diff --git a/Readme.md b/README.md
similarity index 83%
rename from Readme.md
rename to README.md
index 7ee4d081..e46d8f22 100644
--- a/Readme.md
+++ b/README.md
@@ -79,7 +79,7 @@ Then, run the program to be debugged as usual.
 
 ## Conventions
 
- If you're using this in one or more of your libraries, you _should_ use the name of your library so that developers may toggle debugging as desired without guessing names. If you have more than one debuggers you _should_ prefix them with your library name and use ":" to separate features. For example "bodyParser" from Connect would then be "connect:bodyParser".
+  If you're using this in one or more of your libraries, you _should_ use the name of your library so that developers may toggle debugging as desired without guessing names. If you have more than one debuggers you _should_ prefix them with your library name and use ":" to separate features. For example "bodyParser" from Connect would then be "connect:bodyParser".
 
 ## Wildcards
 
@@ -87,6 +87,28 @@ Then, run the program to be debugged as usual.
 
   You can also exclude specific debuggers by prefixing them with a "-" character.  For example, `DEBUG=*,-connect:*` would include all debuggers except those starting with "connect:".
 
+## Environment Variables
+
+  When running through Node.js, you can set a few environment variables that will
+  change the behavior of the debug logging:
+
+| Name      | Purpose                                         |
+|-----------|-------------------------------------------------|
+| `DEBUG`   | Enables/disabled specific debugging namespaces. |
+| `DEBUG_COLORS`| Whether or not to use colors in the debug output. |
+| `DEBUG_FD`| File descriptor to output debug logs to. Defaults to stderr. |
+| `DEBUG_DEPTH` | Object inspection depth. |
+| `DEBUG_SHOW_HIDDEN` | Shows hidden properties on inspected objects. |
+
+
+  __Note:__ The environment variables beginning with `DEBUG_` end up being
+  converted into an Options object that gets used with `%o`/`%O` formatters.
+  See the Node.js documentation for
+  [`util.inspect()`](https://nodejs.org/api/util.html#util_util_inspect_object_options)
+  for the complete list.
+
+  __Note:__ Certain IDEs (such as WebStorm) don't support colors on stderr. In these cases you must set `DEBUG_COLORS` to `1` and additionally change `DEBUG_FD` to `1`.
+
 ## Formatters
 
