diff --git a/asdf.sh b/asdf.sh
index 4d7b2aa50..7a01f5e8c 100644
--- a/asdf.sh
+++ b/asdf.sh
@@ -3,7 +3,7 @@
 # For Bash, ${BASH_SOURCE[0]} will be used to obtain this script's path.
 # For Zsh and others, $0 (the path to the shell or script) will be used.
 _under="$_"
-if [ -z "$ASDF_DIR" ]; then
+if [ -z "${ASDF_DIR:-}" ]; then
   if [ -n "${BASH_SOURCE[0]}" ]; then
     current_script_path="${BASH_SOURCE[0]}"
   elif [[ "$_under" == *".sh" ]]; then
diff --git a/test/asdf_sh.bats b/test/asdf_sh.bats
index 02ff44a6c..9e06e1542 100644
--- a/test/asdf_sh.bats
+++ b/test/asdf_sh.bats
@@ -26,6 +26,22 @@ cleaned_path() {
   [ "$output" != "" ]
 }
 
+@test "does not error if nounset is enabled" {
+  result=$(
+    unset -f asdf
+    unset ASDF_DIR
+    PATH=$(cleaned_path)
+    set -o nounset
+
+    source_asdf_sh
+    echo $ASDF_DIR
+  )
+
+  output=$(echo "$result" | grep "asdf")
+  [ "$?" -eq 0 ]
+  [ "$output" != "" ]
+}
+
 @test "adds asdf dirs to PATH" {
   result=$(
     unset -f asdf