diff --git a/cmd/tools/vpm/settings.v b/cmd/tools/vpm/settings.v
index cdbcafbdac974f..80f89ecf00f831 100644
--- a/cmd/tools/vpm/settings.v
+++ b/cmd/tools/vpm/settings.v
@@ -39,8 +39,9 @@ fn init_settings() VpmSettings {
 	}
 	if !is_ci && !is_dbg {
 		// Log by default:
-		os.mkdir_all(os.join_path(vmodules_path, 'cache'), mode: 0o700) or { panic(err) }
-		logger.set_output_path(os.join_path(vmodules_path, 'cache', 'vpm.log'))
+		cache_path := os.join_path(vmodules_path, '.cache')
+		os.mkdir_all(cache_path, mode: 0o700) or { panic(err) }
+		logger.set_output_path(os.join_path(cache_path, 'vpm.log'))
 	}
 
 	return VpmSettings{
diff --git a/cmd/tools/vpm/vpm.v b/cmd/tools/vpm/vpm.v
index 6a11e6580d949d..b74a9e495982a1 100644
--- a/cmd/tools/vpm/vpm.v
+++ b/cmd/tools/vpm/vpm.v
@@ -14,7 +14,7 @@ const default_vpm_server_urls = ['https://vpm.vlang.io', 'https://vpm.url4e.com'
 const vpm_server_urls = rand.shuffle_clone(default_vpm_server_urls) or { [] } // ensure that all queries are distributed fairly
 const valid_vpm_commands = ['help', 'search', 'install', 'update', 'upgrade', 'outdated', 'list',
 	'remove', 'show']
-const excluded_dirs = ['cache', 'vlib']
+const excluded_dirs = ['.cache', 'vlib']
 
 fn main() {
 	// This tool is intended to be launched by the v frontend,
diff --git a/vlib/v/gen/c/embed.v b/vlib/v/gen/c/embed.v
index f0205257c71293..890018d56f6866 100644
--- a/vlib/v/gen/c/embed.v
+++ b/vlib/v/gen/c/embed.v
@@ -34,7 +34,7 @@ fn (mut g Gen) gen_embed_file_init(mut node ast.ComptimeCall) {
 		if node.embed_file.compression_type == 'none' {
 			node.embed_file.bytes = file_bytes
 		} else {
-			cache_dir := os.join_path(os.vmodules_dir(), 'cache', 'embed_file')
+			cache_dir := os.join_path(os.vmodules_dir(), '.cache', 'embed_file')
 			cache_key := rand.ulid()
 			// cache_key := md5.hexhash(node.embed_file.apath)
 			if !os.exists(cache_dir) {
diff --git a/vlib/v/tests/multiple_paths_in_vmodules/path1/.gitignore b/vlib/v/tests/multiple_paths_in_vmodules/path1/.gitignore
index 38977ffd211367..82ea626f6eae49 100644
--- a/vlib/v/tests/multiple_paths_in_vmodules/path1/.gitignore
+++ b/vlib/v/tests/multiple_paths_in_vmodules/path1/.gitignore
@@ -1,4 +1,4 @@
 ## this folder is the first one that will be put in vmodules.
 ## V uses that to put there its cache too.
 ## Just ignore it for now.
-cache/
+.cache/
diff --git a/vlib/v/tests/projects_that_should_compile_test.v b/vlib/v/tests/projects_that_should_compile_test.v
index baf9780447cd4f..bd35b6de4d9b7c 100644
--- a/vlib/v/tests/projects_that_should_compile_test.v
+++ b/vlib/v/tests/projects_that_should_compile_test.v
@@ -2,6 +2,12 @@ import os
 
 fn testsuite_begin() {
 	os.setenv('VCOLORS', 'never', true)
+	// TODO: remove this, when after vc/v.c *also* uses `_cache`, instead of `cache`:
+	old_cache_path := os.join_path(os.vmodules_dir(), 'cache')
+	dump(old_cache_path)
+	if os.exists(old_cache_path) {
+		os.rmdir_all(old_cache_path)!
+	}
 }
 
