diff --git a/setup.py b/setup.py
index 48b779997df..45484e5d770 100755
--- a/setup.py
+++ b/setup.py
@@ -745,6 +745,12 @@ class Install(install):
             self.distribution.salt_download_windows_dlls = True
             self.run_command('download-windows-dlls')
             self.distribution.salt_download_windows_dlls = None
+        # need to ensure _version.py is created in build dir before install
+        if not os.path.exists(os.path.join(self.build_lib)):
+            if not self.skip_build:
+                self.run_command('build')
+        else:
+            self.run_command('write_salt_version')
         # Run install.run
         install.run(self)
 
diff --git a/tests/integration/setup/test_egg.py b/tests/integration/setup/test_egg.py
new file mode 100644
index 00000000000..fd538ebd61d
--- /dev/null
+++ b/tests/integration/setup/test_egg.py
@@ -0,0 +1,58 @@
+# -*- coding: utf-8 -*-
+'''
+tests.integration.setup.test_egg
+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
+'''
+
+# Import python libs
+from __future__ import absolute_import, print_function, unicode_literals
+import os
+import re
+import shutil
+
+# Import Salt Testing libs
+from tests.support.runtests import RUNTIME_VARS
+from tests.support.unit import skipIf
+from tests.support.helpers import VirtualEnv, destructiveTest
+from tests.support.case import ModuleCase
+
+# Import salt libs
+import salt.utils.path
+import salt.utils.platform
+from salt.modules.virtualenv_mod import KNOWN_BINARY_NAMES
+
+
+@destructiveTest
+@skipIf(salt.utils.path.which_bin(KNOWN_BINARY_NAMES) is None, 'virtualenv not installed')
+class EggSetupTest(ModuleCase):
+    '''
+    Tests for building and installing egg packages
+    '''
+    def test_egg_install(self):
+        '''
+        test installing an egg package
+        '''
+        # Let's create the testing virtualenv
+        with VirtualEnv() as venv:
+            ret = self.run_function('cmd.run', ['{0} setup.py install --prefix={1}'.format(venv.venv_python,
+                                                                                           venv.venv_dir)],
+                                               cwd=RUNTIME_VARS.CODE_DIR)
+            lib_dir = os.path.join(venv.venv_dir, 'lib')
+            for _dir in os.listdir(lib_dir):
+                site_pkg = os.path.join(lib_dir, _dir, 'site-packages')
+                for _file in os.listdir(site_pkg):
+                    if _file.startswith('salt-'):
+                        egg = os.path.join(venv.venv_dir, _file)
+                        assert os.path.exists(os.path.join(site_pkg, _file, 'salt', '_version.py'))
+                        break
+
+            # Let's ensure the version is correct
+            pip_ver = self.run_function('pip.list', bin_env=venv.venv_dir).get('salt')
+            egg_ver = [x for x in egg.split('/')[-1:][0].split('-') if re.search(r'^\d.\d*', x)][0]
+            assert pip_ver == egg_ver.replace('_', '-')
+            assert self.run_function('cmd.run', ['salt --version']).split()[1] == pip_ver
+
+    def tearDown(self):
+        build_dir = os.path.join(RUNTIME_VARS.CODE_DIR, 'build')
+        if os.path.exists(build_dir):
+            shutil.rmtree(build_dir)