diff --git a/ChangeLog b/ChangeLog
index f742b8688d..557b981aad 100644
--- a/ChangeLog
+++ b/ChangeLog
@@ -1,3 +1,9 @@
+Sun Dec 28 23:49:37 2014  Michal Papis  <mpapis@gmail.com>
+
+	* rbinstall.rb: fix target location for installing bundled gems.
+	  install to the prepared directory instead of default Gem.dir,
+	  not to be affected GEM_HOME environment variable.  [Fix GH-798]
+
 Sun Dec 28 18:19:28 2014  Eric Wong  <e@80x24.org>
 
 	* test/-ext-/iseq_load/test_iseq_load.rb
diff --git a/tool/rbinstall.rb b/tool/rbinstall.rb
index db36a2159c..0d15a591a7 100755
--- a/tool/rbinstall.rb
+++ b/tool/rbinstall.rb
@@ -719,7 +719,7 @@ install?(:ext, :comm, :gem) do
     directories = Gem.ensure_gem_subdirectories(gem_dir, :mode => $dir_mode)
     prepare "bundle gems", gem_dir, directories
     Dir.glob(srcdir+'/gems/*.gem').each do |gem|
-      Gem.install gem, Gem::Requirement.default, :install_dir => with_destdir(Gem.dir), :domain => :local, :ignore_dependencies => true
+      Gem.install gem, Gem::Requirement.default, :install_dir => with_destdir(gem_dir), :domain => :local, :ignore_dependencies => true
       gemname = Pathname(gem).basename
       puts "#{" "*30}#{gemname}"
     end