diff --git a/aclocal.m4 b/aclocal.m4
index 6614450a367ac5aef0d9e77f314e1d582cff4e2b..eca1dd63fc3f1952cf69a89c1c4c07df5f4795c1 100644
--- a/aclocal.m4
+++ b/aclocal.m4
@@ -299,6 +299,28 @@ AC_DEFUN(STEPMAKE_DATADIR, [
 ])
 
 
+## ugh: cut & paste programming from datadir.
+AC_DEFUN(STEPMAKE_LIBDIR, [
+    presome=${exec_prefix}
+    if test "$presome" = "NONE"; then
+        presome=${prefix}
+    fi
+    if test "$presome" = "NONE"; then
+        presome=${ac_default_prefix}
+    fi
+
+    build_package_libdir=$ac_pwd/out/lib/$package
+
+    LIBDIR=`echo ${libdir} | sed "s!\\\${exec_prefix}!$presome!"`
+    BUILD_PACKAGE_LIBDIR=`echo ${build_package_libdir} | sed "s!\\\${exec_prefix}!$presome!"`
+
+    AC_SUBST(libdir)
+    AC_SUBST(build_package_libdir)
+    AC_DEFINE_UNQUOTED(CONFIG_LIBDIR, ["${LIBDIR}"])
+    AC_DEFINE_UNQUOTED(BUILD_PACKAGE_LIBDIR, ["${BUILD_PACKAGE_LIBDIR}"])
+])
+
+
 AC_DEFUN(STEPMAKE_PREFIX_EXPAND_FIXUP, [
     # undo expanding of explicit --infodir=/usr/share
     # to ease install-time override with prefix=...
@@ -306,6 +328,10 @@ AC_DEFUN(STEPMAKE_PREFIX_EXPAND_FIXUP, [
     if test "$includedir" = "`eval echo $prefix$strip`"; then
         includedir='${prefix}'$strip''
     fi
+    strip=`echo $libdir | eval sed s@^$exec_prefix@@`
+    if test "$libdir" = "`eval echo $exec_prefix$strip`"; then
+        libdir='${exec_prefix}'$strip''
+    fi
     strip=`echo $infodir | eval sed s@^$datarootdir@@`
     if test "$infodir" = "`eval echo $datarootdir$strip`"; then
         infodir='${datarootdir}'$strip''
@@ -636,6 +662,7 @@ AC_DEFUN(STEPMAKE_INIT, [
     AC_SUBST(ROOTSEP)
 
     STEPMAKE_DATADIR
+    STEPMAKE_LIBDIR
 ])
 
 
diff --git a/config.hh.in b/config.hh.in
index c0d25fb319d07fb632786ada9905efbb4dc0924d..fa5dddda0605c073e6f9e76a1655b1227a34a239 100644
--- a/config.hh.in
+++ b/config.hh.in
@@ -2,8 +2,10 @@
 
 /* datadir */
 #define CONFIG_DATADIR "@CONFIG_DATADIR@"
+#define CONFIG_LIBDIR "@CONFIG_LIBDIR@"
 
 #define PACKAGE_DATADIR CONFIG_DATADIR "/lilypond"
+#define PACKAGE_LIBDIR CONFIG_LIBDIR "/lilypond"
 
 /* default lilypond locale dir */
 #define LOCALEDIR "@LOCALEDIR@"
diff --git a/lily/global-vars.cc b/lily/global-vars.cc
index 0b0aefab9a70a6042b7ea27435f1d68eb6e62143..4496a793bfdb295f99b53134d183f8daf06f15d1 100644
--- a/lily/global-vars.cc
+++ b/lily/global-vars.cc
@@ -55,3 +55,6 @@ File_path global_path;
    LILYPOND_DATADIR = /usr/share/lilypond
 */
 string lilypond_datadir;
+
+/* Where the compiled Guile modules live. */
+string lilypond_libdir;
diff --git a/lily/include/main.hh b/lily/include/main.hh
index 9a5d03269354d642edd0be1a7c0c86f617b16e57..f029a605dc04668ce366746e34bf3f52bfb40d84 100644
--- a/lily/include/main.hh
+++ b/lily/include/main.hh
@@ -32,6 +32,7 @@ extern std::string output_name_global;
 extern bool be_safe_global;
 extern bool do_internal_type_checking_global;
 extern std::string lilypond_datadir;
+extern std::string lilypond_libdir;
 extern bool strict_infinity_checking;
 extern std::string init_scheme_code_global;
 extern std::string init_scheme_variables_global;
diff --git a/lily/main.cc b/lily/main.cc
index 9d37e022f07b3c274b73fc9be322904e8df0c5b0..5564222b35b4fbb0f15d298f537f495b174ae88b 100644
--- a/lily/main.cc
+++ b/lily/main.cc
@@ -493,35 +493,11 @@ main_with_guile (void *, int, char **)
       %load-compiled-path is the symbol Guile V2 searches for .go files
    */
   string scm_pct_load_path = "%load-path";
-  string scm_pct_load_compiled_path = "%load-compiled-path";
-
   prepend_scheme_list (lilypond_datadir + "/scm", scm_pct_load_path);
 
-#if 0
-  /* this code is dead, but keeping this around until we sort the
-     guile2/3 situation. */
-  /*
-    Just as ughy - prepend "/scm/out" onto GUILE V2+ %load-compiled-path
-    and set %compile-fallback-path to our scm/out directory
-  */
-  /*
-    %load-compiled-path is the symbol Guile V2 searches for .go files
-  */
-  prepend_scheme_list (lilypond_datadir + "/scm/out",
-                       scm_pct_load_compiled_path);
-  /*
-    %compile-fallback-path is the guile cache root for auto-compiled files
-  */
-
-  string scm_pct_fallback_path = "%compile-fallback-path";
-  string ly_scm_go_dir = lilypond_datadir + "/scm/out";
-  //string scm_pct_set_fallback = "(set! " + scm_pct_fallback_path +
-  //  " \"" + lilypond_datadir + "/scm/out\")";
-  //scm_c_eval_string (scm_pct_set_fallback.c_str() );
-  scm_primitive_eval
-  (scm_list_3 (scm_from_latin1_symbol ("set!"),
-               scm_from_latin1_symbol ("%compile-fallback-path"),
-               scm_from_locale_string (ly_scm_go_dir.c_str ())));
+#if GUILEV2
+  string scm_pct_load_compiled_path = "%load-compiled-path";
+  prepend_scheme_list (lilypond_libdir + "/ccache", scm_pct_load_compiled_path);
 #endif
 
   if (is_loglevel (LOG_DEBUG))
diff --git a/lily/relocate.cc b/lily/relocate.cc
index b0827dfe1920d8dc3fc6978e16ecb4a0cb5c5c6b..bcb84e743b68ed31fdf673ab3190b48d61a43152 100644
--- a/lily/relocate.cc
+++ b/lily/relocate.cc
@@ -222,6 +222,11 @@ setup_paths (char const *argv0_ptr)
                                        PACKAGE_DATADIR "/" TOPLEVEL_VERSION,
                                        prefix + "/share/lilypond/" TOPLEVEL_VERSION,
                                        prefix + "/share/lilypond/current");
+  lilypond_libdir = set_up_directory ("LILYPOND_LIBDIR",
+                                      "libdir",
+                                      PACKAGE_LIBDIR "/" TOPLEVEL_VERSION,
+                                      prefix + "/lib/lilypond/" TOPLEVEL_VERSION,
+                                      prefix + "/lib/lilypond/current");
   string localedir = set_up_directory ("LILYPOND_LOCALEDIR",
                                        "localedir",
                                        LOCALEDIR,