diff --git a/dist/setup/index.js b/dist/setup/index.js
index e4e670836..a9d9214a0 100644
--- a/dist/setup/index.js
+++ b/dist/setup/index.js
@@ -6078,7 +6078,15 @@ function cacheDependencies(cache, pythonVersion) {
     });
 }
 function run() {
+    var _a;
     return __awaiter(this, void 0, void 0, function* () {
+        if ((_a = process.env.AGENT_TOOLSDIRECTORY) === null || _a === void 0 ? void 0 : _a.trim()) {
+            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 2f946578e..62c76dba9 100644
--- a/src/setup-python.ts
+++ b/src/setup-python.ts
@@ -22,6 +22,16 @@ async function cacheDependencies(cache: string, pythonVersion: string) {
 }
 
 async function run() {
+  if (process.env.AGENT_TOOLSDIRECTORY?.trim()) {
+    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) {