diff --git a/dpaste/settings/base.py b/dpaste/settings/base.py
index 0dcabf7..cc89dd9 100644
--- a/dpaste/settings/base.py
+++ b/dpaste/settings/base.py
@@ -13,12 +13,18 @@ PROJECT_DIR, PROJECT_MODULE_NAME = os.path.split(
     os.path.dirname(os.path.realpath(dpaste.__file__))
 )
 
-# Set the variable root to $VIRTUALENV/var.
 PYTHON_BIN = os.path.dirname(sys.executable)
-
-VAR_ROOT = os.path.join(os.path.dirname(PYTHON_BIN), 'var')
-if not os.path.exists(VAR_ROOT):
-    os.mkdir(VAR_ROOT)
+if os.path.exists(os.path.join(PYTHON_BIN, 'activate_this.py')):
+    # Assume that the presence of 'activate_this.py' in the python bin/
+    # directory means that we're running in a virtual environment. Set the
+    # variable root to $VIRTUALENV/var.
+    VAR_ROOT = os.path.join(os.path.dirname(PYTHON_BIN), 'var')
+    if not os.path.exists(VAR_ROOT):
+        os.mkdir(VAR_ROOT)
+else:
+    # Set the variable root to the local configuration location (which is
+    # ignored by the repository).
+    VAR_ROOT = os.path.join(PROJECT_DIR, PROJECT_MODULE_NAME, 'conf', 'local')
 
 #==============================================================================
 # Generic Django project settings