		:set shell=\"c:\program\ files\unix\sh.exe\"\ -f
 <	Note the backslash before each quote (to avoid starting a comment) and
 	each space (to avoid ending the option value).  Also note that the
 	"-f" is not inside the quotes, because it is not part of the command
-	name.  And Vim automagically recognizes the backslashes that are path
+	name.  Vim automagically recognizes the backslashes that are path
 	separators.
+	Example with escaped space (Vim will do this when initializing the
+	option from $SHELL): >
+		:set shell=/bin/with\\\ space/sh
+<	The resulting value of 'shell' is  "/bin/with\ space/sh", two
+	backslashes are consumed by `:set`.
+
 	Under MS-Windows, when the executable ends in ".com" it must be
 	included.  Thus setting the shell to "command.com" or "4dos.com"
 	works, but "command" and "4dos" do not work for all commands (e.g.,
diff --git a/src/option.c b/src/option.c
index ce54369..4898e69 100644
--- a/src/option.c
+++ b/src/option.c
@@ -3265,6 +3265,7 @@
 
 static void set_option_default(int, int opt_flags, int compatible);
 static void set_options_default(int opt_flags);
+static void set_string_default_esc(char *name, char_u *val, int escape);
 static char_u *term_bg_default(void);
 static void did_set_option(int opt_idx, int opt_flags, int new_value);
 static char_u *illegal_char(char_u *, int);
@@ -3371,7 +3372,7 @@
 # endif
 #endif
 	    )
-	set_string_default("sh", p);
+	set_string_default_esc("sh", p, TRUE);
 
 #ifdef FEAT_WILDIGN
     /*
@@ -3859,14 +3860,18 @@
 /*
  * Set the Vi-default value of a string option.
  * Used for 'sh', 'backupskip' and 'term'.
+ * When "escape" is TRUE escape spaces with a backslash.
  */
-    void
-set_string_default(char *name, char_u *val)
+    static void
+set_string_default_esc(char *name, char_u *val, int escape)
 {
     char_u	*p;
     int		opt_idx;
 
-    p = vim_strsave(val);
+    if (escape && vim_strchr(val, ' ') != NULL)
+	p = vim_strsave_escaped(val, (char_u *)" ");
+    else
+	p = vim_strsave(val);
     if (p != NULL)		/* we don't want a NULL */
     {
 	opt_idx = findoption((char_u *)name);
@@ -3880,6 +3885,12 @@
     }
 }
 
+    void
+set_string_default(char *name, char_u *val)
+{
+    set_string_default_esc(name, val, FALSE);
+}
+
 /*
  * Set the Vi-default value of a number option.
  * Used for 'lines' and 'columns'.
diff --git a/src/testdir/test_startup.vim b/src/testdir/test_startup.vim
index 6f67bfc..42e4896 100644
--- a/src/testdir/test_startup.vim
+++ b/src/testdir/test_startup.vim
@@ -226,6 +226,20 @@
   call delete('Xtestout')
 endfunc
 
+func Test_set_shell()
+  let after = [
+	\ 'call writefile([&shell], "Xtestout")',
+	\ 'quit!',
+	\ ]
+  let $SHELL = '/bin/with space/sh'
+  if RunVimPiped([], after, '', '')
+    let lines = readfile('Xtestout')
+    " MS-Windows adds a space after the word
+    call assert_equal('/bin/with\ space/sh', lines[0])
+  endif
+  call delete('Xtestout')
+endfunc
+
 func Test_progpath()
   " Tests normally run with "./vim" or "../vim", these must have been expanded
   " to a full path.
diff --git a/src/version.c b/src/version.c
index 5704074..69ba3f5 100644
--- a/src/version.c
+++ b/src/version.c
@@ -772,6 +772,8 @@
 static int included_patches[] =
 {   /* Add new patch number below this line */
 /**/
+    1455,
+/**/
     1454,
 /**/
     1453,