diff --git a/package.json b/package.json
index 3e44182..f231759 100644
--- a/package.json
+++ b/package.json
@@ -18,7 +18,7 @@
     "babel-core": "^6.21.0",
     "babel-preset-es2015": "^6.18.0",
     "chai": "^3.5.0",
-    "coveralls": "^2.11.15",
+    "coveralls": "^2.11.16",
     "cross-env": "^3.1.4",
     "mocha": "^3.2.0",
     "nyc": "^10.0.0",
diff --git a/src/index.js b/src/index.js
index 4ce06f2..efa65b5 100644
--- a/src/index.js
+++ b/src/index.js
@@ -18,12 +18,30 @@ function makeShouldSkip () {
   return function shouldSkip (file, opts) {
     if (!exclude) {
       const cwd = getRealpath(process.env.NYC_CWD || process.cwd())
-      exclude = testExclude(Object.assign(
-        { cwd },
-        Object.keys(opts).length > 0 ? opts : {
+      const nycConfig = process.env.NYC_CONFIG ? JSON.parse(process.env.NYC_CONFIG) : {}
+
+      let config = {}
+      if (Object.keys(opts).length > 0) {
+        // explicitly configuring options in babel
+        // takes precendence.
+        config = opts
+      } else if (nycConfig.include || nycConfig.exclude) {
+        // nyc was configured in a parent process (keep these settings).
+        config = {
+          include: nycConfig.include,
+          exclude: nycConfig.exclude
+        }
+      } else {
+        // fallback to loading config from key in package.json.
+        config = {
           configKey: 'nyc',
           configPath: dirname(findUp.sync('package.json', { cwd }))
         }
+      }
+
+      exclude = testExclude(Object.assign(
+        { cwd },
+        config
       ))
     }
 
diff --git a/test/babel-plugin-istanbul.js b/test/babel-plugin-istanbul.js
index 91408e3..b5e59a5 100644
--- a/test/babel-plugin-istanbul.js
+++ b/test/babel-plugin-istanbul.js
@@ -68,22 +68,52 @@ describe('babel-plugin-istanbul', function () {
   })
 
   context('package.json "nyc" config', function () {
-    it('should instrument file if shouldSkip returns false', function () {
-      var result = babel.transformFileSync('./fixtures/should-cover.js', {
-        plugins: [
-          makeVisitor({types: babel.types})
-        ]
+    context('process.env.NYC_CONFIG is set', function () {
+      it('should instrument file if shouldSkip returns false', function () {
+        var result = babel.transformFileSync('./fixtures/should-cover.js', {
+          plugins: [
+            makeVisitor({types: babel.types})
+          ]
+        })
+        result.code.should.match(/statementMap/)
+      })
+
+      it('should not instrument file if shouldSkip returns true', function () {
+        var result = babel.transformFileSync('./fixtures/should-not-cover.js', {
+          plugins: [
+            makeVisitor({types: babel.types})
+          ]
+        })
+        result.code.should.not.match(/statementMap/)
       })
-      result.code.should.match(/statementMap/)
     })
 
-    it('should not instrument file if shouldSkip returns true', function () {
-      var result = babel.transformFileSync('./fixtures/should-not-cover.js', {
-        plugins: [
-          makeVisitor({types: babel.types})
-        ]
+    context('process.env.NYC_CONFIG is not set', function () {
+      const OLD_NYC_CONFIG = process.env.NYC_CONFIG
+      before(() => {
+        delete process.env.NYC_CONFIG
+      })
+      after(() => {
+        process.env.NYC_CONFIG = OLD_NYC_CONFIG
+      })
+
+      it('should instrument file if shouldSkip returns false', function () {
+        var result = babel.transformFileSync('./fixtures/should-cover.js', {
+          plugins: [
+            makeVisitor({types: babel.types})
+          ]
+        })
+        result.code.should.match(/statementMap/)
+      })
+
+      it('should not instrument file if shouldSkip returns true', function () {
+        var result = babel.transformFileSync('./fixtures/should-not-cover.js', {
+          plugins: [
+            makeVisitor({types: babel.types})
+          ]
+        })
+        result.code.should.not.match(/statementMap/)
       })
-      result.code.should.not.match(/statementMap/)
     })
   })