diff --git a/command/server.go b/command/server.go
index 17f40d1655..c402d09d52 100644
--- a/command/server.go
+++ b/command/server.go
@@ -284,6 +284,13 @@ func (c *ServerCommand) Run(args []string) int {
 			return 1
 		}
 		coreConfig.PluginDirectory = filepath.Join(homePath, "/.vault-plugins/")
+		err = os.Mkdir(coreConfig.PluginDirectory, 0700)
+		if err != nil && !os.IsExist(err) {
+			c.Ui.Output(fmt.Sprintf(
+				"Error making default plugin directory: %v", err))
+			return 1
+		}
+
 	}
 
 	var disableClustering bool
diff --git a/command/server/config.go b/command/server/config.go
index 4821a29ba8..dad485928d 100644
--- a/command/server/config.go
+++ b/command/server/config.go
@@ -273,6 +273,11 @@ func (c *Config) Merge(c2 *Config) *Config {
 		result.EnableUI = c2.EnableUI
 	}
 
+	result.PluginDirectory = c.PluginDirectory
+	if c2.PluginDirectory != "" {
+		result.PluginDirectory = c2.PluginDirectory
+	}
+
 	return result
 }