diff --git a/cabal-install/Distribution/Client/SetupWrapper.hs b/cabal-install/Distribution/Client/SetupWrapper.hs
index c4ff805a97f..6069f87063a 100644
--- a/cabal-install/Distribution/Client/SetupWrapper.hs
+++ b/cabal-install/Distribution/Client/SetupWrapper.hs
@@ -78,7 +78,7 @@ import Distribution.Simple.Setup
 import Distribution.Simple.Utils
          ( die, debug, info, cabalVersion, tryFindPackageDesc, comparing
          , createDirectoryIfMissingVerbose, installExecutableFile
-         , copyFileVerbose, rewriteFile, intercalate )
+         , copyFileVerbose, rewriteFile, intercalate, warn )
 import Distribution.Client.Utils
          ( inDir, tryCanonicalizePath, withExtraPathEnv
          , existsAndIsMoreRecentThan, moreRecentFile, withEnv
@@ -480,6 +480,11 @@ getExternalSetupMethod verbosity options pkg bt = do
   createDirectoryIfMissingVerbose verbosity True setupDir
   (cabalLibVersion, mCabalLibInstalledPkgId, options') <- cabalLibVersionToUse
   debug verbosity $ "Using Cabal library version " ++ display cabalLibVersion
+  when (cabalLibVersion < cabalVersion) $
+    warn verbosity $
+    "The external Setup method uses Cabal-" ++ display cabalLibVersion ++
+    ", but cabal-install uses Cabal-" ++ display cabalVersion ++
+    ".  If this fails, update the Setup script."
   path <- if useCachedSetupExecutable
           then getCachedSetupExecutable options'
                cabalLibVersion mCabalLibInstalledPkgId
diff --git a/cabal-install/changelog b/cabal-install/changelog
index 616ad386280..f4652094a96 100644
--- a/cabal-install/changelog
+++ b/cabal-install/changelog
@@ -20,6 +20,8 @@
 	* The '-v/--verbosity' option no longer affects GHC verbosity
 	(except in the case of '-v0'). Use '--ghc-options=-v' to enable
 	verbose GHC output (#3540, #3671).
+	* Added a warning when the external setup method uses a Cabal library
+	older than that used to build cabal-install (#707).
 
 1.24.0.0 Ryan Thomas <ryan@ryant.org> March 2016
 	* If there are multiple remote repos, 'cabal update' now updates