diff --git a/lisp/progmodes/grep.el b/lisp/progmodes/grep.el

index 9962945..763f906 100644

--- a/lisp/progmodes/grep.el

+++ b/lisp/progmodes/grep.el

@@ -77,11 +77,10 @@ in grep buffers, so if you have globally disabled font-lock-mode,

 you will not get highlighting.

 This option sets the environment variable GREP_COLORS to specify

-markers for highlighting and GREP_OPTIONS to add the --color

-option in front of any explicit grep options before starting

-the grep.

+markers for highlighting and adds the --color option in front of

+any explicit grep options before starting the grep.

-When this option is `auto', grep uses `--color=auto' to highlight

+When this option is `auto', grep uses `--color' to highlight

 matches only when it outputs to a terminal (when `grep' is the last

 command in the pipe), thus avoiding the use of any potentially-harmful

 escape sequences when standard output goes to a file or pipe.

@@ -97,7 +96,7 @@ To change the default value, use Customize or call the function

   :type '(choice (const :tag "Do not highlight matches with grep markers" nil)

 		 (const :tag "Highlight matches with grep markers" t)

 		 (const :tag "Use --color=always" always)

-		 (const :tag "Use --color=auto" auto)

+		 (const :tag "Use --color" auto)

 		 (other :tag "Not Set" auto-detect))

   :set 'grep-apply-setting

   :version "22.1"

@@ -467,10 +466,6 @@ Set up `compilation-exit-message-function' and run `grep-setup-hook'."

     ;; `setenv' modifies `process-environment' let-bound in `compilation-start'

     ;; Any TERM except "dumb" allows GNU grep to use `--color=auto'

     (setenv "TERM" "emacs-grep")

-    (setenv "GREP_OPTIONS"

-	    (concat (getenv "GREP_OPTIONS")

-		    " --color=" (if (eq grep-highlight-matches 'always)

-				    "always" "auto")))

     ;; GREP_COLOR is used in GNU grep 2.5.1, but deprecated in later versions

     (setenv "GREP_COLOR" "01;31")

     ;; GREP_COLORS is used in GNU grep 2.5.2 and later versions

@@ -570,7 +565,13 @@ This function is called from `compilation-filter-hook'."

     (unless (and grep-command grep-find-command

 		 grep-template grep-find-template)

       (let ((grep-options

-	     (concat (if grep-use-null-device "-n" "-nH")

+	     (concat (and grep-highlight-matches

+                      (grep-probe grep-program

+                                  `(nil nil nil "--color" "x" ,null-device)

+                                  nil 1)

+                      (if (eq grep-highlight-matches 'always)

+                           "--color=always " "--color "))

+                 (if grep-use-null-device "-n" "-nH")

 		     (if (grep-probe grep-program

 				     `(nil nil nil "-e" "foo" ,null-device)

 				     nil 1)