diff --git a/repo2docker/buildpacks/base.py b/repo2docker/buildpacks/base.py
index 0bb9703bb..140a1d331 100644
--- a/repo2docker/buildpacks/base.py
+++ b/repo2docker/buildpacks/base.py
@@ -132,6 +132,11 @@
 {% endfor -%}
 {% endif -%}
 
+{% if preassemble_script_directives -%}
+USER root
+RUN chown -R ${NB_USER}:${NB_USER} ${REPO_DIR}
+{% endif -%}
+
 {% for sd in preassemble_script_directives -%}
 {{ sd }}
 {% endfor %}
@@ -711,12 +716,8 @@ def get_preassemble_scripts(self):
         except FileNotFoundError:
             pass
 
-        return scripts
-
-    def get_assemble_scripts(self):
-        assemble_scripts = []
         if "py" in self.stencila_contexts:
-            assemble_scripts.extend(
+            scripts.extend(
                 [
                     (
                         "${NB_USER}",
@@ -728,7 +729,7 @@ def get_assemble_scripts(self):
                 ]
             )
         if self.stencila_manifest_dir:
-            assemble_scripts.extend(
+            scripts.extend(
                 [
                     (
                         "${NB_USER}",
@@ -741,7 +742,11 @@ def get_assemble_scripts(self):
                     )
                 ]
             )
-        return assemble_scripts
+        return scripts
+
+    def get_assemble_scripts(self):
+        """Return directives to run after the entire repository has been added to the image"""
+        return []
 
     def get_post_build_scripts(self):
         post_build = self.binder_path("postBuild")
diff --git a/repo2docker/buildpacks/conda/__init__.py b/repo2docker/buildpacks/conda/__init__.py
index 8e818bc4d..c781f00a0 100644
--- a/repo2docker/buildpacks/conda/__init__.py
+++ b/repo2docker/buildpacks/conda/__init__.py
@@ -6,6 +6,7 @@
 from ruamel.yaml import YAML
 
 from ..base import BaseImage
+from ...utils import is_local_pip_requirement
 
 # pattern for parsing conda dependency line
 PYTHON_REGEX = re.compile(r"python\s*=+\s*([\d\.]*)")
@@ -127,6 +128,50 @@ def get_build_script_files(self):
         files.update(super().get_build_script_files())
         return files
 
+    _environment_yaml = None
+
+    @property
+    def environment_yaml(self):
+        if self._environment_yaml is not None:
+            return self._environment_yaml
+
+        environment_yml = self.binder_path("environment.yml")
+        if not os.path.exists(environment_yml):
+            self._environment_yaml = {}
+            return self._environment_yaml
+
+        with open(environment_yml) as f:
+            env = YAML().load(f)
+            # check if the env file is empty, if so instantiate an empty dictionary.
+            if env is None:
+                env = {}
+            # check if the env file provided a dict-like thing not a list or other data structure.
+            if not isinstance(env, Mapping):
+                raise TypeError(
+                    "environment.yml should contain a dictionary. Got %r" % type(env)
+                )
+            self._environment_yaml = env
+
+        return self._environment_yaml
+
+    @property
+    def _should_preassemble_env(self):
+        """Check for local pip requirements in environment.yaml
+
+        If there are any local references, e.g. `-e .`,
+        stage the whole repo prior to installation.
+        """
+        dependencies = self.environment_yaml.get("dependencies", [])
+        pip_requirements = None
+        for dep in dependencies:
+            if isinstance(dep, dict) and dep.get("pip"):
+                pip_requirements = dep["pip"]
+        if isinstance(pip_requirements, list):
+            for line in pip_requirements:
+                if is_local_pip_requirement(line):
+                    return False
+        return True
+
     @property
     def python_version(self):
         """Detect the Python version for a given `environment.yml`
@@ -135,31 +180,17 @@ def python_version(self):
         or a Falsy empty string '' if not found.
 
         """
-        environment_yml = self.binder_path("environment.yml")
-        if not os.path.exists(environment_yml):
-            return ""
-
         if not hasattr(self, "_python_version"):
             py_version = None
-            with open(environment_yml) as f:
-                env = YAML().load(f)
-                # check if the env file is empty, if so instantiate an empty dictionary.
-                if env is None:
-                    env = {}
-                # check if the env file provided a dick-like thing not a list or other data structure.
-                if not isinstance(env, Mapping):
-                    raise TypeError(
-                        "environment.yml should contain a dictionary. Got %r"
-                        % type(env)
-                    )
-                for dep in env.get("dependencies", []):
-                    if not isinstance(dep, str):
-                        continue
-                    match = PYTHON_REGEX.match(dep)
-                    if not match:
-                        continue
-                    py_version = match.group(1)
-                    break
+            env = self.environment_yaml
+            for dep in env.get("dependencies", []):
+                if not isinstance(dep, str):
+                    continue
+                match = PYTHON_REGEX.match(dep)
+                if not match:
+                    continue
+                py_version = match.group(1)
+                break
 
             # extract major.minor
             if py_version:
@@ -178,14 +209,27 @@ def py2(self):
         """Am I building a Python 2 kernel environment?"""
         return self.python_version and self.python_version.split(".")[0] == "2"
 
