diff --git a/package/paxtest/paxtest.mk b/package/paxtest/paxtest.mk
index 5eaee86e69..e632e222c3 100644
--- a/package/paxtest/paxtest.mk
+++ b/package/paxtest/paxtest.mk
@@ -11,15 +11,20 @@ PAXTEST_LICENSE_FILES = README
 
 define PAXTEST_BUILD_CMDS
 	$(TARGET_MAKE_ENV) $(TARGET_CONFIGURE_OPTS) $(MAKE) -C $(@D) \
-		CC="$(TARGET_CC)" LD="$(TARGET_CC)" linux
+		RUNDIR="/usr/lib/paxtest" CC="$(TARGET_CC)" LD="$(TARGET_CC)" linux
 endef
 
+# The files installed to RUNDIR include test apps and shared libs.
+# Assuming /usr/bin/paxtest script solely uses these libs and apps, the
+# genpaxtest script updates LD_LIBRARY_PATH in the paxtest script
+# as part of the paxtest's creation to include the RUNDIR path for shared
+# library use.
 define PAXTEST_INSTALL_TARGET_CMDS
 	$(TARGET_MAKE_ENV) $(TARGET_CONFIGURE_OPTS) $(MAKE) -C $(@D) \
 		CC="$(TARGET_CC)" LD="$(TARGET_CC)" \
 		DESTDIR=$(TARGET_DIR) \
 		BINDIR="usr/bin" \
-		RUNDIR="usr/lib" -f Makefile.psm install
+		RUNDIR="/usr/lib/paxtest" -f Makefile.psm install
 endef
 
 $(eval $(generic-package))