diff --git a/changelog.d/1660.change.rst b/changelog.d/1660.change.rst
new file mode 100644
index 0000000000..52f6239786
--- /dev/null
+++ b/changelog.d/1660.change.rst
@@ -0,0 +1 @@
+On Python 2, when reading config files, downcast options from text to bytes to satisfy distutils expectations.
diff --git a/setuptools/dist.py b/setuptools/dist.py
index b8551228eb..ddb1787ad0 100644
--- a/setuptools/dist.py
+++ b/setuptools/dist.py
@@ -603,7 +603,7 @@ def _parse_config_files(self, filenames=None):
 
                 for opt in options:
                     if opt != '__name__' and opt not in ignore_options:
-                        val = parser.get(section, opt)
+                        val = self._try_str(parser.get(section, opt))
                         opt = opt.replace('-', '_')
                         opt_dict[opt] = (filename, val)
 
@@ -627,6 +627,26 @@ def _parse_config_files(self, filenames=None):
                 except ValueError as msg:
                     raise DistutilsOptionError(msg)
 
+    @staticmethod
+    def _try_str(val):
+        """
+        On Python 2, much of distutils relies on string values being of
+        type 'str' (bytes) and not unicode text. If the value can be safely
+        encoded to bytes using the default encoding, prefer that.
+
+        Why the default encoding? Because that value can be implicitly
+        decoded back to text if needed.
+
+        Ref #1653
+        """
+        if six.PY3:
+            return val
+        try:
+            return val.encode()
+        except UnicodeEncodeError:
+            pass
+        return val
+
     def _set_command_options(self, command_obj, option_dict=None):
         """
         Set the options for 'command_obj' from 'option_dict'.  Basically
diff --git a/setuptools/tests/environment.py b/setuptools/tests/environment.py
index c67898ca79..bd3119efca 100644
--- a/setuptools/tests/environment.py
+++ b/setuptools/tests/environment.py
@@ -46,6 +46,8 @@ def run_setup_py(cmd, pypath=None, path=None,
             cmd, stdout=_PIPE, stderr=_PIPE, shell=shell, env=env,
         )
 
+        if isinstance(data_stream, tuple):
+            data_stream = slice(*data_stream)
         data = proc.communicate()[data_stream]
     except OSError:
         return 1, ''
diff --git a/setuptools/tests/test_build_ext.py b/setuptools/tests/test_build_ext.py
index 602571540f..3dc87ca363 100644
--- a/setuptools/tests/test_build_ext.py
+++ b/setuptools/tests/test_build_ext.py
@@ -8,6 +8,10 @@
 from setuptools.dist import Distribution
 from setuptools.extension import Extension
 
+from . import environment
+from .files import build_files
+from .textwrap import DALS
+
 
 class TestBuildExt:
     def test_get_ext_filename(self):
@@ -43,3 +47,69 @@ def test_abi3_filename(self):
             assert res.endswith('eggs.pyd')
         else:
             assert 'abi3' in res
+
+
+def test_build_ext_config_handling(tmpdir_cwd):
+    files = {
+        'setup.py': DALS(
+            """
+            from setuptools import Extension, setup
+            setup(
+                name='foo',
+                version='0.0.0',
+                ext_modules=[Extension('foo', ['foo.c'])],
+            )
+            """),
+        'foo.c': DALS(
+            """
+            #include "Python.h"
+
+            #if PY_MAJOR_VERSION >= 3
+
+            static struct PyModuleDef moduledef = {
+                    PyModuleDef_HEAD_INIT,
+                    "foo",
+                    NULL,
+                    0,
+                    NULL,
+                    NULL,
+                    NULL,
+                    NULL,
+                    NULL
+            };
+
+            #define INITERROR return NULL
+
+            PyMODINIT_FUNC PyInit_foo(void)
+
+            #else
+
+            #define INITERROR return
+
+            void initfoo(void)
+
+            #endif
+            {
+            #if PY_MAJOR_VERSION >= 3
+                PyObject *module = PyModule_Create(&moduledef);
+            #else
+                PyObject *module = Py_InitModule("extension", NULL);
+            #endif
+                if (module == NULL)
+                    INITERROR;
+            #if PY_MAJOR_VERSION >= 3
+                return module;
+            #endif
+            }
+            """),
+        'setup.cfg': DALS(
+            """
+            [build]
+            build-base = foo_build
+            """),
+    }
+    build_files(files)
+    code, output = environment.run_setup_py(
+        cmd=['build'], data_stream=(0, 2),
+    )
+    assert code == 0, '\nSTDOUT:\n%s\nSTDERR:\n%s' % output