diff --git a/NEWS.md b/NEWS.md
index beba643cd67ee..58346e59eb0ef 100644
--- a/NEWS.md
+++ b/NEWS.md
@@ -288,6 +288,9 @@ Miscellaneous changes
   * `julia-release-*` executables renamed to `julia-*`,
     and `libjulia-release` renamed to `libjulia` ([#4177]).
 
+  * Packages will now be installed in `.julia/vX.Y`, where
+    X.Y is the current Julia version.
+
 Bugfixes and performance updates
 --------------------------------
 
diff --git a/base/pkg/cache.jl b/base/pkg/cache.jl
index ecda6939b5009..576652e71be70 100644
--- a/base/pkg/cache.jl
+++ b/base/pkg/cache.jl
@@ -1,11 +1,33 @@
 module Cache
 
-using Base.Git, ..Types
+import Base.Git, ..Dir
+using ..Types
 
 path(pkg::String) = abspath(".cache", pkg)
 
+function mkcachedir()
+    cache = joinpath(realpath("."), ".cache")
+    if isdir(cache)
+        return
+    end
+
+    @windows_only mkdir(cache)
+    @unix_only begin
+        if Dir.isversioned(pwd())
+            rootcache = joinpath(realpath(".."), ".cache")
+            if !isdir(rootcache)
+                mkdir(rootcache)
+            end
+            run(`ln -s $rootcache $cache`)
+            return
+        end
+        mkdir(cache)
+    end
+end
+
+
 function prefetch{S<:String}(pkg::String, url::String, sha1s::Vector{S})
-    isdir(".cache") || mkdir(".cache")
+    isdir(".cache") || mkcachedir()
     cache = path(pkg)
     if !isdir(cache)
         info("Cloning cache of $pkg from $url")
diff --git a/base/pkg/dir.jl b/base/pkg/dir.jl
index afa3ffe773b4b..4e1a03693f8f0 100644
--- a/base/pkg/dir.jl
+++ b/base/pkg/dir.jl
@@ -5,13 +5,16 @@ import ..Pkg: DEFAULT_META, META_BRANCH
 
 const DIR_NAME = ".julia"
 
+_pkgroot() = abspath(get(ENV,"JULIA_PKGDIR",joinpath(homedir(),DIR_NAME)))
+isversioned(p::String) = ((x,y) = (VERSION.major, VERSION.minor); basename(p) == "v$x.$y")
+
 function path()
-    b = abspath(get(ENV,"JULIA_PKGDIR",joinpath(homedir(),DIR_NAME)))
+    b = _pkgroot()
     x, y = VERSION.major, VERSION.minor
     d = joinpath(b,"v$x.$y")
-    isdir(d) && return d
-    d = joinpath(b,"v$x")
-    isdir(d) && return d
+    if isdir(d) || !isdir(b) || !isdir(joinpath(b, "METADATA"))
+        return d
+    end
     return b
 end
 path(pkg::String...) = normpath(path(),pkg...)