diff --git a/Changelog b/Changelog
index 8372d02cc..3349d24aa 100644
--- a/Changelog
+++ b/Changelog
@@ -1,5 +1,7 @@
 version 1.0.8 (not yet released)
 --------------------------------
+* allow shapefile to be optional, so a system version can be used
+  in stead of the bundled version
 * add 'textcolor' kwarg to drawmeridians and drawparallels (issue 145).
 * don't assume grid is regular when adding cyclic point in addcyclic. 
   New kwargs 'axis' and 'cyclic' added.  More than one array
diff --git a/MANIFEST.in b/MANIFEST.in
index f60568909..d2edc5513 100644
--- a/MANIFEST.in
+++ b/MANIFEST.in
@@ -95,10 +95,10 @@ include lib/mpl_toolkits/__init__.py
 include lib/mpl_toolkits/basemap/__init__.py
 include lib/mpl_toolkits/basemap/proj.py
 include lib/mpl_toolkits/basemap/pyproj.py
-include lib/mpl_toolkits/basemap/shapefile.py
 include lib/mpl_toolkits/basemap/cm.py
 include lib/mpl_toolkits/basemap/solar.py
 include lib/mpl_toolkits/basemap/test.py
+include opt_lib/mpl_toolkits/basemap/shapefile.py
 include doc/users/figures/*py
 include doc/users/*rst
 include doc/api/*rst
diff --git a/lib/mpl_toolkits/basemap/__init__.py b/lib/mpl_toolkits/basemap/__init__.py
index 68fea3de1..6fb9cdae5 100644
--- a/lib/mpl_toolkits/basemap/__init__.py
+++ b/lib/mpl_toolkits/basemap/__init__.py
@@ -2128,7 +2128,13 @@ def readshapefile(self,shapefile,name,drawbounds=True,zorder=None,
         matplotlib.patches.LineCollection object is appended to the tuple.
         """
         import shapefile as shp
-        from .shapefile import Reader
+        try:
+            # try system version first
+            from shapefile import Reader
+        except ImportError:
+            # try bundled version as fallback
+            from .shapefile import Reader
+            
         shp.default_encoding = default_encoding
         if not os.path.exists('%s.shp'%shapefile):
             raise IOError('cannot locate %s.shp'%shapefile)
diff --git a/lib/mpl_toolkits/basemap/shapefile.py b/opt_lib/mpl_toolkits/basemap/shapefile.py
similarity index 100%
rename from lib/mpl_toolkits/basemap/shapefile.py
rename to opt_lib/mpl_toolkits/basemap/shapefile.py
diff --git a/setup.py b/setup.py
index 8b804cd89..0bf6d530a 100644
--- a/setup.py
+++ b/setup.py
@@ -81,6 +81,29 @@ def checkversion(GEOS_dir):
     geos_include_dirs=[os.path.join(GEOS_dir,'include'),inc_dirs]
     geos_library_dirs=[os.path.join(GEOS_dir,'lib'),os.path.join(GEOS_dir,'lib64')]
 
+# get location of pyshp lib from environment variable if it is set.
+if 'PYSHP_DIR' in os.environ:
+    PYSHP_dir = os.environ.get('PYSHP_DIR')
+else:
+    # set PYSHP_DIR to None if not defined by the user
+    PYSHP_dir = None
+
+if PYSHP_dir:
+    if not PYSHP_dir in sys.path:
+        sys.path.append(PYSHP_dir)
+    try:
+        import shapefile
+    except ImportError:
+        raise SystemExit("""
+Could not import shapefile!'
+Please make sure the pyshp module is installed and set the PYSHP_DIR
+environment variable to point to the proper location.
+Alternatively, you may choose to not define the PYSHP_DIR environment
+variable, in which case the bundled copy of pyshp will be used.
+""")
+else:
+    pass
+
 # proj4 and geos extensions.
 deps = glob.glob('src/*.c')
 deps.remove(os.path.join('src','_proj.c'))
@@ -89,6 +112,13 @@ def checkversion(GEOS_dir):
 packages          = ['mpl_toolkits','mpl_toolkits.basemap']
 namespace_packages = ['mpl_toolkits']
 package_dirs       = {'':'lib'}
+
+if PYSHP_dir is None:
+    # copy shapefile into basemap dir
+    import shutil
+    shutil.copy('opt_lib/mpl_toolkits/basemap/shapefile.py',
+                'lib/mpl_toolkits/basemap/shapefile.py')
+    
 extensions = [Extension("mpl_toolkits.basemap._proj",deps+['src/_proj.c'],include_dirs = ['src'],)]
 # can't install _geoslib in mpl_toolkits.basemap namespace,
 # or Basemap objects won't be pickleable.
@@ -165,3 +195,7 @@ def checkversion(GEOS_dir):
   cmdclass = {'build_py': build_py},
   package_data = package_data
   )
+
+# clean up afterwards
+if PYSHP_dir is None:
+    os.remove('lib/mpl_toolkits/basemap/shapefile.py')
diff --git a/utils/readboundaries_shp.py b/utils/readboundaries_shp.py
index 6beb5120f..a641ee7db 100644
--- a/utils/readboundaries_shp.py
+++ b/utils/readboundaries_shp.py
@@ -1,5 +1,10 @@
 import numpy as np
-from mpl_toolkits.basemap.shapefile import Reader
+try:
+    # try system version first
+    from shapefile import Reader
+except ImportError:
+    # try bundled version as fallback
+    from mpl_toolkits.basemap.shapefile import Reader
 
 lsd = 5