-    def get_assemble_scripts(self):
+    def get_preassemble_script_files(self):
+        """preassembly only requires environment.yml
+
+        enables caching assembly result even when
+        repo contents change
+        """
+        assemble_files = super().get_preassemble_script_files()
+        if self._should_preassemble_env:
+            environment_yml = self.binder_path("environment.yml")
+            if os.path.exists(environment_yml):
+                assemble_files[environment_yml] = environment_yml
+        return assemble_files
+
+    def get_env_scripts(self):
         """Return series of build-steps specific to this source repository.
         """
-        assembly_scripts = []
+        scripts = []
         environment_yml = self.binder_path("environment.yml")
         env_prefix = "${KERNEL_PYTHON_PREFIX}" if self.py2 else "${NB_PYTHON_PREFIX}"
         if os.path.exists(environment_yml):
-            assembly_scripts.append(
+            scripts.append(
                 (
                     "${NB_USER}",
                     r"""
@@ -197,7 +241,19 @@ def get_assemble_scripts(self):
                     ),
                 )
             )
-        return super().get_assemble_scripts() + assembly_scripts
+        return scripts
+
+    def get_preassemble_scripts(self):
+        scripts = super().get_preassemble_scripts()
+        if self._should_preassemble_env:
+            scripts.extend(self.get_env_scripts())
+        return scripts
+
+    def get_assemble_scripts(self):
+        scripts = super().get_assemble_scripts()
+        if not self._should_preassemble_env:
+            scripts.extend(self.get_env_scripts())
+        return scripts
 
     def detect(self):
         """Check if current repo should be built with the Conda BuildPack.
diff --git a/repo2docker/buildpacks/pipfile/__init__.py b/repo2docker/buildpacks/pipfile/__init__.py
index e91e63aa5..b38db08a8 100644
--- a/repo2docker/buildpacks/pipfile/__init__.py
+++ b/repo2docker/buildpacks/pipfile/__init__.py
@@ -65,6 +65,24 @@ def python_version(self):
             self._python_version = self.major_pythons["3"]
             return self._python_version
 
+    def get_preassemble_script_files(self):
+        """Return files needed for preassembly"""
+        files = super().get_preassemble_script_files()
+        for name in ("requirements3.txt", "Pipfile", "Pipfile.lock"):
+            path = self.binder_path(name)
+            if os.path.exists(path):
+                files[path] = path
+        return files
+
+    def get_preassemble_scripts(self):
+        """scripts to run prior to staging the repo contents"""
+        scripts = super().get_preassemble_scripts()
+        # install pipenv to install dependencies within Pipfile.lock or Pipfile
+        scripts.append(
+            ("${NB_USER}", "${KERNEL_PYTHON_PREFIX}/bin/pip install pipenv==2018.11.26")
+        )
+        return scripts
+
     def get_assemble_scripts(self):
         """Return series of build-steps specific to this repository.
         """
@@ -104,11 +122,6 @@ def get_assemble_scripts(self):
         #     my_package_example = {path=".", editable=true}
         working_directory = self.binder_dir or "."
 
-        # install pipenv to install dependencies within Pipfile.lock or Pipfile
-        assemble_scripts.append(
-            ("${NB_USER}", "${KERNEL_PYTHON_PREFIX}/bin/pip install pipenv==2018.11.26")
-        )
-
         # NOTES:
         # - Without prioritizing the PATH to KERNEL_PYTHON_PREFIX over
         #   NB_SERVER_PYTHON_PREFIX, 'pipenv' draws the wrong conclusion about
diff --git a/repo2docker/buildpacks/python/__init__.py b/repo2docker/buildpacks/python/__init__.py
index 4db5c72d8..72029d78b 100644
--- a/repo2docker/buildpacks/python/__init__.py
+++ b/repo2docker/buildpacks/python/__init__.py
@@ -2,6 +2,7 @@
 import os
 
 from ..conda import CondaBuildPack
+from ...utils import is_local_pip_requirement
 
 
 class PythonBuildPack(CondaBuildPack):
@@ -34,24 +35,22 @@ def python_version(self):
         self._python_version = py_version
         return self._python_version
 
