diff --git a/README.md b/README.md
index 96bfa858..8cbc6dc5 100644
--- a/README.md
+++ b/README.md
@@ -105,16 +105,14 @@ tldextract http://forums.bbc.co.uk
 ### Note About Caching
 
 Beware when first running the module, it updates its TLD list with a live HTTP
-request. This updated TLD set is cached indefinitely in
-`/path/to/tldextract/.tld_set`.
+request. This updated TLD set is usually cached indefinitely in ``$HOME/.cache/python-tldextract`.
+To control the cache's location, set TLDEXTRACT_CACHE environment variable or set the
+cache_dir path in TLDExtract initialization.
 
 (Arguably runtime bootstrapping like that shouldn't be the default behavior,
 like for production systems. But I want you to have the latest TLDs, especially
 when I haven't kept this code up to date.)
 
-To avoid this fetch or control the cache's location, use your own extract
-callable by setting TLDEXTRACT_CACHE environment variable or by setting the
-cache_dir path in TLDExtract initialization.
 
 ```python
 # extract callable that falls back to the included TLD snapshot, no live HTTP fetching
diff --git a/tests/test_cache.py b/tests/test_cache.py
index 6c53ed3c..b148ae15 100644
--- a/tests/test_cache.py
+++ b/tests/test_cache.py
@@ -1,6 +1,12 @@
 """Test the caching functionality"""
+import os.path
+import sys
+import types
+
 import pytest
-from tldextract.cache import DiskCache
+
+import tldextract.cache
+from tldextract.cache import DiskCache, get_pkg_unique_identifier, get_cache_dir
 
 
 def test_disk_cache(tmpdir):
@@ -15,3 +21,45 @@ def test_disk_cache(tmpdir):
 
     cache.set("testing", "foo", "baz")
     assert cache.get("testing", "foo") == "baz"
+
+
+def test_get_pkg_unique_identifier(monkeypatch):
+    monkeypatch.setattr(sys, "version_info", (3, 8, 1, "final", 0))
+    monkeypatch.setattr(sys, "prefix", "/home/john/.pyenv/versions/myvirtualenv")
+
+    mock_version_module = types.ModuleType('tldextract._version', 'mocked module')
+    mock_version_module.version = "1.2.3"
+    monkeypatch.setitem(sys.modules, "tldextract._version", mock_version_module)
+
+    assert get_pkg_unique_identifier() == "3.8.1.final__myvirtualenv__f01a7b__tldextract-1.2.3"
+
+
+def test_get_cache_dir(monkeypatch):
+    pkg_identifier = "3.8.1.final__myvirtualenv__f01a7b__tldextract-1.2.3"
+    monkeypatch.setattr(tldextract.cache, "get_pkg_unique_identifier", lambda: pkg_identifier)
+
+    # with no HOME set, fallback to attempting to use package directory itself
+    monkeypatch.delenv("HOME", raising=False)
+    monkeypatch.delenv("XDG_CACHE_HOME", raising=False)
+    monkeypatch.delenv("TLDEXTRACT_CACHE", raising=False)
+    assert get_cache_dir().endswith("tldextract/.suffix_cache/")
+
+    # with home set, but not anything else specified, use XDG_CACHE_HOME default
+    monkeypatch.setenv("HOME", "/home/john")
+    monkeypatch.delenv("XDG_CACHE_HOME", raising=False)
+    monkeypatch.delenv("TLDEXTRACT_CACHE", raising=False)
+    assert get_cache_dir() == os.path.join("/home/john", ".cache/python-tldextract", pkg_identifier)
+
+    # if XDG_CACHE_HOME is set, use it
+    monkeypatch.setenv("HOME", "/home/john")
+    monkeypatch.setenv("XDG_CACHE_HOME", "/my/alt/cache")
+    monkeypatch.delenv("TLDEXTRACT_CACHE", raising=False)
+
+    assert get_cache_dir() == os.path.join("/my/alt/cache/python-tldextract", pkg_identifier)
+
+    # if TLDEXTRACT_CACHE is set, use it
+    monkeypatch.setenv("HOME", "/home/john")
+    monkeypatch.setenv("XDG_CACHE_HOME", "/my/alt/cache")
+    monkeypatch.setenv("TLDEXTRACT_CACHE", "/alt-tld-cache")
+
