diff --git a/railties/CHANGELOG.md b/railties/CHANGELOG.md
index 3dd2944da3..88e08a29a6 100644
--- a/railties/CHANGELOG.md
+++ b/railties/CHANGELOG.md
@@ -1,5 +1,9 @@
 ## Rails 4.0.0 (unreleased) ##
 
+*   Explicit options have precedence over `~/.railsrc` on the `rails new` command.
+
+    *Rafael Mendonça França*
+
 *   Generated migrations now always use the `change` method.
 
     *Marc-André Lafortune*
diff --git a/railties/lib/rails/commands/application.rb b/railties/lib/rails/commands/application.rb
index ff0eda3413..2d9708e5b5 100644
--- a/railties/lib/rails/commands/application.rb
+++ b/railties/lib/rails/commands/application.rb
@@ -14,8 +14,7 @@ else
     extra_args_string = File.open(railsrc).read
     extra_args = extra_args_string.split(/\n+/).map {|l| l.split}.flatten
     puts "Using #{extra_args.join(" ")} from #{railsrc}"
-    ARGV << extra_args
-    ARGV.flatten!
+    ARGV.insert(1, *extra_args)
   end
 end