diff --git a/doc/manual/installation.xml b/doc/manual/installation.xml
index a136d3b11..4c433a6bf 100644
--- a/doc/manual/installation.xml
+++ b/doc/manual/installation.xml
@@ -69,27 +69,26 @@ $ dpkg -i nix_1.0-1_amd64.deb</screen>
 
 <para>For other platforms, including Mac OS X (Darwin), FreeBSD and
 other Linux distributions, you can download a binary tarball.  It
-contains Nix and all its dependencies.  You should unpack it in the
-root directory, then run <command>nix-finish-install</command>:
+contains Nix and all its dependencies.  You should unpack it somewhere
+(e.g. in <filename>/tmp</filename>), and then run the script named
+<command>install</command> inside the binary tarball:
 
 <screen>
-$ cd /
-$ tar xfj nix-1.1-x86_64-darwin.tar.bz2
-$ nix-finish-install
+alice$ cd /tmp
+alice$ tar xfj nix-1.1-x86_64-darwin.tar.bz2
+alice$ cd nix-1.1-x86_64-darwin
+alice$ ./install
 </screen>
 
-After this you can delete
-<filename>/usr/bin/nix-finish-install</filename>.</para>
-
-<para>If you plan to use Nix from a single non-root user account, it’s
-probably convenient to change the ownership of the entire Nix store
-and database to that user account.  In that case, install as follows:
+You should run this under your usual user account,
+<emphasis>not</emphasis> as root.  The script will invoke
+<command>sudo</command> to create <filename>/nix</filename> if it
+doesn’t already exist.  If you don’t have <command>sudo</command>, you
+should manually create <command>/nix</command> first as root:
 
 <screen>
-alice$ cd /
-alice$ sudo tar xfj nix-1.1-x86_64-darwin.tar.bz2
-alice$ sudo chown -R alice /nix
-alice$ nix-finish-install
+$ mkdir /nix
+$ chown alice /nix
 </screen>
 
 </para>
diff --git a/release.nix b/release.nix
index e3758f5b2..0547aeeea 100644
--- a/release.nix
+++ b/release.nix
@@ -124,15 +124,19 @@ let
           storePaths=$(perl ${pathsFromGraph} ./closure)
           printRegistration=1 perl ${pathsFromGraph} ./closure > $TMPDIR/reginfo
           substitute ${./scripts/install-nix-from-closure.sh} $TMPDIR/install \
-            --subst-var-by nix ${toplevel} --subst-var-by regInfo /nix/store/reginfo
+            --subst-var-by nix ${toplevel}
           chmod +x $TMPDIR/install
-          fn=$out/nix-${version}-${system}.tar.bz2
+          dir=nix-${version}-${system}
+          fn=$out/$dir.tar.bz2
           mkdir -p $out/nix-support
           echo "file binary-dist $fn" >> $out/nix-support/hydra-build-products
           tar cvfj $fn \
-            --owner=0 --group=0 --absolute-names \
-            --transform "s,$TMPDIR/install,/usr/bin/nix-finish-install," \
-            --transform "s,$TMPDIR/reginfo,/nix/store/reginfo," \
+            --owner=0 --group=0 --mode=u+rw,uga+r \
+            --absolute-names \
+            --hard-dereference \
+            --transform "s,$TMPDIR/install,$dir/install," \
+            --transform "s,$TMPDIR/reginfo,$dir/.reginfo," \
+            --transform "s,$NIX_STORE,$dir/store,S" \
             $TMPDIR/install $TMPDIR/reginfo $storePaths
         '');
 
diff --git a/scripts/install-nix-from-closure.sh b/scripts/install-nix-from-closure.sh
index 00f23e0f4..454cb432f 100644
--- a/scripts/install-nix-from-closure.sh
+++ b/scripts/install-nix-from-closure.sh
@@ -1,17 +1,74 @@
-#! /bin/sh -e
+#! /bin/sh
 