-    def get_assemble_scripts(self):
-        """Return series of build-steps specific to this repository.
+    def _get_pip_scripts(self):
+        """Get pip install scripts
+
+        added to preassemble unless local references are found,
+        in which case this happens in assemble.
         """
-        # If we have a runtime.txt & that's set to python-2.7,
-        # requirements.txt will be installed in the *kernel* env
-        # and requirements3.txt (if it exists)
-        # will be installed in the python 3 notebook server env.
-        assemble_scripts = super().get_assemble_scripts()
-        setup_py = "setup.py"
         # KERNEL_PYTHON_PREFIX is the env with the kernel,
         # whether it's distinct from the notebook or the same.
         pip = "${KERNEL_PYTHON_PREFIX}/bin/pip"
+        scripts = []
         if self.py2:
             # using python 2 kernel,
             # requirements3.txt allows installation in the notebook server env
             nb_requirements_file = self.binder_path("requirements3.txt")
             if os.path.exists(nb_requirements_file):
-                assemble_scripts.append(
+                scripts.append(
                     (
                         "${NB_USER}",
                         # want the $NB_PYHTON_PREFIX environment variable, not for
@@ -65,12 +64,65 @@ def get_assemble_scripts(self):
         # install requirements.txt in the kernel env
         requirements_file = self.binder_path("requirements.txt")
         if os.path.exists(requirements_file):
-            assemble_scripts.append(
+            scripts.append(
                 (
                     "${NB_USER}",
                     '{} install --no-cache-dir -r "{}"'.format(pip, requirements_file),
                 )
             )
+        return scripts
+
+    @property
+    def _should_preassemble_pip(self):
+        """Peek in requirements.txt to determine if we can assemble from only env files
+
+        If there are any local references, e.g. `-e .`,
+        stage the whole repo prior to installation.
+        """
+        if not os.path.exists("binder") and os.path.exists("setup.py"):
+            # can't install from subset if we're using setup.py
+            return False
+        for name in ("requirements.txt", "requirements3.txt"):
+            requirements_txt = self.binder_path(name)
+            if not os.path.exists(requirements_txt):
+                continue
+            with open(requirements_txt) as f:
+                for line in f:
+                    if is_local_pip_requirement(line):
+                        return False
+
+        # didn't find any local references,
+        # allow assembly from subset
+        return True
+
+    def get_preassemble_script_files(self):
+        assemble_files = super().get_preassemble_script_files()
+        for name in ("requirements.txt", "requirements3.txt"):
+            requirements_txt = self.binder_path(name)
+            if os.path.exists(requirements_txt):
+                assemble_files[requirements_txt] = requirements_txt
+        return assemble_files
+
+    def get_preassemble_scripts(self):
+        """Return scripts to run before adding the full repository"""
+        scripts = super().get_preassemble_scripts()
+        if self._should_preassemble_pip:
+            scripts.extend(self._get_pip_scripts())
+        return scripts
+
+    def get_assemble_scripts(self):
+        """Return series of build steps that require the full repository"""
+        # If we have a runtime.txt & that's set to python-2.7,
+        # requirements.txt will be installed in the *kernel* env
+        # and requirements3.txt (if it exists)
+        # will be installed in the python 3 notebook server env.
+        assemble_scripts = super().get_assemble_scripts()
+        setup_py = "setup.py"
+        # KERNEL_PYTHON_PREFIX is the env with the kernel,
+        # whether it's distinct from the notebook or the same.
+        pip = "${KERNEL_PYTHON_PREFIX}/bin/pip"
+        if not self._should_preassemble_pip:
+            assemble_scripts.extend(self._get_pip_scripts())
 
         # setup.py exists *and* binder dir is not used
         if not self.binder_dir and os.path.exists(setup_py):
diff --git a/repo2docker/utils.py b/repo2docker/utils.py
index a53ba5ef1..1c0a43341 100644
--- a/repo2docker/utils.py
+++ b/repo2docker/utils.py
@@ -431,3 +431,29 @@ def normalize_doi(val):
     (e.g. https://doi.org/10.1234/jshd123)"""
     m = doi_regexp.match(val)
     return m.group(2)
+
+
+def is_local_pip_requirement(line):
+    """Return whether a pip requirement (e.g. in requirements.txt file) references a local file"""
+    # trim comments and skip empty lines
+    line = line.split("#", 1)[0].strip()
+    if not line:
+        return False
+    if line.startswith(("-r", "-c")):
+        # local -r or -c references break isolation
+        return True
+    # strip off `-e, etc.`
+    if line.startswith("-"):
+        line = line.split(None, 1)[1]
+    if "file://" in line:
+        # file references break isolation
+        return True
+    if "://" in line:
+        # handle git://../local/file
+        path = line.split("://", 1)[1]
+    else:
+        path = line
+    if path.startswith("."):
+        # references a local file
+        return True
+    return False
diff --git a/tests/unit/test_utils.py b/tests/unit/test_utils.py
index 6ad1ff281..951f2085d 100644
--- a/tests/unit/test_utils.py
+++ b/tests/unit/test_utils.py
@@ -110,3 +110,20 @@ def test_normalize_doi():
     assert utils.normalize_doi("http://doi.org/10.1234/jshd123") == "10.1234/jshd123"
     assert utils.normalize_doi("https://doi.org/10.1234/jshd123") == "10.1234/jshd123"
     assert utils.normalize_doi("http://dx.doi.org/10.1234/jshd123") == "10.1234/jshd123"
+
+
+@pytest.mark.parametrize(
+    "req, is_local",
+    [
+        ("-r requirements.txt", True),
+        ("-e .", True),
+        ("file://subdir", True),
+        ("file://./subdir", True),
+        ("git://github.com/jupyter/repo2docker", False),
+        ("git+https://github.com/jupyter/repo2docker", False),
+        ("numpy", False),
+        ("# -e .", False),
+    ],
+)
+def test_local_pip_requirement(req, is_local):
+    assert utils.is_local_pip_requirement(req) == is_local