Python Virtualenv is broken since upgrading to OS X Mountain Lion

Solution 1:

You need to download the Command Line Tools for Mountain Lion.

Xcode installed:

Go to the prefences in Xcode (Xcode -> Preferences), select the 'Downloads' tab and choose to install Command Line Tools

Xcode not installed:

Apple has released a Command Line Tools package that is compatible with Mountain Lion (OS X 10.8.*), check the Apple Developers Download Page. You will need a free developer account for this.

Solution 2:

You need to install Xcode 4.4 (from the app store) and then, within xcode open Xcode > Preferences (or press Cmd + ,) then open the downloads tab and install the Command Line Tools.