diff --git a/libexec/rbenv-rehash b/libexec/rbenv-rehash
index a1d79864..9e59ddfc 100755
--- a/libexec/rbenv-rehash
+++ b/libexec/rbenv-rehash
@@ -37,12 +37,41 @@ create_prototype_shim() {
   cat > "$PROTOTYPE_SHIM_PATH" <<SH
 #!/usr/bin/env bash
 set -e
+[ -n "\$RBENV_DEBUG" ] && set -x
+
+program="\${0##*/}"
+if [ "\$program" = "ruby" ]; then
+  for arg; do
+    case "\$arg" in
+    -e* | -- ) break ;;
+    */* )
+      if [ -f "\$arg" ]; then
+        export RBENV_DIR="\${arg%/*}"
+        break
+      fi
+      ;;
+    esac
+  done
+fi
+
 export RBENV_ROOT="$RBENV_ROOT"
-exec rbenv exec "\${0##*/}" "\$@"
+exec rbenv exec "\$program" "\$@"
 SH
   chmod +x "$PROTOTYPE_SHIM_PATH"
 }
 
+# If the contents of the prototype shim file differ from the contents
+# of the first shim in the shims directory, assume rbenv has been
+# upgraded and the existing shims need to be removed.
+remove_outdated_shims() {
+  for shim in *; do
+    if ! diff "$PROTOTYPE_SHIM_PATH" "$shim" >/dev/null 2>&1; then
+      for shim in *; do rm -f "$shim"; done
+    fi
+    break
+  done
+}
+
 # The basename of each argument passed to `make_shims` will be
 # registered for installation as a shim. In this way, plugins may call
 # `make_shims` with a glob to register many shims at once.
@@ -97,10 +126,11 @@ remove_stale_shims() {
 
 # Change to the shims directory.
 cd "$SHIM_PATH"
+shopt -s nullglob
 
 # Create the prototype shim, then register shims for all known binaries.
 create_prototype_shim
-shopt -s nullglob
+remove_outdated_shims
 make_shims ../versions/*/bin/*
 
 # Restore the previous working directory.
diff --git a/libexec/rbenv-version-file b/libexec/rbenv-version-file
index 9b678769..e9451f42 100755
--- a/libexec/rbenv-version-file
+++ b/libexec/rbenv-version-file
@@ -2,14 +2,19 @@
 set -e
 [ -n "$RBENV_DEBUG" ] && set -x
 
-root="$RBENV_DIR"
-while [ -n "$root" ]; do
-  if [ -e "${root}/.rbenv-version" ]; then
-    echo "${root}/.rbenv-version"
-    exit
-  fi
-  root="${root%/*}"
-done
+find_local_version_file() {
+  local root="$1"
+  while [ -n "$root" ]; do
+    if [ -e "${root}/.rbenv-version" ]; then
+      echo "${root}/.rbenv-version"
+      exit
+    fi
+    root="${root%/*}"
+  done
+}
+
+find_local_version_file "$RBENV_DIR"
+[ "$RBENV_DIR" = "$PWD" ] || find_local_version_file "$PWD"
 
 global_version_file="${RBENV_ROOT}/version"