diff --git a/dist/setup/index.js b/dist/setup/index.js
index a742d588..8c0f675d 100644
--- a/dist/setup/index.js
+++ b/dist/setup/index.js
@@ -6645,6 +6645,13 @@ function cacheDependencies(cache, pythonVersion) {
 }
 function run() {
     return __awaiter(this, void 0, void 0, function* () {
+        if (process.env['AGENT_TOOLSDIRECTORY'] !== undefined) {
+            core.debug('Python is expected to be installed into AGENT_TOOLSDIRECTORY=' + process.env['AGENT_TOOLSDIRECTORY']);
+            process.env['RUNNER_TOOL_CACHE'] = process.env['AGENT_TOOLSDIRECTORY'];
+        }
+        else {
+            core.debug('Python is expected to be installed into RUNNER_TOOL_CACHE=' + process.env['RUNNER_TOOL_CACHE']);
+        }
         try {
             const version = core.getInput('python-version');
             if (version) {
diff --git a/src/setup-python.ts b/src/setup-python.ts
index 3a19efe1..9b1fd353 100644
--- a/src/setup-python.ts
+++ b/src/setup-python.ts
@@ -25,6 +25,13 @@ async function cacheDependencies(cache: string, pythonVersion: string) {
 }
 
 async function run() {
+
+  if (process.env['AGENT_TOOLSDIRECTORY'] !== undefined) {
+    core.debug('Python is expected to be installed into AGENT_TOOLSDIRECTORY=' + process.env['AGENT_TOOLSDIRECTORY'] )
+    process.env['RUNNER_TOOL_CACHE'] = process.env['AGENT_TOOLSDIRECTORY']
+  } else {
+    core.debug('Python is expected to be installed into RUNNER_TOOL_CACHE=' + process.env['RUNNER_TOOL_CACHE'] )
+  }
   try {
     const version = core.getInput('python-version');
     if (version) {