-nix=@nix@
-regInfo=@regInfo@
+set -e
 
-if ! $nix/bin/nix-store --load-db < $regInfo; then
-    echo "$0: unable to register valid paths"
+dest="/nix"
+self="$(dirname "$0")"
+nix="@nix@"
+
+if ! [ -e $self/.reginfo ]; then
+    echo "$0: incomplete installer (.reginfo is missing)" >&2
     exit 1
 fi
 
-. @nix@/etc/profile.d/nix.sh
+if [ -z "$USER" ]; then
+    echo "$0: \$USER is not set" >&2
+    exit 1
+fi
 
-if ! $nix/bin/nix-env -i @nix@; then
-    echo "$0: unable to install Nix into your default profile"
+if [ "$(id -u)" -eq 0 ]; then
+    echo "warning: installing Nix as root is not recommended" >&2
+    exit 1
+fi
+
+echo "performing a single-user installation of Nix..." >&2
+
+if ! [ -e $dest ]; then
+    cmd="mkdir -m 0755 $dest && chown $USER $dest"
+    echo "directory $dest does not exist; creating it by running \`$cmd' using sudo" >&2
+    if ! sudo sh -c "$cmd"; then
+        echo "$0: please manually run \`$cmd' as root to create $dest" >&2
+        exit 1
+    fi
+fi
+
+if ! [ -w $dest ]; then
+    echo "$0: directory $dest exists, but is not writable by you; please run \`chown -R $USER $dest' as root" >&2
+    exit 1
+fi
+
+mkdir -p $dest/store
+
+echo -n "copying Nix to $dest/store..." >&2
+
+for i in $(cd $self/store && echo *); do
+    echo -n "." >&2
+    i_tmp="$dest/store/$i.$$"
+    if [ -e "$i_tmp" ]; then
+        rm -rf "$i_tmp"
+    fi
+    if ! [ -e "$dest/store/$i" ]; then
+        cp -rp "$self/store/$i" "$i_tmp"
+        mv "$i_tmp" "$dest/store/$i"
+    fi
+done
+echo "" >&2
+
+echo "initialising Nix database..." >&2
+if ! $nix/bin/nix-store --init; then
+    echo "$0: failed to initialize the Nix database" >&2
+    exit 1
+fi
+
+if ! $nix/bin/nix-store --load-db < $self/.reginfo; then
+    echo "$0: unable to register valid paths" >&2
+    exit 1
+fi
+
+. $nix/etc/profile.d/nix.sh
+
+if ! $nix/bin/nix-env -i $nix; then
+    echo "$0: unable to install Nix into your default profile" >&2
     exit 1
 fi
 
@@ -21,20 +78,40 @@ if ! $nix/bin/nix-channel --list | grep -q "^nixpkgs "; then
 fi
 $nix/bin/nix-channel --update nixpkgs
 
-# Add nix.sh to the shell's profile.d directory.
+# Make the shell source nix.sh during login.
 p=$NIX_LINK/etc/profile.d/nix.sh
 
-if [ -w /etc/profile.d ]; then
-    ln -s $p /etc/profile.d/
-elif [ -w /usr/local/etc/profile.d ]; then
-    ln -s $p /usr/local/etc/profile.d/
-else
-    cat <<EOF
-Installation finished.  To ensure that the necessary environment
+added=
+for i in .bash_profile .bash_login .profile; do
+    fn="$HOME/$i"
+    if [ -e "$fn" ]; then
+        if ! grep -q "$p" "$fn"; then
+            echo "modifying $fn..." >&2
+            echo "if [ -e $p ]; then . $p; fi # added by Nix installer" >> $fn
+        fi
+        added=1
+        break
+    fi
+done
+
+if [ -z "$added" ]; then
+    cat >&2 <<EOF
+
+Installation finished!  To ensure that the necessary environment
 variables are set, please add the line
 
-  source $p
+  . $p
 
 to your shell profile (e.g. ~/.profile).
 EOF
+else
+    cat >&2 <<EOF
+
+Installation finished!  To ensure that the necessary environment
+variables are set, either log in again, or type
+
+  . $p
+
+in your shell.
+EOF
 fi