diff --git a/Makefile.am b/Makefile.am
index 78a05477e2e4..5a6ebe3e98cd 100644
--- a/Makefile.am
+++ b/Makefile.am
@@ -1,8 +1,7 @@
 SUBDIRS = src doc t
 
-sysconf_DATA = \
-	etc/flux/config
 noinst_DATA = \
+	etc/flux/config \
 	etc/flux/curve
 
 etc/flux/config: $(srcdir)/flux.conf.in
diff --git a/src/cmd/flux.c b/src/cmd/flux.c
index 969b5edc6861..37b0d5ab507b 100644
--- a/src/cmd/flux.c
+++ b/src/cmd/flux.c
@@ -188,12 +188,14 @@ int main (int argc, char *argv[])
         err_exit ("setenv");
     /* Process config from the KVS if running in a session and not
      * forced to use a config file by the command line.
+     * It is not an error if config is not foud in either place, we will
+     * try to make do with compiled-in defaults.
      */
     if (getenv ("FLUX_TMPDIR") && !Fopt) {
         flux_t h;
         if (!(h = flux_api_open ()))
             err_exit ("flux_api_open");
-        if (kvs_conf_load (h, cf) < 0)
+        if (kvs_conf_load (h, cf) < 0 && errno != ENOENT)
             err_exit ("could not load config from KVS");
         flux_api_close (h);
     } else {