diff --git a/README.md b/README.md
index 171a9ba..dde80a5 100644
--- a/README.md
+++ b/README.md
@@ -60,8 +60,17 @@ rostr add
 # Generate configs
 rostr sync
 
+# The base directory (BASE_DIR) is determined as:
+# - If ROSTR_HOME is set: $ROSTR_HOME
+# - If XDG_CONFIG_HOME is set: $XDG_CONFIG_HOME/rostr
+# - Otherwise: ~/.rostr
+
+# Set BASE_DIR for use in commands below
+BASE_DIR="${ROSTR_HOME:-${XDG_CONFIG_HOME:+$XDG_CONFIG_HOME/rostr}}"
+BASE_DIR="${BASE_DIR:-$HOME/.rostr}"
+
 # Include in your SSH config
-echo "Include ~/.rostr/generated/ssh_config" >> ~/.ssh/config
+echo "Include $BASE_DIR/generated/ssh_config" >> ~/.ssh/config
 ```
 
 ## Usage
@@ -108,7 +117,11 @@ rostr setup automation          # Configure cloud-init registration
 ## Directory Structure
 
 ```
-~/.rostr/
+# Set BASE_DIR for reference
+BASE_DIR="${ROSTR_HOME:-${XDG_CONFIG_HOME:+$XDG_CONFIG_HOME/rostr}}"
+BASE_DIR="${BASE_DIR:-$HOME/.rostr}"
+
+$BASE_DIR/
 ├── config.yaml              # Configuration
 ├── inventory/
 │   ├── _defaults.yaml       # Default values
@@ -150,7 +163,11 @@ servers:
 ### SSH Config
 
 ```
-# ~/.rostr/generated/ssh_config
+# Set BASE_DIR for reference
+BASE_DIR="${ROSTR_HOME:-${XDG_CONFIG_HOME:+$XDG_CONFIG_HOME/rostr}}"
+BASE_DIR="${BASE_DIR:-$HOME/.rostr}"
+
+# $BASE_DIR/generated/ssh_config
 Host web-prod-01
     HostName 10.0.1.10
     User admin
@@ -165,7 +182,11 @@ Groups are auto-generated by:
 - Notes: `notes_primary`
 
