diff --git a/CMakeLists.txt b/CMakeLists.txt
index 5b0ebe3d..22d2897a 100644
--- a/CMakeLists.txt
+++ b/CMakeLists.txt
@@ -1413,11 +1413,21 @@ endif()
 file(WRITE "${CMAKE_CURRENT_BINARY_DIR}/liblzma-config.cmake"
         "${LZMA_CONFIG_CONTENTS}")
 
-# Create liblzma.pc.
+# Create liblzma.pc. If using CMake >= 3.20 and CMAKE_INSTALL_<dir> paths
+# are relative to CMAKE_INSTALL_PREFIX, the .pc file will be relocatable
+# (that is, all paths will be relative to ${prefix}). Otherwise absolute
+# paths will be used.
 set(prefix "${CMAKE_INSTALL_PREFIX}")
-set(exec_prefix "${CMAKE_INSTALL_PREFIX}")
-set(libdir "${CMAKE_INSTALL_FULL_LIBDIR}")
-set(includedir "${CMAKE_INSTALL_FULL_INCLUDEDIR}")
+set(exec_prefix "\${prefix}")
+
+if(CMAKE_VERSION VERSION_GREATER_EQUAL "3.20")
+    cmake_path(APPEND libdir "\${exec_prefix}" "${CMAKE_INSTALL_LIBDIR}")
+    cmake_path(APPEND includedir "\${prefix}" "${CMAKE_INSTALL_INCLUDEDIR}")
+else()
+    set(libdir "${CMAKE_INSTALL_FULL_LIBDIR}")
+    set(includedir "${CMAKE_INSTALL_FULL_INCLUDEDIR}")
+endif()
+
 set(PTHREAD_CFLAGS "${CMAKE_THREAD_LIBS_INIT}")
 configure_file(src/liblzma/liblzma.pc.in liblzma.pc
                @ONLY