diff --git a/roles/alloy/README.md b/roles/alloy/README.md
index f1f0198b..2ec0e4d4 100644
--- a/roles/alloy/README.md
+++ b/roles/alloy/README.md
@@ -19,13 +19,13 @@ Available variables with their default values are listed below (`defaults/main.y
 | `arch`                | The architecture of the current machine.                             | Based on `ansible_architecture` lookup, defaults to 'amd64'.       |
 | `binary_url`          | URL to Grafana Alloy binary for the specific version and architecture. | Constructed URL based on `version` and `arch` variables.          |
 | `service_name`        | The name to be used for the Grafana Alloy service.                   | "alloy"                                                            |
-| `installation_dir`    | Directory where Grafana Alloy is to be installed.                    | "/etc/alloy"                                                      |
+| `installation_dir`    | Directory where Grafana Alloy binary is to be installed. Must be present.   | "/usr/local/bin"                                                      |
 | `environment_file`    | Name of the environment file for the Grafana Alloy service.          | "service.env"                                                      |
 | `config_dir`          | Directory for Grafana Alloy configuration.                           | "/etc/alloy"                                                      |
 | `config_file`         | Configuration file name for Grafana Alloy.                           | "config.river"                                                     |
 | `service_user`        | User under which the Grafana Alloy service will run.                 | "alloy"                                                            |
 | `service_group`       | Group under which the Grafana Alloy service will run.                | "alloy"                                                            |
-| `working_dir`         | Working directory for the Grafana Alloy service.                     | "/etc/alloy"                                                      |
+| `working_dir`         | Working directory for the Grafana Alloy service.                     | "/var/lib/alloy"                                                      |
 | `env_file_vars`       | Additional environment variables to be set in the service environment file. | {} (Empty dictionary)                                          |
 | `alloy_flags_extra`   | Extra flags to pass to the Alloy service.                            | {} (Empty dictionary)                                              |
 | `start_after_service` | Specify an optional dependency service Alloy should start after.     | '' (Empty string)                                                  |
diff --git a/roles/alloy/defaults/main.yml b/roles/alloy/defaults/main.yml
index e9de0973..3f00bd9d 100644
--- a/roles/alloy/defaults/main.yml
+++ b/roles/alloy/defaults/main.yml
@@ -13,7 +13,7 @@ binary_url: "https://github.com/grafana/alloy/releases/download/v{{ version }}/a
 
 service_name: "alloy"
 
-installation_dir: "/etc/alloy"
+installation_dir: "/usr/local/bin"
 
 environment_file: "service.env"
 
@@ -25,7 +25,7 @@ service_user: "alloy"
 
 service_group: "alloy"
 
-working_dir: "/etc/alloy"
+working_dir: "/var/lib/alloy"
 
 env_file_vars: {}
 
diff --git a/roles/alloy/tasks/configure.yml b/roles/alloy/tasks/configure.yml
index 6a9f7790..61e5220b 100644
--- a/roles/alloy/tasks/configure.yml
+++ b/roles/alloy/tasks/configure.yml
@@ -1,3 +1,12 @@
+- name: Create alloy working directory
+  ansible.builtin.file:
+    path: "{{ working_dir }}"
+    state: directory
+    owner: "{{ service_user }}"
+    group: "{{ service_group }}"
+    mode: "0755"
+  become: true
+  
 - name: Create alloy config directory
   ansible.builtin.file:
     path: "{{ config_dir }}"
diff --git a/roles/alloy/tasks/install.yml b/roles/alloy/tasks/install.yml
index 967d73c3..2ee35999 100644
--- a/roles/alloy/tasks/install.yml
+++ b/roles/alloy/tasks/install.yml
@@ -26,22 +26,13 @@
   become: true
   register: download_result
 
-- name: Remove existing alloy installation directory
+- name: Remove existing alloy binary
   ansible.builtin.file:
-    path: "{{ installation_dir }}"
+    path: "{{ installation_dir }}/alloy-linux-{{ arch }}"
     state: absent
   become: true
   when: download_result.changed
 
-- name: Create alloy installation directory
-  ansible.builtin.file:
-    path: "{{ installation_dir }}"
-    state: directory
-    mode: '0755'
-    owner: "{{ service_user }}"
-    group: "{{ service_group }}"
-  become: true
-
 - name: Extract alloy binary
   ansible.builtin.unarchive:
     src: "/tmp/alloy-{{ version }}.zip"
diff --git a/roles/alloy/templates/alloy.service.j2 b/roles/alloy/templates/alloy.service.j2
index 5e56b330..78626e3e 100644
--- a/roles/alloy/templates/alloy.service.j2
+++ b/roles/alloy/templates/alloy.service.j2
@@ -9,7 +9,7 @@ Restart=always
 User={{ service_user }}
 Group={{ service_group }}
 Environment=HOSTNAME=%H
-EnvironmentFile={{ installation_dir }}/{{ environment_file }}
+EnvironmentFile={{ config_dir }}/{{ environment_file }}
 WorkingDirectory={{ working_dir }}
 ExecStart={{ installation_dir }}/alloy-linux-{{ arch }} run \
 {% for flag, flag_value in alloy_flags_extra.items() %}