diff --git a/Lib/sysconfig.py b/Lib/sysconfig.py
index bf04ac541e6b02..f3198d666080b0 100644
--- a/Lib/sysconfig.py
+++ b/Lib/sysconfig.py
@@ -259,12 +259,21 @@ def _parse_makefile(filename, vars=None):
     while len(variables) > 0:
         for name in tuple(variables):
             value = notdone[name]
-            m1 = _findvar1_rx.search(value)
-            m2 = _findvar2_rx.search(value)
-            if m1 and m2:
-                m = m1 if m1.start() < m2.start() else m2
-            else:
-                m = m1 if m1 else m2
+            m = None
+            offset = 0
+            for substr in value.split('$$'):
+                m1 = _findvar1_rx.search(substr)
+                m2 = _findvar2_rx.search(substr)
+                if m1 and m2:
+                    m = m1 if m1.start() < m2.start() else m2
+                else:
+                    m = m1 if m1 else m2
+                if m is not None:
+                    break
+
+                # Add 2 to account for the $$ which were removed by split('$$')
+                offset += 2 + len(substr)
+
             if m is not None:
                 n = m.group(1)
                 found = True
@@ -292,11 +301,13 @@ def _parse_makefile(filename, vars=None):
                     done[n] = item = ""
 
                 if found:
-                    after = value[m.end():]
-                    value = value[:m.start()] + item + after
-                    if "$" in after:
+                    after = value[offset + m.end():]
+                    value = value[:offset + m.start()] + \
+                            item.replace('$', '$$') + after
+                    if "$" in after.replace('$$', ''):
                         notdone[name] = value
                     else:
+                        value = value.replace('$$', '$')
                         try:
                             value = int(value)
                         except ValueError:
diff --git a/Lib/test/test_sysconfig.py b/Lib/test/test_sysconfig.py
index d07d28df607ce7..05fa441e20c429 100644
--- a/Lib/test/test_sysconfig.py
+++ b/Lib/test/test_sysconfig.py
@@ -406,6 +406,7 @@ def test_parse_makefile(self):
             print("var5=dollar$$5", file=makefile)
             print("var6=${var3}/lib/python3.5/config-$(VAR2)$(var5)"
                   "-x86_64-linux-gnu", file=makefile)
+            print("var7=$${ORIGIN}${var5}", file=makefile)
         vars = sysconfig._parse_makefile(TESTFN)
         self.assertEqual(vars, {
             'var1': 'ab42',
@@ -414,6 +415,7 @@ def test_parse_makefile(self):
             'var4': '$/invalid',
             'var5': 'dollar$5',
             'var6': '42/lib/python3.5/config-b42dollar$5-x86_64-linux-gnu',
+            'var7': '${ORIGIN}dollar$5',
         })
 
 
diff --git a/Misc/NEWS.d/next/Library/2018-09-17-19-11-17.bpo-34689.RtyOE3.rst b/Misc/NEWS.d/next/Library/2018-09-17-19-11-17.bpo-34689.RtyOE3.rst
new file mode 100644
index 00000000000000..1751dcb7bb77a6
--- /dev/null
+++ b/Misc/NEWS.d/next/Library/2018-09-17-19-11-17.bpo-34689.RtyOE3.rst
@@ -0,0 +1,2 @@
+Split strings prior to parsing in `sysconfig._parse_makefile` so it doesn't
+expand variables formatted as ``$${variable}``.