diff --git a/config/database.yml.env b/config/database.yml.env
new file mode 100644
index 00000000000..b2ff23cb5ab
--- /dev/null
+++ b/config/database.yml.env
@@ -0,0 +1,9 @@
+<%= ENV['RAILS_ENV'] %>:
+  adapter: <%= ENV['GITLAB_DATABASE_ADAPTER'] || 'postgresql' %>
+  encoding: <%= ENV['GITLAB_DATABASE_ENCODING'] || 'unicode' %>
+  database: <%= ENV['GITLAB_DATABASE_DATABASE'] || "gitlab_#{ENV['RAILS_ENV']}" %>
+  pool: <%= ENV['GITLAB_DATABASE_POOL'] || '10' %>
+  username: <%= ENV['GITLAB_DATABASE_USERNAME'] || 'root' %>
+  password: <%= ENV['GITLAB_DATABASE_PASSWORD'] || '' %>
+  host: <%= ENV['GITLAB_DATABASE_HOST'] || 'localhost' %>
+  port: <%= ENV['GITLAB_DATABASE_PORT'] || '5432' %>
diff --git a/config/initializers/1_settings.rb b/config/initializers/1_settings.rb
index fb7adc77284..045bab739ea 100644
--- a/config/initializers/1_settings.rb
+++ b/config/initializers/1_settings.rb
@@ -151,7 +151,7 @@ Settings.gitlab['default_projects_limit'] ||= 10
 Settings.gitlab['default_branch_protection'] ||= 2
 Settings.gitlab['default_can_create_group'] = true if Settings.gitlab['default_can_create_group'].nil?
 Settings.gitlab['default_theme'] = Gitlab::Themes::APPLICATION_DEFAULT if Settings.gitlab['default_theme'].nil?
-Settings.gitlab['host']       ||= 'localhost'
+Settings.gitlab['host']       ||= ENV['GITLAB_HOST'] || 'localhost'
 Settings.gitlab['ssh_host']   ||= Settings.gitlab.host
 Settings.gitlab['https']        = false if Settings.gitlab['https'].nil?
 Settings.gitlab['port']       ||= Settings.gitlab.https ? 443 : 80
diff --git a/doc/README.md b/doc/README.md
index f40a257b42f..d82ff8b908b 100644
--- a/doc/README.md
+++ b/doc/README.md
@@ -56,6 +56,7 @@
 - [Issue closing](customization/issue_closing.md) Customize how to close an issue from commit messages.
 - [Libravatar](customization/libravatar.md) Use Libravatar for user avatars.
 - [Log system](logs/logs.md) Log system.
+- [Environmental Variables](administration/environmental_variables.md) to configure GitLab.
 - [Operations](operations/README.md) Keeping GitLab up and running
 - [Raketasks](raketasks/README.md) Backups, maintenance, automatic web hook setup and the importing of projects.
 - [Security](security/README.md) Learn what you can do to further secure your GitLab instance.
diff --git a/doc/administration/enviroment_variables.md b/doc/administration/enviroment_variables.md
new file mode 100644
index 00000000000..d7f5cb7c21f
--- /dev/null
+++ b/doc/administration/enviroment_variables.md
@@ -0,0 +1,45 @@
+# Environment Variables
+
+## Introduction
+
+Commonly people configure GitLab via the gitlab.rb configuration file in the Omnibus package.
+
+But if you prefer to use environment variables we allow that too.
+
+## Supported environment variables
+
+Variable | Type | Explanation
+--- | --- | ---
+GITLAB_ROOT_PASSWORD | string | sets the password for the `root` user on installation
+GITLAB_HOST | url | hostname of the GitLab server includes http or https
+RAILS_ENV | production/development/staging/test | Rails environment
+DATABASE_URL | url | For example: postgresql://localhost/blog_development?pool=5
+
+## Complete database variables
+
+As explained in the [Heroku documentation](https://devcenter.heroku.com/articles/rails-database-connection-behavior) the DATABASE_URL doesn't let you set:
+
+- adapter
+- database
+- username
+- password
+- host
+- port
+
+To do so please `cp config/database.yml.env config/database.yml` and use the following variables:
+
+Variable | Default
+--- | ---
+GITLAB_DATABASE_ADAPTER | postgresql
+GITLAB_DATABASE_ENCODING | unicode
+GITLAB_DATABASE_DATABASE | gitlab_#{ENV['RAILS_ENV']
+GITLAB_DATABASE_POOL | 10
+GITLAB_DATABASE_USERNAME | root
+GITLAB_DATABASE_PASSWORD |
+GITLAB_DATABASE_HOST | localhost
+GITLAB_DATABASE_PORT | 5432
+
+## Other variables
+
+We welcome merge requests to make more settings configurable via variables.
+Please stick to the naming scheme "GITLAB_#{name 1_settings.rb in upper case}".