diff --git a/src/Grpc.Net.Client/GrpcChannel.cs b/src/Grpc.Net.Client/GrpcChannel.cs
index 7420482bd..5d80e9e31 100644
--- a/src/Grpc.Net.Client/GrpcChannel.cs
+++ b/src/Grpc.Net.Client/GrpcChannel.cs
@@ -113,7 +113,6 @@ internal GrpcChannel(Uri address, GrpcChannelOptions channelOptions) : base(addr
             Address = address;
             LoggerFactory = channelOptions.LoggerFactory ?? channelOptions.ResolveService<ILoggerFactory>(NullLoggerFactory.Instance);
             RandomGenerator = channelOptions.ResolveService<IRandomGenerator>(new RandomGenerator());
-            (HttpHandlerType, ConnectTimeout) = CalculateHandlerContext(channelOptions);
 
 #if SUPPORT_LOAD_BALANCING
             InitialReconnectBackoff = channelOptions.InitialReconnectBackoff;
@@ -121,10 +120,11 @@ internal GrpcChannel(Uri address, GrpcChannelOptions channelOptions) : base(addr
 
             var resolverFactory = GetResolverFactory(channelOptions);
             ResolveCredentials(channelOptions, out _isSecure, out _callCredentials);
+            (HttpHandlerType, ConnectTimeout) = CalculateHandlerContext(address, _isSecure, channelOptions);
 
             SubchannelTransportFactory = channelOptions.ResolveService<ISubchannelTransportFactory>(new SubChannelTransportFactory(this));
 
-            if (!IsHttpOrHttpsAddress() || channelOptions.ServiceConfig?.LoadBalancingConfigs.Count > 0)
+            if (!IsHttpOrHttpsAddress(Address) || channelOptions.ServiceConfig?.LoadBalancingConfigs.Count > 0)
             {
                 ValidateHttpHandlerSupportsConnectivity();
             }
@@ -149,6 +149,7 @@ internal GrpcChannel(Uri address, GrpcChannelOptions channelOptions) : base(addr
                 throw new ArgumentException($"Address '{address.OriginalString}' doesn't have a host. Address should include a scheme, host, and optional port. For example, 'https://localhost:5001'.");
             }
             ResolveCredentials(channelOptions, out _isSecure, out _callCredentials);
+            (HttpHandlerType, ConnectTimeout) = CalculateHandlerContext(address, _isSecure, channelOptions);
 #endif
 
             HttpInvoker = channelOptions.HttpClient ?? CreateInternalHttpInvoker(channelOptions.HttpHandler);
@@ -213,12 +214,12 @@ private void ResolveCredentials(GrpcChannelOptions channelOptions, out bool isSe
             }
         }
 
-        private bool IsHttpOrHttpsAddress()
+        private static bool IsHttpOrHttpsAddress(Uri address)
         {
-            return Address.Scheme == Uri.UriSchemeHttps || Address.Scheme == Uri.UriSchemeHttp;
+            return address.Scheme == Uri.UriSchemeHttps || address.Scheme == Uri.UriSchemeHttp;
         }
 
-        private static HttpHandlerContext CalculateHandlerContext(GrpcChannelOptions channelOptions)
+        private static HttpHandlerContext CalculateHandlerContext(Uri address, bool isSecure, GrpcChannelOptions channelOptions)
         {
             if (channelOptions.HttpHandler == null)
             {
@@ -262,7 +263,10 @@ private static HttpHandlerContext CalculateHandlerContext(GrpcChannelOptions cha
                 // If a proxy is specified then requests could be sent via an SSL tunnel.
                 // A CONNECT request is made to the proxy to establish the transport stream and then
                 // gRPC calls are sent via stream. This feature isn't supported by load balancer.
-                if (socketsHttpHandler.Proxy != null)
+                // Proxy can be specified via:
+                // - SocketsHttpHandler.Proxy. Set via app code.
+                // - HttpClient.DefaultProxy. Set via environment variables, e.g. HTTPS_PROXY.
+                if (IsProxied(socketsHttpHandler, address, isSecure))
                 {
                     type = HttpHandlerType.Custom;
                     connectTimeout = null;
@@ -281,6 +285,33 @@ private static HttpHandlerContext CalculateHandlerContext(GrpcChannelOptions cha
             return new HttpHandlerContext(HttpHandlerType.Custom);
         }
 
+#if NET5_0_OR_GREATER
+        private static readonly Uri HttpLoadBalancerTemporaryUri = new Uri("http://loadbalancer.temporary.invalid");
+        private static readonly Uri HttpsLoadBalancerTemporaryUri = new Uri("https://loadbalancer.temporary.invalid");
+
+        private static bool IsProxied(SocketsHttpHandler socketsHttpHandler, Uri address, bool isSecure)
+        {
+            // Check standard address directly.
+            // When load balancing the channel doesn't know the final addresses yet so use temporary address.
+            Uri resolvedAddress;
+            if (IsHttpOrHttpsAddress(address))
+            {
+                resolvedAddress = address;
+            }
+            else if (isSecure)
+            {
+                resolvedAddress = HttpsLoadBalancerTemporaryUri;
+            }
+            else
+            {
+                resolvedAddress = HttpLoadBalancerTemporaryUri;
+            }
+
+            var proxy = socketsHttpHandler.Proxy ?? HttpClient.DefaultProxy;
+            return proxy.GetProxy(resolvedAddress) != null;
+        }
+#endif
+
 #if SUPPORT_LOAD_BALANCING
         private ResolverFactory GetResolverFactory(GrpcChannelOptions options)
         {
@@ -289,7 +320,7 @@ private ResolverFactory GetResolverFactory(GrpcChannelOptions options)
             //
             // Even with just one address we still want to use the load balancing infrastructure. This enables
             // the connectivity APIs on channel like GrpcChannel.State and GrpcChannel.WaitForStateChanged.
-            if (IsHttpOrHttpsAddress())
+            if (IsHttpOrHttpsAddress(Address))
             {
                 return new StaticResolverFactory(uri => new[] { new BalancerAddress(Address.Host, Address.Port) });
             }