diff --git a/lib/rubygems/install_update_options.rb b/lib/rubygems/install_update_options.rb
index 5c7289426e..15b0860fc9 100644
--- a/lib/rubygems/install_update_options.rb
+++ b/lib/rubygems/install_update_options.rb
@@ -185,9 +185,24 @@ module Gem::InstallUpdateOptions
   # Default options for the gem install and update commands.
 
   def install_update_options
-    {
+    default_options = {
       :document => %w[ri],
     }
+
+    # If Gem.paths.home exists, but we can't write to it,
+    # fall back to a user installation.
+    if File.exist?(Gem.paths.home) && !File.writable?(Gem.paths.home)
+      default_options[:user_install] = true
+
+      alert_warning "The default GEM_HOME (#{Gem.paths.home}) is not" \
+                    " writable, so rubygems is falling back to installing" \
+                    " under your home folder. To get rid of this warning" \
+                    " permanently either fix your GEM_HOME folder permissions" \
+                    " or add the following to your ~/.gemrc file:\n" \
+                    "    gem: --user-install"
+    end
+
+    default_options
   end
 
   ##
diff --git a/test/rubygems/test_gem_install_update_options.rb b/test/rubygems/test_gem_install_update_options.rb
index f3bd1c6d5e..7342def5e9 100644
--- a/test/rubygems/test_gem_install_update_options.rb
+++ b/test/rubygems/test_gem_install_update_options.rb
@@ -159,6 +159,33 @@ class TestGemInstallUpdateOptions < Gem::InstallerTestCase
     FileUtils.chmod 0o755, @gemhome
   end
 
+  def test_auto_user_install_unless_gem_home_writable
+    if Process.uid.zero?
+      pend("test_auto_user_install_unless_gem_home_writable test skipped in root privilege")
+      return
+    end
+
+    @spec = quick_gem "a" do |spec|
+      util_make_exec spec
+    end
+
+    util_build_gem @spec
+    @gem = @spec.cache_file
+
+    @cmd.handle_options %w[]
+
+    refute @cmd.options[:user_install]
+
+    FileUtils.chmod 0755, @userhome
+    FileUtils.chmod 0000, @gemhome
+
+    Gem.use_paths @gemhome, @userhome
+
+    @cmd.install_update_options.include?(:user_install)
+  ensure
+    FileUtils.chmod 0755, @gemhome
+  end
+
   def test_vendor
     vendordir(File.join(@tempdir, "vendor")) do
       @cmd.handle_options %w[--vendor]