diff --git a/nvm.sh b/nvm.sh
index 6ec0d63b..8204b6d9 100755
--- a/nvm.sh
+++ b/nvm.sh
@@ -2775,8 +2775,12 @@ nvm_install_binary() {
     return 2
   fi
 
+  # dash's `local` keeps the caller's value, and TMPDIR is usually set: it is
+  # later removed with `rm -rf`, so it must not start as the system temp dir
   local TARBALL
+  TARBALL=''
   local TMPDIR
+  TMPDIR=''
 
   local PROGRESS_BAR
   local NODE_OR_IOJS
@@ -3176,9 +3180,13 @@ nvm_install_source() {
     fi
   fi
 
+  # see nvm_install_binary: these must not inherit TMPDIR, which is removed on failure
   local TARBALL
+  TARBALL=''
   local TMPDIR
+  TMPDIR=''
   local VERSION_PATH
+  VERSION_PATH=''
 
   if [ "${NVM_NO_PROGRESS-}" = "1" ]; then
     # --silent, --show-error, use short option as @samrocketman mentions the compatibility issue.
diff --git a/test/fast/Unit tests/nvm_install_binary and nvm_install_source do not remove an inherited TMPDIR b/test/fast/Unit tests/nvm_install_binary and nvm_install_source do not remove an inherited TMPDIR
new file mode 100755
index 00000000..90db055e
--- /dev/null
+++ b/test/fast/Unit tests/nvm_install_binary and nvm_install_source do not remove an inherited TMPDIR	
@@ -0,0 +1,30 @@
+#!/bin/sh
+
+WORK="${PWD}/nvm-inherited-tmpdir-work.$$"
+
+cleanup() {
+  command rm -rf "${WORK}"
+  unset -f cleanup die nvm_download_artifact
+}
+die () { echo "$@" ; cleanup ; exit 1; }
+
+: nvm.sh
+\. ../../../nvm.sh
+
+nvm_download_artifact() { return 1; }
+
+make_canary() {
+  command rm -rf "${WORK}/tmp"
+  command mkdir -p "${WORK}/tmp"
+  echo canary > "${WORK}/tmp/canary"
+}
+
+make_canary
+TMPDIR="${WORK}/tmp" nvm_install_binary node std 8.0.0 0 < /dev/null > /dev/null 2>&1
+[ -f "${WORK}/tmp/canary" ] || die 'nvm_install_binary removed the TMPDIR it inherited after a failed download'
+
+make_canary
+TMPDIR="${WORK}/tmp" nvm_install_source node std 8.0.0 < /dev/null > /dev/null 2>&1
+[ -f "${WORK}/tmp/canary" ] || die 'nvm_install_source removed the TMPDIR it inherited after a failed download'
+
+cleanup