 
@@ -191,12 +213,6 @@ Example:
 $ DEBUG_FD=3 node your-app.js 3> whatever.log
 ```
 
-### Terminal colors
-
-  By default colors will only be used in a TTY. However this can be overridden by setting the environment variable `DEBUG_COLORS` to `1`.
-
-  Note: Certain IDEs (such as WebStorm) don't support colors on stderr. In these cases you must set `DEBUG_COLORS` to `1` and additionally change `DEBUG_FD` to `1`.
-
 ## Authors
 
  - TJ Holowaychuk
diff --git a/browser.js b/browser.js
index 3f63ab23..2963b23c 100644
--- a/browser.js
+++ b/browser.js
@@ -1,4 +1,3 @@
-
 /**
  * This is the web browser implementation of `debug()`.
  *
@@ -69,8 +68,7 @@ exports.formatters.j = function(v) {
  * @api public
  */
 
-function formatArgs() {
-  var args = arguments;
+function formatArgs(args) {
   var useColors = this.useColors;
 
   args[0] = (useColors ? '%c' : '')
@@ -101,7 +99,6 @@ function formatArgs() {
   });
 
   args.splice(lastC, 0, c);
-  return args;
 }
 
 /**
@@ -172,7 +169,7 @@ exports.enable(load());
  * @api private
  */
 
-function localstorage(){
+function localstorage() {
   try {
     return window.localStorage;
   } catch (e) {}
diff --git a/debug.js b/debug.js
index 6664947c..fc634f7e 100644
--- a/debug.js
+++ b/debug.js
@@ -6,7 +6,7 @@
  * Expose `debug()` as the module.
  */
 
-exports = module.exports = debug.debug = debug;
+exports = module.exports = createDebug.debug = createDebug.default = createDebug;
 exports.coerce = coerce;
 exports.disable = disable;
 exports.enable = enable;
@@ -23,7 +23,7 @@ exports.skips = [];
 /**
  * Map of special "%n" handling functions, for the debug "format" argument.
  *
- * Valid key names are a single, lowercased letter, i.e. "n".
+ * Valid key names are a single, lower or upper-case letter, i.e. "n" and "N".
  */
 
 exports.formatters = {};
@@ -66,17 +66,13 @@ function selectColor(namespace) {
  * @api public
  */
 
-function debug(namespace) {
+function createDebug(namespace) {
 
-  // define the `disabled` version
-  function disabled() {
-  }
-  disabled.enabled = false;
-
-  // define the `enabled` version
-  function enabled() {
+  function debug() {
+    // disabled?
+    if (!debug.enabled) return;
 
-    var self = enabled;
+    var self = debug;
 
     // set `diff` timestamp
     var curr = +new Date();
@@ -86,10 +82,7 @@ function debug(namespace) {
     self.curr = curr;
     prevTime = curr;
 
-    // add the `color` if not set
-    if (null == self.useColors) self.useColors = exports.useColors();
-    if (null == self.color && self.useColors) self.color = selectColor(namespace);
-
+    // turn the `arguments` into a proper Array
     var args = new Array(arguments.length);
     for (var i = 0; i < args.length; i++) {
       args[i] = arguments[i];
@@ -120,19 +113,24 @@ function debug(namespace) {
       return match;
     });
 
-    // apply env-specific formatting
-    args = exports.formatArgs.apply(self, args);
+    // apply env-specific formatting (colors, etc.)
+    exports.formatArgs.call(self, args);
 
     var logFn = enabled.log || exports.log || console.log.bind(console);
     logFn.apply(self, args);
   }
-  enabled.enabled = true;
 
-  var fn = exports.enabled(namespace) ? enabled : disabled;
+  debug.namespace = namespace;
+  debug.enabled = exports.enabled(namespace);
+  debug.useColors = exports.useColors();
+  debug.color = selectColor(namespae);
 
-  fn.namespace = namespace;
+  // env-specific initialization logic for debug instances
+  if ('function' === typeof exports.init) {
+    exports.init(debug);
+  }
 
-  return fn;
+  return debug;
 }
 
 /**
diff --git a/node.js b/node.js
index 1f5cd7ed..15bf55af 100644
--- a/node.js
+++ b/node.js
@@ -1,4 +1,3 @@
-
 /**
  * Module dependencies.
  */
@@ -13,6 +12,7 @@ var util = require('util');
  */
 
 exports = module.exports = require('./debug');
+exports.init = init;
 exports.log = log;
 exports.formatArgs = formatArgs;
 exports.save = save;
@@ -25,6 +25,32 @@ exports.useColors = useColors;
 
 exports.colors = [6, 2, 3, 4, 5, 1];
 
+/**
+ * Build up the default `inspectOpts` object from the environment variables.
+ *
+ *   $ DEBUG_COLORS=no DEBUG_DEPTH=10 DEBUG_SHOW_HIDDEN=enabled node script.js
+ */
+
+exports.inspectOpts = Object.keys(process.env).filter(function (key) {
+  return /^debug_/i.test(key);
+}).reduce(function (obj, key) {
+  // camel-case
+  var prop = key
+    .substring(6)
+    .toLowerCase()
+    .replace(/_([a-z])/, function (_, k) { return k.toUpperCase() });
+
+  // coerce string value into JS value
+  var val = process.env[key];
+  if (/^(yes|on|true|enabled)$/i.test(val)) val = true;
+  else if (/^(no|off|false|disabled)$/i.test(val)) val = false;
+  else if (val === 'null') val = null;
+  else val = Number(val);
+
+  obj[prop] = val;
+  return obj;
+}, {});
+
 /**
  * The file descriptor to write the `debug()` calls to.
  * Set the `DEBUG_FD` env variable to override with another value. i.e.:
@@ -42,39 +68,28 @@ var stream = 1 === fd ? process.stdout :
  */
 
 function useColors() {
-  var debugColors = (process.env.DEBUG_COLORS || '').trim().toLowerCase();
-  if (0 === debugColors.length) {
-    return tty.isatty(fd);
-  } else {
-    return '0' !== debugColors
-        && 'no' !== debugColors
-        && 'false' !== debugColors
-        && 'disabled' !== debugColors;
-  }
+  return 'colors' in exports.inspectOpts
+    ? Boolean(exports.inspectOpts.colors)
+    : tty.isatty(fd);
 }
 
 /**
- * Map %o to `util.inspect()`, since Node doesn't do that out of the box.
+ * Map %o to `util.inspect()`, all on a single line.
  */
 
-var inspect = (4 === util.inspect.length ?
-  // node <= 0.8.x
-  function (v, colors) {
-    return util.inspect(v, void 0, void 0, colors);
-  } :
-  // node > 0.8.x
-  function (v, colors) {
-    return util.inspect(v, { colors: colors });
-  }
-);
-
 exports.formatters.o = function(v) {
-  return inspect(v, this.useColors)
+  this.inspectOpts.colors = this.useColors;
+  return util.inspect(v, this.inspectOpts)
     .replace(/\s*\n\s*/g, ' ');
 };
 
+/**
+ * Map %o to `util.inspect()`, allowing multiple lines if needed.
+ */
+
 exports.formatters.O = function(v) {
-  return inspect(v, this.useColors);
+  this.inspectOpts.colors = this.useColors;
+  return util.inspect(v, this.inspectOpts);
 };
 
 /**
@@ -83,14 +98,9 @@ exports.formatters.O = function(v) {
  * @api public
  */
 
-function formatArgs() {
-  var len = arguments.length;
-  var args = new Array(len);
-  var useColors = this.useColors;
+function formatArgs(args) {
   var name = this.namespace;
-  for (var i = 0; i < len; i++) {
-    args[i] = arguments[i];
-  }
+  var useColors = this.useColors;
 
   if (useColors) {
     var c = this.color;
@@ -102,15 +112,14 @@ function formatArgs() {
     args[0] = new Date().toUTCString()
       + ' ' + name + ' ' + args[0];
   }
-  return args;
 }
 
 /**
- * Invokes `console.error()` with the specified arguments.
+ * Invokes `util.format()` with the specified arguments and writes to `stream`.
  */
 
 function log() {
-  return stream.write(util.format.apply(this, arguments) + '\n');
+  return stream.write(util.format.apply(util, arguments) + '\n');
 }
 
 /**
@@ -209,6 +218,17 @@ function createWritableStdioStream (fd) {
   return stream;
 }
 
+/**
+ * Init logic for `debug` instances.
+ *
+ * Create a new `inspectOpts` object in case `useColors` is set
+ * differently for a particular `debug` instance.
+ */
+
+function init (debug) {
+  debug.inspectOpts = util._extend({}, exports.inspectOpts);
+}
+
 /**
  * Enable namespaces listed in `process.env.DEBUG` initially.
  */