 ```bash
-ansible -i ~/.rostr/generated/ansible-inventory.yaml tag_webserver -m ping
+# Set BASE_DIR for reference
+BASE_DIR="${ROSTR_HOME:-${XDG_CONFIG_HOME:+$XDG_CONFIG_HOME/rostr}}"
+BASE_DIR="${BASE_DIR:-$HOME/.rostr}"
+
+ansible -i $BASE_DIR/generated/ansible-inventory.yaml tag_webserver -m ping
 ```
 
 ## Configuration
diff --git a/docs/CONFIGURATION.md b/docs/CONFIGURATION.md
index 4c35553..4ff65b5 100644
--- a/docs/CONFIGURATION.md
+++ b/docs/CONFIGURATION.md
@@ -65,7 +65,8 @@ These are applied when adding servers if not explicitly specified.
 
 | Variable | Description | Default |
 |----------|-------------|---------|
-| `ROSTR_HOME` | Base directory | `~/.rostr` |
+| `ROSTR_HOME` | Base directory | `$XDG_CONFIG_HOME/rostr` or `~/.rostr` |
+| `XDG_CONFIG_HOME` | XDG config directory | `~/.config` |
 | `ROSTR_UPTIMEKUMA_SSH_HOST` | SSH host override | From config |
 | `ROSTR_UPTIMEKUMA_DOCKER_CMD` | Docker command path | `docker` |
 | `ROSTR_UPTIMEKUMA_DB_USER` | Database username | `kuma` |
diff --git a/src/rostr/cli.py b/src/rostr/cli.py
index 0aa4f35..b241300 100644
--- a/src/rostr/cli.py
+++ b/src/rostr/cli.py
@@ -10,6 +10,7 @@
 import logging
 import os
 import re
+import shutil
 import subprocess
 import sys
 from concurrent.futures import ThreadPoolExecutor, as_completed
@@ -43,12 +44,15 @@
 # Initialize Rich console with theme
 console = Console(theme=CATPPUCCIN)
 
-# Determine base directory from environment or default to ~/.rostr
+# Determine base directory from environment or default
 def get_base_dir() -> Path:
-    """Get base directory from ROSTR_HOME environment variable or default."""
+    """Get base directory from environment or default."""
     env_home = os.environ.get("ROSTR_HOME")
     if env_home:
         return Path(env_home).expanduser()
+    xdg_config = os.environ.get("XDG_CONFIG_HOME")
+    if xdg_config:
+        return Path(xdg_config) / "rostr"
     return Path.home() / ".rostr"
 
 BASE_DIR = get_base_dir()
@@ -517,6 +521,14 @@ def init(ctx):
     """Initialize rostr in the current or default directory."""
     console.print("[primary]Welcome to rostr![/primary]\n")
 
+    # Check for migration from old .rostr location
+    old_base = Path.home() / ".rostr"
+    if old_base.exists() and not BASE_DIR.exists() and os.environ.get("XDG_CONFIG_HOME"):
+        if Confirm.ask(f"Found existing rostr config at {old_base}. Would you like to migrate to the new XDG location {BASE_DIR}?", default=True):
+            shutil.copytree(old_base, BASE_DIR)
+            console.print(f"[success]✓[/success] Migrated from {old_base} to {BASE_DIR}")
+            console.print("You can now remove the old directory if desired.\n")
+
     # Check if already initialized
     if CONFIG_FILE.exists():
         if not Confirm.ask(f"rostr is already initialized at {BASE_DIR}. Reinitialize?", default=False):
@@ -553,7 +565,7 @@ def init(ctx):
         console.print(f"  [success]✓[/success] {DEFAULTS_FILE}")
 
     # Create config file
-    config_content = """# rostr configuration
+    config_content = f"""# rostr configuration
 # See docs/CONFIGURATION.md for all options
 
 defaults:
@@ -585,10 +597,10 @@ def init(ctx):
     enabled: false
 
 paths:
-  inventory: ~/.rostr/inventory
-  generated: ~/.rostr/generated
-  backups: ~/.rostr/backups
-  logs: ~/.rostr/logs
+  inventory: {BASE_DIR}/inventory
+  generated: {BASE_DIR}/generated
+  backups: {BASE_DIR}/backups
+  logs: {BASE_DIR}/logs
 """
     if not CONFIG_FILE.exists():
         with open(CONFIG_FILE, "w") as f:
@@ -669,7 +681,7 @@ def init(ctx):
         "1. Edit config.yaml with your settings",
         "2. Add your first server: [cyan]rostr add[/cyan]",
         "3. Generate configs: [cyan]rostr sync[/cyan]",
-        "4. Include in SSH: [dim]echo \"Include ~/.rostr/generated/ssh_config\" >> ~/.ssh/config[/dim]",
+        f"4. Include in SSH: [dim]echo \"Include {BASE_DIR}/generated/ssh_config\" >> ~/.ssh/config[/dim]",
     ])
 
     console.print("\n[primary]Next steps:[/primary]")
diff --git a/src/rostr/setup.py b/src/rostr/setup.py
index f03eda7..517e430 100644
--- a/src/rostr/setup.py
+++ b/src/rostr/setup.py
@@ -738,7 +738,7 @@ def generate_cloud_init_template(webhook_url: str, token: str, default_group: st
 def save_cloud_init_templates(webhook_url: str, token: str, groups: list[str],
                                ssh_pubkey: str, username: str) -> list[Path]:
     """Generate and save cloud-init template for each group."""
-    from rostr.cli import GENERATED_DIR
+    from rostr.cli import BASE_DIR, GENERATED_DIR
 
     output_dir = Path(GENERATED_DIR) / "cloud-init"
     output_dir.mkdir(parents=True, exist_ok=True)
@@ -881,7 +881,7 @@ def generate_n8n_workflow(
 
 def save_n8n_workflow(workflow: dict) -> Path:
     """Save n8n workflow JSON to generated directory."""
-    from rostr.cli import GENERATED_DIR
+    from rostr.cli import BASE_DIR, GENERATED_DIR
 
     output_dir = Path(GENERATED_DIR) / "n8n"
     output_dir.mkdir(parents=True, exist_ok=True)
@@ -1179,8 +1179,8 @@ def automation():
 
     console.print()
     console.print("[bold]Quick Reference:[/bold]")
-    console.print("  Cloud-init templates: [cyan]~/.rostr/generated/cloud-init/[/cyan]")
-    console.print("  n8n workflow: [cyan]~/.rostr/generated/n8n/server-registration-workflow.json[/cyan]")
+    console.print(f"  Cloud-init templates: [cyan]{BASE_DIR}/generated/cloud-init/[/cyan]")
+    console.print(f"  n8n workflow: [cyan]{BASE_DIR}/generated/n8n/server-registration-workflow.json[/cyan]")
     console.print(f"  Webhook URL: [cyan]{webhook_url}[/cyan]")
     console.print(f"  Groups: [cyan]{', '.join(groups)}[/cyan]")
     console.print(f"  SSH user: [cyan]{cloud_username}[/cyan]")