diff --git a/README.md b/README.md
index 6dc8819e..8266c527 100644
--- a/README.md
+++ b/README.md
@@ -75,10 +75,12 @@ c12 merged config sources with [unjs/defu](https://github.com/unjs/defu) by belo
 1. Config overrides passed by options
 2. Config file in CWD
 3. RC file in CWD
-4. Global RC file in the user's home directory
-5. Config from `package.json`
-6. Default config passed by options
-7. Extended config layers
+4. RC file in the workspace directory
+5. RC file in the user's config directory (`$XDG_CONFIG_HOME` or `~/.config`)
+6. Legacy RC file in the user's home directory
+7. Config from `package.json`
+8. Default config passed by options
+9. Extended config layers
 
 ## Options
 
@@ -102,7 +104,9 @@ Set to `false` to disable loading RC config.
 
 ### `globalRc`
 
-Load RC config from the workspace directory and the user's home directory. Only enabled when `rcFile` is provided. Set to `false` to disable this functionality.
+Load RC config from the workspace directory, the user's config directory (`$XDG_CONFIG_HOME` or `~/.config`) and the user's home directory. Only enabled when `rcFile` is provided. Set to `false` to disable this functionality.
+
+When the same key is set in more than one of these, the workspace wins over the user config directory, which wins over the home directory.
 
 ### `dotenv`
 
diff --git a/src/loader.ts b/src/loader.ts
index 3b7b5a17..65c96f3c 100644
--- a/src/loader.ts
+++ b/src/loader.ts
@@ -124,8 +124,10 @@ export async function loadConfig<
       if (workspaceDir) {
         rcSources.push(rc9.read({ name: options.rcFile, dir: workspaceDir }));
       }
-      // 3. user home
-      rcSources.push(rc9.readUser({ name: options.rcFile, dir: options.cwd }));
+      // 3. user config dir ($XDG_CONFIG_HOME or ~/.config)
+      rcSources.push(rc9.readUserConfig({ name: options.rcFile }));
+      // 4. user home (legacy)
+      rcSources.push(rc9.read({ name: options.rcFile, dir: homedir() }));
     }
     rawConfigs.rc = _merger({} as T, ...rcSources);
   }
diff --git a/test/global-rc.test.ts b/test/global-rc.test.ts
new file mode 100644
index 00000000..09024808
--- /dev/null
+++ b/test/global-rc.test.ts
@@ -0,0 +1,88 @@
+import { mkdir, mkdtemp, rm, writeFile } from "node:fs/promises";
+import { tmpdir } from "node:os";
+import { afterEach, beforeEach, describe, expect, it } from "vitest";
+import { resolve } from "pathe";
+import { loadConfig } from "../src/index.ts";
+
+describe("global rc", () => {
+  let dir: string;
+  let home: string;
+  let cwd: string;
+  const env = {
+    HOME: process.env.HOME,
+    USERPROFILE: process.env.USERPROFILE,
+    XDG_CONFIG_HOME: process.env.XDG_CONFIG_HOME,
+  };
+
+  const restoreEnv = () => {
+    for (const [key, value] of Object.entries(env)) {
+      if (value === undefined) {
+        delete process.env[key];
+      } else {
+        process.env[key] = value;
+      }
+    }
+  };
+
+  beforeEach(async () => {
+    dir = await mkdtemp(resolve(tmpdir(), "c12-global-rc-"));
+    home = resolve(dir, "home");
+    cwd = resolve(dir, "project");
+    await mkdir(resolve(home, ".config"), { recursive: true });
+    await mkdir(cwd, { recursive: true });
+    process.env.HOME = home;
+    process.env.USERPROFILE = home;
+    delete process.env.XDG_CONFIG_HOME;
+  });
+
+  afterEach(async () => {
+    restoreEnv();
+    await rm(dir, { recursive: true, force: true });
+  });
+
+  const load = () => loadConfig({ cwd, name: "test", globalRc: true, packageJson: false });
+
+  it("reads the legacy home rc file", async () => {
+    await writeFile(resolve(home, ".testrc"), "legacy=true\nshared=home\n");
+    const { config } = await load();
+    expect(config).toMatchObject({ legacy: true, shared: "home" });
+  });
+
+  it("reads the rc file from ~/.config", async () => {
+    await writeFile(resolve(home, ".config/.testrc"), "xdg=true\nshared=config\n");
+    const { config } = await load();
+    expect(config).toMatchObject({ xdg: true, shared: "config" });
+  });
+
+  it("prefers ~/.config over the legacy home rc file", async () => {
+    await writeFile(resolve(home, ".testrc"), "legacy=true\nshared=home\n");
+    await writeFile(resolve(home, ".config/.testrc"), "xdg=true\nshared=config\n");
+    const { config } = await load();
+    expect(config).toMatchObject({ legacy: true, xdg: true, shared: "config" });
+  });
+
+  it("still reads the legacy home rc file when ~/.config rc is empty", async () => {
+    await writeFile(resolve(home, ".config/.testrc"), "");
+    await writeFile(resolve(home, ".testrc"), "legacy=true\nshared=home\n");
+    const { config } = await load();
+    expect(config).toMatchObject({ legacy: true, shared: "home" });
+  });
+
+  it("prefers the project rc file over both", async () => {
+    await writeFile(resolve(home, ".testrc"), "shared=home\n");
+    await writeFile(resolve(home, ".config/.testrc"), "shared=config\n");
+    await writeFile(resolve(cwd, ".testrc"), "shared=project\n");
+    const { config } = await load();
+    expect(config).toMatchObject({ shared: "project" });
+  });
+
+  it("still reads the legacy home rc file when XDG_CONFIG_HOME is set", async () => {
+    const xdg = resolve(dir, "xdg");
+    await mkdir(xdg, { recursive: true });
+    process.env.XDG_CONFIG_HOME = xdg;
+    await writeFile(resolve(xdg, ".testrc"), "xdg=true\nshared=config\n");
+    await writeFile(resolve(home, ".testrc"), "legacy=true\nshared=home\n");
+    const { config } = await load();
+    expect(config).toMatchObject({ xdg: true, legacy: true, shared: "config" });
+  });
+});