diff --git a/CHANGELOG.md b/CHANGELOG.md
index 770433da..dbff4797 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -5,6 +5,7 @@
  * When installing a Titanium SDK using the CI version name, but omitting the branch, it now automatically scans all branches [TIMOB-15899]
  * Fixed 'sdk' command to display custom Titanium SDK paths in SDK Install Locations [TIMOB-16141]
  * Fixed bug where the password was not being discarded after logging in and ends up confusing the Android build [TIMOB-16422]
+ * Fixed disabling of colors for 'setup' command. Also fixed --no-color flag [TIMOB-16853]
 
 3.2.2
 -------------------
diff --git a/lib/commands/setup.js b/lib/commands/setup.js
index 0180829b..ed618074 100644
--- a/lib/commands/setup.js
+++ b/lib/commands/setup.js
@@ -43,6 +43,8 @@ exports.extendedDesc = __f('commands/setup');
  * @returns {Object} Setup command configuration
  */
 exports.config = function (logger, config, cli) {
+	fields.setup({ colors: cli.argv.colors });
+
 	return {
 		noAuth: true,
 		args: [
@@ -68,10 +70,6 @@ exports.config = function (logger, config, cli) {
 exports.run = function (logger, config, cli, finished) {
 	logger.log(__('Enter %s at any time to quit.', 'ctrl-c'.cyan));
 
-	fields.setup({
-		colors: !!config.get('cli.colors')
-	});
-
 	var screens = new SetupScreens(logger, config, cli);
 
 	var queue = async.queue(function (screen, callback) {
diff --git a/lib/titanium.js b/lib/titanium.js
index 094a6106..db7ac967 100644
--- a/lib/titanium.js
+++ b/lib/titanium.js
@@ -208,13 +208,20 @@ function run(locale) {
 			},
 			'colors': {
 				callback: function (value) {
-					var c = value !== false;
+					var c = process.stdout.isTTY ? value !== false : false;
 					colors.mode = c ? 'console' : 'none';
 					Object.keys(logger.transports).forEach(function (name) {
 						logger.transports[name].colorize = c;
 					});
+					if (!value) {
+						// since this function is called whenever --no-color or --no-colors is set
+						// and we don't know which one it was, we set whichever is not set and the
+						// parser will correctly set --no-colors
+						cli.argv.$_.indexOf('--no-color') == -1 && cli.argv.$_.push('--no-color');
+						cli.argv.$_.indexOf('--no-colors') == -1 && cli.argv.$_.push('--no-colors');
+					}
 				},
-				default: config.get('cli.colors', true),
+				default: process.stdout.isTTY ? config.get('cli.colors', true) : false,
 				desc: __('disable colors'),
 				hideDefault: true,
 				negate: true
@@ -235,7 +242,7 @@ function run(locale) {
 				negate: true
 			},
 			'progress-bars': {
-				default: config.get('cli.progressBars', true),
+				default: process.stdout.isTTY ? config.get('cli.progressBars', true) : false,
 				desc: __('disable progress bars'),
 				hideDefault: true,
 				negate: true