diff --git a/doc/manual/rl-next/move-nixdaemon-cache-dirs.md b/doc/manual/rl-next/move-nixdaemon-cache-dirs.md
new file mode 100644
index 000000000..b61eccdd0
--- /dev/null
+++ b/doc/manual/rl-next/move-nixdaemon-cache-dirs.md
@@ -0,0 +1,31 @@
+---
+synopsis: "Move /root/.cache/nix to /var/cache/nix by default"
+cls: [4671]
+issues: [fj#634]
+category: "Breaking Changes"
+credits: [raito]
+---
+
+By default, Lix attempts to locate a cache directory for its operations (such
+as the narinfo cache) by checking the value of `$XDG_CACHE_DIR`.
+
+However, since the Nix daemon is a system service, using `$XDG_CACHE_DIR` is
+not typical in this context.
+
+To address this, systemd provides a better solution. Specifically, when
+`CacheDirectory=` is set in the `[Service]` section of a systemd unit, it
+automatically sets the `$CACHE_DIRECTORY` environment variable and systemd will
+manage that cache directory for us.
+
+Now, our systemd unit includes `CacheDirectory=nix`, which sets the
+`$CACHE_DIRECTORY` and takes precedence over `$XDG_CACHE_DIR`.
+
+If the daemon is run under user units, systemd will automatically set
+`$XDG_CACHE_DIR`.
+
+If neither of these variables is set, Lix falls back to its default behavior.
+By default, Lix will try to find a cache directory for its various operations
+(e.g. narinfo cache) by looking into `$XDG_CACHE_DIR`.
+
+In summary, what was stored in `/root/.cache/nix` is now moved to
+`/var/cache/nix/nix`.
diff --git a/lix/libutil/users.cc b/lix/libutil/users.cc
index bfb674210..ad763263c 100644
--- a/lix/libutil/users.cc
+++ b/lix/libutil/users.cc
@@ -73,8 +73,24 @@ Path getHome()
 
 Path getCacheDir()
 {
-    auto cacheDir = getEnv("XDG_CACHE_HOME");
-    return cacheDir ? *cacheDir : getHome() + "/.cache";
+    // We follow systemd semantics here:
+    // https://www.freedesktop.org/software/systemd/man/latest/systemd.exec.html#RuntimeDirectory=
+    static auto cacheDir = [] {
+        auto userCacheDir = getEnv("XDG_CACHE_HOME");
+        auto serviceCacheDir = getEnv("CACHE_DIRECTORY");
+
+        if (serviceCacheDir) {
+            return *serviceCacheDir;
+        }
+
+        if (userCacheDir) {
+            return *userCacheDir;
+        }
+
+        return getHome() + "/.cache";
+    }();
+
+    return cacheDir;
 }
 
 
diff --git a/misc/systemd/nix-daemon.service.in b/misc/systemd/nix-daemon.service.in
index 88d60ea7d..cf0cd7292 100644
--- a/misc/systemd/nix-daemon.service.in
+++ b/misc/systemd/nix-daemon.service.in
@@ -8,6 +8,7 @@ ConditionPathIsReadWrite=@localstatedir@/nix/daemon-socket
 
 [Service]
 ExecStart=@@bindir@/nix-daemon nix-daemon --daemon
+CacheDirectory=nix
 KillMode=process
 LimitNOFILE=1048576
 TasksMax=1048576