diff --git a/colcon_core/shell/__init__.py b/colcon_core/shell/__init__.py
index 1e1eaeaa..faa103ff 100644
--- a/colcon_core/shell/__init__.py
+++ b/colcon_core/shell/__init__.py
@@ -188,7 +188,11 @@ def create_hook_set_value(
         :param str pkg_name: The package name
         :param str name: The name of the environment variable
         :param str value: The value to be set. If an empty string is passed the
-          environment variable should be set to the prefix path.
+          environment variable should be set to the prefix path at the time the
+          hook is sourced (from COLCON_CURRENT_PREFIX).
+          Note that the install-space may have been relocated, and the final
+          value may differ from the value of argument prefix_path, where
+          the hook was originally installed to.
         :returns: The relative path to the created hook script
         :rtype: Path
         """
diff --git a/colcon_core/shell/bat.py b/colcon_core/shell/bat.py
index 5f2463eb..2ae4bc76 100644
--- a/colcon_core/shell/bat.py
+++ b/colcon_core/shell/bat.py
@@ -95,7 +95,7 @@ def create_hook_set_value(  # noqa: D102
             ('%s.bat' % env_hook_name)
         logger.info("Creating environment hook '%s'" % hook_path)
         if value == '':
-            value = '%COLCON_PREFIX_PATH%'
+            value = '%COLCON_CURRENT_PREFIX%'
         expand_template(
             Path(__file__).parent / 'template' / 'hook_set_value.bat.em',
             hook_path, {'name': name, 'value': value})
diff --git a/colcon_core/shell/sh.py b/colcon_core/shell/sh.py
index e46840f8..64005512 100644
--- a/colcon_core/shell/sh.py
+++ b/colcon_core/shell/sh.py
@@ -97,7 +97,7 @@ def create_hook_set_value(  # noqa: D102
             ('%s.sh' % env_hook_name)
         logger.info("Creating environment hook '%s'" % hook_path)
         if value == '':
-            value = '$COLCON_PREFIX_PATH'
+            value = '$COLCON_CURRENT_PREFIX'
         expand_template(
             Path(__file__).parent / 'template' / 'hook_set_value.sh.em',
             hook_path, {'name': name, 'value': value})