diff --git a/UPGRADE-2.0.md b/UPGRADE-2.0.md
index fa2b176f4..df2b41359 100644
--- a/UPGRADE-2.0.md
+++ b/UPGRADE-2.0.md
@@ -5,6 +5,7 @@
 - The new platform-check feature means that Composer checks the runtime PHP version and available extensions to ensure they match the project dependencies. If a mismatch is found, it exits with error details to make sure problems are not overlooked. To avoid issues when deploying to production it is recommended to run `composer check-platform-reqs` with the production PHP process as part of your build or deployment process.
 - If a package exists in a higher priority repository, it will now be entirely ignored in lower priority repositories. See [repository priorities](https://getcomposer.org/repoprio) for details.
 - Invalid PSR-0 / PSR-4 class configurations will not autoload anymore in optimized-autoloader mode, as per the warnings introduced in 1.10
+- On linux systems supporting the XDG Base Directory Specification, Composer will now prefer using XDG_CONFIG_DIR/composer over ~/.composer if both are available (1.x used ~/.composer first)
 - Package names now must comply to our [naming guidelines](doc/04-schema.md#name) or Composer will abort, as per the warnings introduced in 1.8.1
 - Deprecated --no-suggest flag as it is not needed anymore
 - PEAR support (repository, downloader, etc.) has been removed
diff --git a/src/Composer/Factory.php b/src/Composer/Factory.php
index 8eb2d24cf..e0947b46a 100644
--- a/src/Composer/Factory.php
+++ b/src/Composer/Factory.php
@@ -69,18 +69,32 @@ class Factory
         }
 
         $userDir = self::getUserDir();
-        if (is_dir($userDir . '/.composer')) {
-            return $userDir . '/.composer';
-        }
+        $dirs = array();
 
         if (self::useXdg()) {
             // XDG Base Directory Specifications
-            $xdgConfig = getenv('XDG_CONFIG_HOME') ?: $userDir . '/.config';
+            $xdgConfig = getenv('XDG_CONFIG_HOME');
+            if (!$xdgConfig && is_dir('/etc/xdg')) {
+                $xdgConfig = '/etc/xdg';
+            }
+            if (!$xdgConfig) {
+                $xdgConfig = $userDir . '/.config';
+            }
 
-            return $xdgConfig . '/composer';
+            $dirs[] = $xdgConfig . '/composer';
         }
 
-        return $userDir . '/.composer';
+        $dirs[] = $userDir . '/.composer';
+
+        // select first dir which exists of: $XDG_CONFIG_HOME/composer or ~/.composer
+        foreach ($dirs as $dir) {
+            if (is_dir($dir)) {
+                return $dir;
+            }
+        }
+
+        // if none exists, we default to first defined one (XDG one if system uses it, or ~/.composer otherwise)
+        return $dirs[0];
     }
 
     /**
@@ -644,6 +658,10 @@ class Factory
             }
         }
 
+        if (is_dir('/etc/xdg')) {
+            return true;
+        }
+
         return false;
     }