diff --git a/.hgignore b/.hgignore
--- a/.hgignore
+++ b/.hgignore
@@ -10,7 +10,6 @@ syntax: glob
 *.rej
 *.bak
 .eggs/
-tarballcache/
 
 syntax: regexp
 ^rcextensions
diff --git a/development.ini b/development.ini
--- a/development.ini
+++ b/development.ini
@@ -102,7 +102,7 @@ cache_dir = %(here)s/data
 index_dir = %(here)s/data/index
 
 ## uncomment and set this path to use archive download cache
-archive_cache_dir = %(here)s/tarballcache
+archive_cache_dir = %(here)s/data/tarballcache
 
 ## change this to unique ID for security
 #app_instance_uuid = VERY-SECRET
diff --git a/kallithea/lib/paster_commands/template.ini.mako b/kallithea/lib/paster_commands/template.ini.mako
--- a/kallithea/lib/paster_commands/template.ini.mako
+++ b/kallithea/lib/paster_commands/template.ini.mako
@@ -166,7 +166,7 @@ cache_dir = %(here)s/data
 index_dir = %(here)s/data/index
 
 <%text>##</%text> uncomment and set this path to use archive download cache
-archive_cache_dir = %(here)s/tarballcache
+archive_cache_dir = %(here)s/data/tarballcache
 
 <%text>##</%text> change this to unique ID for security
 app_instance_uuid = ${uuid()}