diff --git a/bin/pyspark b/bin/pyspark
index 5142411e36974b430b3cc73554a1763edc391ddf..6655725ef8e8e6dfc04c3de08c35e99acbdf931a 100755
--- a/bin/pyspark
+++ b/bin/pyspark
@@ -52,10 +52,20 @@ fi
 
 # Figure out which Python executable to use
 if [[ -z "$PYSPARK_PYTHON" ]]; then
-  PYSPARK_PYTHON="python"
+  if [[ "$IPYTHON" = "1" || -n "$IPYTHON_OPTS" ]]; then
+    # for backward compatibility
+    PYSPARK_PYTHON="ipython"
+  else
+    PYSPARK_PYTHON="python"
+  fi
 fi
 export PYSPARK_PYTHON
 
+if [[ -z "$PYSPARK_PYTHON_OPTS" && -n "$IPYTHON_OPTS" ]]; then
+  # for backward compatibility
+  PYSPARK_PYTHON_OPTS="$IPYTHON_OPTS"
+fi
+
 # Add the PySpark classes to the Python path:
 export PYTHONPATH="$SPARK_HOME/python/:$PYTHONPATH"
 export PYTHONPATH="$SPARK_HOME/python/lib/py4j-0.8.2.1-src.zip:$PYTHONPATH"
@@ -64,11 +74,6 @@ export PYTHONPATH="$SPARK_HOME/python/lib/py4j-0.8.2.1-src.zip:$PYTHONPATH"
 export OLD_PYTHONSTARTUP="$PYTHONSTARTUP"
 export PYTHONSTARTUP="$FWDIR/python/pyspark/shell.py"
 
-# If IPython options are specified, assume user wants to run IPython
-if [[ -n "$IPYTHON_OPTS" ]]; then
-  IPYTHON=1
-fi
-
 # Build up arguments list manually to preserve quotes and backslashes.
 # We export Spark submit arguments as an environment variable because shell.py must run as a
 # PYTHONSTARTUP script, which does not take in arguments. This is required for IPython notebooks.
@@ -106,10 +111,5 @@ if [[ "$1" =~ \.py$ ]]; then
 else
   # PySpark shell requires special handling downstream
   export PYSPARK_SHELL=1
-  # Only use ipython if no command line arguments were provided [SPARK-1134]
-  if [[ "$IPYTHON" = "1" ]]; then
-    exec ${PYSPARK_PYTHON:-ipython} $IPYTHON_OPTS
-  else
-    exec "$PYSPARK_PYTHON"
-  fi
+  exec "$PYSPARK_PYTHON" $PYSPARK_PYTHON_OPTS
 fi
diff --git a/core/src/main/scala/org/apache/spark/deploy/PythonRunner.scala b/core/src/main/scala/org/apache/spark/deploy/PythonRunner.scala
index b66c3ba4d5fb0020f2aed9561f11a8c3363f43cd..79b4d7ea41a332eddb46e1b945c4240e02bcf021 100644
--- a/core/src/main/scala/org/apache/spark/deploy/PythonRunner.scala
+++ b/core/src/main/scala/org/apache/spark/deploy/PythonRunner.scala
@@ -54,9 +54,10 @@ object PythonRunner {
     val pythonPath = PythonUtils.mergePythonPaths(pathElements: _*)
 
     // Launch Python process
-    val builder = new ProcessBuilder(Seq(pythonExec, "-u", formattedPythonFile) ++ otherArgs)
+    val builder = new ProcessBuilder(Seq(pythonExec, formattedPythonFile) ++ otherArgs)
     val env = builder.environment()
     env.put("PYTHONPATH", pythonPath)
+    env.put("PYTHONUNBUFFERED", "YES") // value is needed to be set to a non-empty string
     env.put("PYSPARK_GATEWAY_PORT", "" + gatewayServer.getListeningPort)
     builder.redirectErrorStream(true) // Ugly but needed for stdout and stderr to synchronize
     val process = builder.start()
diff --git a/docs/programming-guide.md b/docs/programming-guide.md
index 1d61a3c555eaf944116555ebc9a8089a053f600d..8e8cc1dd983f8b9704294d41af00339f39903e47 100644
--- a/docs/programming-guide.md
+++ b/docs/programming-guide.md
@@ -211,17 +211,17 @@ For a complete list of options, run `pyspark --help`. Behind the scenes,
 
 It is also possible to launch the PySpark shell in [IPython](http://ipython.org), the
 enhanced Python interpreter. PySpark works with IPython 1.0.0 and later. To
-use IPython, set the `IPYTHON` variable to `1` when running `bin/pyspark`:
+use IPython, set the `PYSPARK_PYTHON` variable to `ipython` when running `bin/pyspark`:
 
 {% highlight bash %}
-$ IPYTHON=1 ./bin/pyspark
+$ PYSPARK_PYTHON=ipython ./bin/pyspark
 {% endhighlight %}
 
-You can customize the `ipython` command by setting `IPYTHON_OPTS`. For example, to launch
+You can customize the `ipython` command by setting `PYSPARK_PYTHON_OPTS`. For example, to launch
 the [IPython Notebook](http://ipython.org/notebook.html) with PyLab plot support:
 
 {% highlight bash %}
-$ IPYTHON_OPTS="notebook --pylab inline" ./bin/pyspark
+$ PYSPARK_PYTHON=ipython PYSPARK_PYTHON_OPTS="notebook --pylab inline" ./bin/pyspark
 {% endhighlight %}
 
 </div>