diff --git a/prelude/prelude-packages.el b/prelude/prelude-packages.el
index 301fff8..382541a 100644
--- a/prelude/prelude-packages.el
+++ b/prelude/prelude-packages.el
@@ -36,6 +36,8 @@
 (require 'package)
 (add-to-list 'package-archives
              '("melpa" . "http://melpa.milkbox.net/packages/") t)
+;; set package-user-dir to be relative to Prelude install path
+(setq package-user-dir (expand-file-name "elpa" prelude-dir))
 (package-initialize)
 
 ;; required because of a package.el bug