diff --git a/config/plugins/interactive_environments/ipython/templates/ipython.mako b/config/plugins/interactive_environments/ipython/templates/ipython.mako
index 9772e187e26..a0a3b1e7059 100644
--- a/config/plugins/interactive_environments/ipython/templates/ipython.mako
+++ b/config/plugins/interactive_environments/ipython/templates/ipython.mako
@@ -3,6 +3,7 @@
 <%
 import os
 import shutil
+import hashlib
 
 # Sets ID and sets up a lot of other variables
 ie_request.load_deploy_config()
@@ -10,6 +11,13 @@ ie_request.attr.docker_port = 6789
 # Create tempdir in galaxy
 temp_dir = ie_request.temp_dir
 
+if ie_request.attr.PASSWORD_AUTH:
+    m = hashlib.sha1()
+    m.update( ie_request.notebook_pw + ie_request.notebook_pw_salt )
+    PASSWORD = 'sha1:%s:%s' % (ie_request.notebook_pw_salt, m.hexdigest())
+else:
+	PASSWORD = "none"
+
 ## IPython Specific
 # Prepare an empty notebook
 notebook_id = ie_request.generate_hex(64)
@@ -32,7 +40,9 @@ notebook_login_url = ie_request.url_template('${PROXY_URL}/ipython/${PORT}/login
 
 
 # Add all environment variables collected from Galaxy's IE infrastructure
-ie_request.launch()
+ie_request.launch(env_override={
+    'notebook_password': PASSWORD,
+})
 
 %>
 <html>
diff --git a/lib/galaxy/web/base/interactive_environments.py b/lib/galaxy/web/base/interactive_environments.py
index 4504e6f6287..12a3e46b633 100644
--- a/lib/galaxy/web/base/interactive_environments.py
+++ b/lib/galaxy/web/base/interactive_environments.py
@@ -1,6 +1,5 @@
 import ConfigParser
 
-import hashlib
 import os
 import random
 import tempfile
@@ -41,6 +40,8 @@ class InteractiveEnviornmentRequest(object):
         self.attr.HOST = trans.request.host.rsplit(':', 1)[0]
         self.attr.PORT = self.attr.proxy_request[ 'proxied_port' ]
 
+        # Generate per-request passwords the IE plugin can use to configure
+        # the destination container.
         self.notebook_pw_salt = self.generate_password(length=12)
         self.notebook_pw = self.generate_password(length=24)
 
@@ -100,16 +101,6 @@ class InteractiveEnviornmentRequest(object):
             # Galaxy paster port is deprecated
             conf_file['galaxy_paster_port'] = conf_file['galaxy_web_port']
 
-        if self.attr.PASSWORD_AUTH:
-            # Generate a random password + salt
-            m = hashlib.sha1()
-            m.update( self.notebook_pw + self.notebook_pw_salt )
-            conf_file['notebook_password'] = 'sha1:%s:%s' % (self.notebook_pw_salt, m.hexdigest())
-            # Should we use password based connection or "default" connection style in galaxy
-        else:
-            notebook_pw = "None"
-
-        self.attr.notebook_pw = notebook_pw
         return conf_file
 
     def generate_hex(self, length):