+    assert get_cache_dir() == "/alt-tld-cache"
diff --git a/tldextract/cache.py b/tldextract/cache.py
index e1e95aff..0059a10a 100644
--- a/tldextract/cache.py
+++ b/tldextract/cache.py
@@ -1,9 +1,11 @@
 """Helpers """
 import errno
+import hashlib
 import json
 import logging
 import os
 import os.path
+import sys
 from hashlib import md5
 
 from filelock import FileLock
@@ -13,8 +15,59 @@
 _DID_LOG_UNABLE_TO_CACHE = False
 
 
+def get_pkg_unique_identifier():
+    """
+    Generate an identifier unique to the python version, tldextract version, and python instance
+
+    This will prevent interference between virtualenvs and issues that might arise when installing
+    a new version of tldextract
+    """
+    try:
+        # pylint: disable=import-outside-toplevel
+        from tldextract._version import version
+    except ImportError:
+        version = "dev"
+
+    tldextract_version = "tldextract-" + version
+    python_env_name = os.path.basename(sys.prefix)
+    # just to handle the edge case of two identically named python environments
+    python_binary_path_short_hash = hashlib.md5(sys.prefix.encode("utf-8")).hexdigest()[:6]
+    python_version = ".".join([str(v) for v in sys.version_info[:-1]])
+    identifier_parts = [
+        python_version,
+        python_env_name,
+        python_binary_path_short_hash,
+        tldextract_version
+    ]
+    pkg_identifier = "__".join(identifier_parts)
+
+    return pkg_identifier
+
+
+def get_cache_dir():
+    """
+    Get a cache dir that we have permission to write to
+
+    Try to follow the XDG standard, but if that doesn't work fallback to the package directory
+    """
+    try:
+        # http://specifications.freedesktop.org/basedir-spec/basedir-spec-latest.html
+        xdg_cache_home = os.getenv("XDG_CACHE_HOME", None)
+        if xdg_cache_home is None:
+            user_home = os.getenv("HOME", None)
+            xdg_cache_home = os.path.join(user_home, ".cache")
+        pkg_id = get_pkg_unique_identifier()
+        cache_dir_default = os.path.join(xdg_cache_home, "python-tldextract", pkg_id)
+
+        return os.path.expanduser(os.environ.get("TLDEXTRACT_CACHE", cache_dir_default))
+    except TypeError:  # noqa
+        # fallback to trying to use package directory itself
+        return os.path.join(os.path.dirname(__file__), ".suffix_cache/")
+
+
 class DiskCache:
     """Disk _cache that only works for jsonable values"""
+    NOT_SET = object()
 
     def __init__(self, cache_dir, lock_timeout=20):
         self.enabled = bool(cache_dir)
diff --git a/tldextract/tldextract.py b/tldextract/tldextract.py
index 04744d1c..536f056d 100644
--- a/tldextract/tldextract.py
+++ b/tldextract/tldextract.py
@@ -56,14 +56,13 @@
 
 import idna
 
-from .cache import DiskCache
+from .cache import DiskCache, get_cache_dir
 from .remote import IP_RE, SCHEME_RE, looks_like_ip
 from .suffix_list import get_suffix_lists
 
 LOG = logging.getLogger("tldextract")
 
-CACHE_DIR_DEFAULT = os.path.join(os.path.dirname(__file__), ".suffix_cache/")
-CACHE_DIR = os.path.expanduser(os.environ.get("TLDEXTRACT_CACHE", CACHE_DIR_DEFAULT))
+
 CACHE_TIMEOUT = os.environ.get("TLDEXTRACT_CACHE_TIMEOUT")
 
 PUBLIC_SUFFIX_LIST_URLS = (
@@ -131,7 +130,7 @@ class TLDExtract:
     # TODO: Agreed with Pylint: too-many-arguments
     def __init__(  # pylint: disable=too-many-arguments
         self,
-        cache_dir=CACHE_DIR,
+        cache_dir=get_cache_dir(),
         suffix_list_urls=PUBLIC_SUFFIX_LIST_URLS,
         fallback_to_snapshot=True,
         include_psl_private_domains=False,