 fn vroot_path(relpath string) string {
@@ -28,4 +34,7 @@ fn test_projects_should_run() {
 
 	res2 := vrun_ok('run', vroot_path('vlib/v/tests/testdata/modules_in_src/'))
 	assert res2.trim_space() == 'somemodule somemoduletwo'
+
+	res3 := vrun_ok('run', vroot_path('vlib/v/tests/testdata/module_named_cache/'))
+	assert res3.trim_space().ends_with('cache.a: 123')
 }
diff --git a/vlib/v/tests/testdata/module_named_cache/src/cache/my_cache.v b/vlib/v/tests/testdata/module_named_cache/src/cache/my_cache.v
new file mode 100644
index 00000000000000..ff345da98bc913
--- /dev/null
+++ b/vlib/v/tests/testdata/module_named_cache/src/cache/my_cache.v
@@ -0,0 +1,3 @@
+module cache
+
+pub const a = 123
diff --git a/vlib/v/tests/testdata/module_named_cache/src/main.v b/vlib/v/tests/testdata/module_named_cache/src/main.v
new file mode 100644
index 00000000000000..2c476aa1e7de58
--- /dev/null
+++ b/vlib/v/tests/testdata/module_named_cache/src/main.v
@@ -0,0 +1,8 @@
+module main
+
+import cache
+
+fn main() {
+	println('Hello World!')
+	dump(cache.a)
+}
diff --git a/vlib/v/tests/testdata/module_named_cache/v.mod b/vlib/v/tests/testdata/module_named_cache/v.mod
new file mode 100644
index 00000000000000..7dd2a885c3b05e
--- /dev/null
+++ b/vlib/v/tests/testdata/module_named_cache/v.mod
@@ -0,0 +1,7 @@
+Module {
+	name: 'aa'
+	description: 'AA'
+	version: '0.0.0'
+	license: 'MIT'
+	dependencies: []
+}
diff --git a/vlib/v/vcache/vcache.v b/vlib/v/vcache/vcache.v
index aaf021886ee34f..f0692c9cbdb121 100644
--- a/vlib/v/vcache/vcache.v
+++ b/vlib/v/vcache/vcache.v
@@ -34,14 +34,25 @@ pub mut:
 	k2cpath map[string]string // key -> filesystem cache path for the object
 }
 
-pub fn new_cache_manager(opts []string) CacheManager {
-	mut vcache_basepath := os.getenv('VCACHE')
-	if vcache_basepath == '' {
-		vcache_basepath = os.join_path(os.vmodules_dir(), 'cache')
+fn remove_old_cache_folder() {
+	// TODO: remove this after bootstrapping the new .cache location, i.e. after 2024-12-01
+	old_cache_folder := os.join_path(os.vmodules_dir(), 'cache')
+	if os.exists(old_cache_folder) {
+		old_readme_file := os.join_path(old_cache_folder, 'README.md')
+		if os.file_size(old_readme_file) == 254 {
+			os.rmdir_all(old_cache_folder) or {}
+			dlog(@FN, 'old_cache_folder: ${old_cache_folder}')
+		}
 	}
+}
+
+pub fn new_cache_manager(opts []string) CacheManager {
+	// use a path, that would not conflict with a user installable module. `import .cache` is not valid, => better than just `cache`:
+	vcache_basepath := os.getenv_opt('VCACHE') or { os.join_path(os.vmodules_dir(), '.cache') }
 	nlog(@FN, 'vcache_basepath: ${vcache_basepath}\n         opts: ${opts}\n      os.args: ${os.args.join(' ')}')
 	dlog(@FN, 'vcache_basepath: ${vcache_basepath} | opts:\n     ${opts}')
 	if !os.is_dir(vcache_basepath) {
+		remove_old_cache_folder()
 		os.mkdir_all(vcache_basepath, mode: 0o700) or { panic(err) } // keep directory private
 		dlog(@FN, 'created folder:\n    ${vcache_basepath}')
 	}