diff --git a/Makefile b/Makefile
index 95ffede3..e3c1c396 100644
--- a/Makefile
+++ b/Makefile
@@ -100,7 +100,7 @@ install-inc:
 	install -d $(DESTDIR)$(INCDIR)
 	install -m644 $(HFILES) $(DESTDIR)$(INCDIR)
 	install -d $(DESTDIR)$(LIBDIR)/pkgconfig
-	sed -e "s,@PREFIX@,$(PREFIX)," -e "s,@LIBDIR@,$(LIBDIR)," -e "s,@VERSION@,$(VERSION)," <vterm.pc.in >$(DESTDIR)$(LIBDIR)/pkgconfig/vterm.pc
+	sed -e "s,@INCDIR@,$(INCDIR)," -e "s,@LIBDIR@,$(LIBDIR)," -e "s,@VERSION@,$(VERSION)," <vterm.pc.in >$(DESTDIR)$(LIBDIR)/pkgconfig/vterm.pc
 
 install-lib: $(LIBRARY)
 	install -d $(DESTDIR)$(LIBDIR)
diff --git a/vterm.pc.in b/vterm.pc.in
index c64c72dd..8d7e59a1 100644
--- a/vterm.pc.in
+++ b/vterm.pc.in
@@ -1,6 +1,5 @@
-prefix=@PREFIX@
 libdir=@LIBDIR@
-includedir=${prefix}/include
+includedir=@INCDIR@
 
 Name: vterm
 Description: Abstract VT220/Xterm/ECMA-48 emulation library