diff --git a/README.md b/README.md
index 1d30da9..7630cdb 100644
--- a/README.md
+++ b/README.md
@@ -6,7 +6,7 @@
 This action sets up watcom for use in actions by:
 
 - downloading a watcom release.
-- eventually setting the PATH and WATCOM environment variables.
+- set default Open Watcom environment variables (WATCOM + INCLUDE + PATH).
 - failing if the specific version of Open Watcom is not available for download.
 
 # Usage
@@ -21,7 +21,7 @@ steps:
   with:
     version: "2.0"
 - run: |
-    wcl386 -zq -d+ ${{ env.WATCOM }}/h -w3 -bt=dos -d2 -fomain.c.obj -c -cc main.c
+    wcl386 -zq -d+ -i"${{ env.WATCOM }}/h" -w3 -bt=dos -d2 -fomain.c.obj -c -cc main.c
     wlink option quiet name hello.exe opt map system dos4g debug all file main.c.obj
 - run: |
     cmake -S . -B build -G "Watcom WMake" -D CMAKE_SYSTEM_NAME=DOS
diff --git a/action.yml b/action.yml
index a7ebc0b..ff6d517 100644
--- a/action.yml
+++ b/action.yml
@@ -13,11 +13,11 @@ inputs:
     required: false
     default: ''
   location:
-    description: 'Location where Open Watcom should be extracted to (default=/opt/watcom or C:\\watcom)'
+    description: 'Location where Open Watcom should be extracted to (default=/opt/watcom or C:\\WATCOM)'
     required: false
     default: ''
   environment:
-    description: 'Set environment variables (WATCOM + PATH)'
+    description: 'Set default Open Watcom environment variables (WATCOM + INCLUDE + PATH)'
     required: false
     default: true
 runs:
diff --git a/src/interface.ts b/src/interface.ts
index 9f724fa..9f8ba35 100644
--- a/src/interface.ts
+++ b/src/interface.ts
@@ -22,15 +22,21 @@ export interface ISetupWatcomSettings {
   location: string;
 
   /**
-   * Set WATCOM environment variable + add to PATH
+   * Set Open Watcom default environment variable (WATCOM + INCLUDE) and add
+   * native binaries subdir to PATH
    */
   environment: boolean;
 
   /**
-   * Watcom subdir containing the native binaries
+   * Watcom subdir containing the native binaries (for host OS)
    */
   path_subdir: string;
 
+  /**
+   * List of Watcom subdirs containing the default header files (for host OS)
+   */
+  inc_subdirs: string[];
+
   /**
    * Need mode bits fix-up
    */
diff --git a/src/main.ts b/src/main.ts
index 754d0da..fa7774a 100644
--- a/src/main.ts
+++ b/src/main.ts
@@ -52,13 +52,15 @@ function getInputs(): ISetupWatcomSettings {
 
   let default_location: string;
   let p_path_subdir: string;
+  let p_inc_subdirs: string[];
   if (process.platform === "win32") {
-    default_location = "C:\\watcom";
+    default_location = "C:\\WATCOM";
     if (p_version == "2.0-64") {
-      p_path_subdir = "binnt64";
+      p_path_subdir = "BINNT64";
     } else {
-      p_path_subdir = "binnt";
+      p_path_subdir = "BINNT";
     }
+    p_inc_subdirs = ["H", "H\\NT", "H\\NT\\DIRECTX", "H\\NT\\DDK"];
   } else if (process.platform === "darwin") {
     throw new Error("Unsupported platform");
   } else {
@@ -68,6 +70,7 @@ function getInputs(): ISetupWatcomSettings {
     } else {
       p_path_subdir = "binl";
     }
+    p_inc_subdirs = ["lh"];
   }
 
   let p_location = core.getInput("location");
@@ -84,6 +87,7 @@ function getInputs(): ISetupWatcomSettings {
     location: p_location,
     environment: p_environment,
     path_subdir: p_path_subdir,
+    inc_subdirs: p_inc_subdirs,
     needs_chmod: p_needs_chmod,
   };
 }
@@ -98,6 +102,7 @@ async function run(): Promise<void> {
     core.info(`location: ${settings.location}`);
     core.info(`environment: ${settings.environment}`);
     core.info(`path_subdir: ${settings.path_subdir}`);
+    core.info(`inc_subdirs: ${settings.inc_subdirs}`);
     core.endGroup();
     if (settings.archive_type == "tar" && process.platform == "win32") {
       core.startGroup("Install GNU tar (MSYS).");
@@ -168,6 +173,17 @@ async function run(): Promise<void> {
       const bin_path = path.join(watcom_path, settings.path_subdir);
       core.addPath(bin_path);
       core.info(`PATH appended with ${bin_path}.`);
+      const originalInclude = process.env["INCLUDE"];
+      const sep = (process.platform == "win32") ? ";" : ":";
+      let inc_path = "";
+      for (var x of settings.inc_subdirs) {
+        inc_path = inc_path + path.join(watcom_path, x) + sep;
+      }
+      if (originalInclude) {
+        inc_path = inc_path + originalInclude;
+      }
+      core.exportVariable("INCLUDE", inc_path);
+      core.info(`Setted INCLUDE=${inc_path}`);
       core.endGroup();
     }
   } catch (error) {