diff --git a/Lib/test/test_urllib2_localnet.py b/Lib/test/test_urllib2_localnet.py
index 9e1ce5bb9ed..f07471dd0ef 100644
--- a/Lib/test/test_urllib2_localnet.py
+++ b/Lib/test/test_urllib2_localnet.py
@@ -352,6 +352,8 @@ class TestUrlopen(unittest.TestCase):
 
     def setUp(self):
         super(TestUrlopen, self).setUp()
+        # Ignore proxies for localhost tests.
+        os.environ['NO_PROXY'] = '*'
         self.server = None
 
     def tearDown(self):
diff --git a/Misc/NEWS b/Misc/NEWS
index a93024a8ecf..880e23aa92e 100644
--- a/Misc/NEWS
+++ b/Misc/NEWS
@@ -179,6 +179,9 @@ Core and Builtins
 Library
 -------
 
+- Issue #16702: test_urllib2_localnet tests now correctly ignores proxies for
+  localhost tests.
+
 - Issue #16511: Use default IDLE width and height if config param is not valid.
   Patch Serhiy Storchaka.