diff --git a/zerver/lib/create_user.py b/zerver/lib/create_user.py
index 057bb6590e..65acb905f0 100644
--- a/zerver/lib/create_user.py
+++ b/zerver/lib/create_user.py
@@ -30,9 +30,9 @@ def create_user_profile(realm, email, password, active, bot, full_name, short_na
                                onboarding_steps=ujson.dumps([]))
 
     if bot or not active:
-        user_profile.set_unusable_password()
-    else:
-        user_profile.set_password(password)
+        password = None
+
+    user_profile.set_password(password)
 
     user_profile.api_key = random_api_key()
     return user_profile
diff --git a/zerver/lib/initial_password.py b/zerver/lib/initial_password.py
index 56c8091167..40e3d8d083 100644
--- a/zerver/lib/initial_password.py
+++ b/zerver/lib/initial_password.py
@@ -9,5 +9,9 @@ def initial_password(email):
     """Given an email address, returns the initial password for that account, as
        created by populate_db."""
 
-    digest = hashlib.sha256(settings.INITIAL_PASSWORD_SALT + email).digest()
-    return base64.b64encode(digest)[:16]
+    if settings.INITIAL_PASSWORD_SALT is not None:
+        digest = hashlib.sha256(settings.INITIAL_PASSWORD_SALT + email).digest()
+        return base64.b64encode(digest)[:16]
+    else:
+        # None as a password for a user tells Django to set an unusable password
+        return None
\ No newline at end of file
diff --git a/zproject/local_settings.py b/zproject/local_settings.py
index 4efa612148..3c554c938e 100644
--- a/zproject/local_settings.py
+++ b/zproject/local_settings.py
@@ -1,8 +1,19 @@
 # Secret Django settings for the Zulip project
-import os
 import platform
 import ConfigParser
 
+config_file = ConfigParser.RawConfigParser()
+config_file.read("/etc/zulip/zulip.conf")
+
+# Whether we're running in a production environment. Note that DEPLOYED does
+# **not** mean hosted by us; customer sites are DEPLOYED and ENTERPRISE
+# and as such should not for example assume they are the main Zulip site.
+DEPLOYED = config_file.has_option('machine', 'deploy_type')
+STAGING_DEPLOYED = DEPLOYED and config_file.get('machine', 'deploy_type') == 'staging'
+TESTING_DEPLOYED = DEPLOYED and config_file.get('machine', 'deploy_type') == 'test'
+
+ENTERPRISE = DEPLOYED and config_file.get('machine', 'deploy_type') == 'enterprise'
+
 # Make this unique, and don't share it with anybody.
 SECRET_KEY = 'xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx'
 
@@ -17,7 +28,8 @@ HASH_SALT = 'xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx'
 AVATAR_SALT = 'xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx'
 
 # Used just for generating initial passwords (only used in testing environments).
-INITIAL_PASSWORD_SALT = 'xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx'
+if not DEPLOYED:
+    INITIAL_PASSWORD_SALT = 'xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx'
 
 # A shared secret, used to authenticate different parts of the app to each other.
 # FIXME: store this password more securely
@@ -45,18 +57,6 @@ EMAIL_HOST_PASSWORD = 'xxxxxxxxxxxxxxxx'
 EMAIL_PORT = 587
 EMAIL_USE_TLS = True
 
-config_file = ConfigParser.RawConfigParser()
-config_file.read("/etc/zulip/zulip.conf")
-
-# Whether we're running in a production environment. Note that DEPLOYED does
-# **not** mean hosted by us; customer sites are DEPLOYED and ENTERPRISE
-# and as such should not for example assume they are the main Zulip site.
-DEPLOYED = config_file.has_option('machine', 'deploy_type')
-STAGING_DEPLOYED = DEPLOYED and config_file.get('machine', 'deploy_type') == 'staging'
-TESTING_DEPLOYED = DEPLOYED and config_file.get('machine', 'deploy_type') == 'test'
-
-ENTERPRISE = DEPLOYED and config_file.get('machine', 'deploy_type') == 'enterprise'
-
 SESSION_SERIALIZER = "django.contrib.sessions.serializers.PickleSerializer"
 
 if TESTING_DEPLOYED:
diff --git a/zproject/settings.py b/zproject/settings.py
index 11062f910e..52856f09f0 100644
--- a/zproject/settings.py
+++ b/zproject/settings.py
@@ -257,7 +257,8 @@ DEFAULT_SETTINGS = {'TWITTER_CONSUMER_KEY': '',
                     'NAGIOS_STAGING_SEND_BOT': None,
                     'NAGIOS_STAGING_RECEIVE_BOT': None,
                     'APNS_CERT_FILE': None,
-                    'ZULIP_ADMINISTRATOR': ''
+                    'ZULIP_ADMINISTRATOR': '',
+                    'INITIAL_PASSWORD_SALT': None
                     }
 
 for setting_name, setting_val in DEFAULT_SETTINGS.iteritems():