diff --git a/CHANGELOG.adoc b/CHANGELOG.adoc
index ad9f31b61e..bac06c9fd2 100644
--- a/CHANGELOG.adoc
+++ b/CHANGELOG.adoc
@@ -52,6 +52,7 @@ The full list of changes for this release can be found in https://github.com/dev
 
 Release with new features and bugfixes:
 
+* https://github.com/devonfw/IDEasy/issues/694[#694]: Improved dotnet installation
 * https://github.com/devonfw/IDEasy/issues/2102[#2102]: IDE_ROOT environment variable is not available to ideasy.exe during MSI installation
 * https://github.com/devonfw/IDEasy/issues/1594[#1594]: Add release commandlet
 * https://github.com/devonfw/IDEasy/issues/1982[#1982]: Modified fallback link creation on Windows
diff --git a/cli/src/main/java/com/devonfw/tools/ide/tool/dotnet/DotNet.java b/cli/src/main/java/com/devonfw/tools/ide/tool/dotnet/DotNet.java
index b897d77f15..84e99811e2 100644
--- a/cli/src/main/java/com/devonfw/tools/ide/tool/dotnet/DotNet.java
+++ b/cli/src/main/java/com/devonfw/tools/ide/tool/dotnet/DotNet.java
@@ -4,7 +4,9 @@
 
 import com.devonfw.tools.ide.common.Tag;
 import com.devonfw.tools.ide.context.IdeContext;
+import com.devonfw.tools.ide.process.EnvironmentContext;
 import com.devonfw.tools.ide.tool.LocalToolCommandlet;
+import com.devonfw.tools.ide.tool.ToolInstallation;
 
 /**
  * {@link LocalToolCommandlet} for <a href="https://docs.microsoft.com/en-us/dotnet/core/tools/">dotnet</a>. The .NET CLI (Command Line Interface)
@@ -27,4 +29,14 @@ public String getToolHelpArguments() {
 
     return "help";
   }
+
+  @Override
+  public void setEnvironment(
+      EnvironmentContext environmentContext,
+      ToolInstallation toolInstallation,
+      boolean additionalInstallation) {
+
+    super.setEnvironment(environmentContext, toolInstallation, additionalInstallation);
+    environmentContext.withEnvVar("DOTNET_ROOT", toolInstallation.linkDir().toString());
+  }
 }
diff --git a/cli/src/test/java/com/devonfw/tools/ide/tool/dotnet/DotNetTest.java b/cli/src/test/java/com/devonfw/tools/ide/tool/dotnet/DotNetTest.java
index 6c16c9d5dd..e071a56ac7 100644
--- a/cli/src/test/java/com/devonfw/tools/ide/tool/dotnet/DotNetTest.java
+++ b/cli/src/test/java/com/devonfw/tools/ide/tool/dotnet/DotNetTest.java
@@ -1,14 +1,24 @@
 package com.devonfw.tools.ide.tool.dotnet;
 
 import java.nio.file.Path;
+import java.util.HashMap;
+import java.util.Map;
 
+import org.junit.jupiter.api.Test;
 import org.junit.jupiter.params.ParameterizedTest;
 import org.junit.jupiter.params.provider.ValueSource;
 
 import com.devonfw.tools.ide.context.AbstractIdeContextTest;
 import com.devonfw.tools.ide.context.IdeTestContext;
+import com.devonfw.tools.ide.environment.EnvironmentVariablesType;
+import com.devonfw.tools.ide.environment.VariableLine;
+import com.devonfw.tools.ide.environment.VariableSource;
 import com.devonfw.tools.ide.os.SystemInfo;
 import com.devonfw.tools.ide.os.SystemInfoMock;
+import com.devonfw.tools.ide.os.WindowsPathSyntax;
+import com.devonfw.tools.ide.process.EnvironmentVariableCollectorContext;
+import com.devonfw.tools.ide.tool.ToolInstallation;
+import com.devonfw.tools.ide.version.VersionIdentifier;
 
 /**
  * Test of {@link DotNet}.
@@ -85,4 +95,31 @@ private static void assignDummyUserHome(IdeTestContext context, String pathStrin
     Path dummyUserHomePath = PROJECTS_TARGET_PATH.resolve(PROJECT_DOTNET).resolve(pathString);
     context.setUserHome(dummyUserHomePath);
   }
+
+  @Test
+  void testSetEnvironment() {
+
+    // arrange
+    Path dotnetPath = this.context.getSoftwarePath().resolve("dotnet");
+    ToolInstallation installation = new ToolInstallation(
+        dotnetPath,
+        dotnetPath,
+        dotnetPath,
+        VersionIdentifier.of("6.0.419"),
+        true);
+
+    Map<String, VariableLine> variables = new HashMap<>();
+    EnvironmentVariableCollectorContext environmentContext =
+        new EnvironmentVariableCollectorContext(
+            variables,
+            new VariableSource(EnvironmentVariablesType.WORKSPACE, null),
+            WindowsPathSyntax.MSYS);
+
+    this.commandlet.setEnvironment(environmentContext, installation, false);
+
+    assertThat(variables.get("DOTNET_HOME").getValue())
+        .isEqualTo(dotnetPath.toString());
+    assertThat(variables.get("DOTNET_ROOT").getValue())
+        .isEqualTo(dotnetPath.toString());
+  }
 }