Set Java_Home and Path System variable in Windows

Stage 1. Locate the JRE Installation Directory

If you already know the installation path for the Java Runtime Environment, go to Stage 2 below. Otherwise, find the installation path by following these instructions:

1. If you didn't change the installation path for the Java Runtime Environment during installation, it will be in a directory under C:\Program Files\Java. Using Explorer, open the directory C:\Program Files\Java.
2. Inside that path will be one or more subdirectories such as C:\Program Files\Java\jre6. 

Stage 2. Set the JAVA_HOME Variable

Once you have identified the JRE installation path:

1. Right-click the My Computer icon on your desktop and select Properties.
2. Click the Advanced tab.
3. Click the Environment Variables button.
4. Under System Variables, click New.
5. Enter the variable name as JAVA_HOME.
6. Enter the variable value as the installation path for the Java Development Kit.
   
   • If your Java installation directory has a space in its path name, you should use the shortened path name (e.g. C:\Progra~1\Java\jre6) in the environment variable instead.
     
     Icon

     Note for Windows users on 64-bit systems
     Progra~1 = 'Program Files'Progra~2 = 'Program Files(x86)'
     
7. Click OK.
8. Click Apply Changes.
9. Close any command window which was open before you made these changes, and open a new command window. There is no way to reload environment variables from an active command prompt. If the changes do not take effect even after reopening the command window, restart Windows.

You can run Java applications just fine without setting the PATH environment variable. Or, you can optionally set it as a convenience.
Set the PATH environment variable if you want to be able to conveniently run the executables (javac.exe, java.exe, javadoc.exe, and so on) from any directory without having to type the full path of the command. If you do not set the PATH variable, you need to specify the full path to the executable every time you run it, such as:

C:\Java\jdk1.7.0\bin\javac MyClass.java

The PATH environment variable is a series of directories separated by semicolons (;). Microsoft Windows looks for programs in the PATH directories in order, from left to right. You should have only one bin directory for the JDK in the path at a time (those following the first are ignored), so if one is already present, you can update that particular entry.
The following is an example of a PATH environment variable:

C:\Java\jdk1.7.0\bin;C:\Windows\System32\;C:\Windows\;C:\Windows\System32\Wbem

It is useful to set the PATH environment variable permanently so it will persist after rebooting. To make a permanent change to the PATH variable, use the System icon in the Control Panel. The precise procedure varies depending on the version of Windows:
Windows XP

1. Select Start, select Control Panel. double click System, and select the Advanced tab.
2. Click Environment Variables. In the section System Variables, find the PATH environment variable and select it. Click Edit. If the PATH environment variable does not exist, click New.
3. In the Edit System Variable (or New System Variable) window, specify the value of the PATH environment variable. Click OK. Close all remaining windows by clicking OK.

Windows Vista:

1. From the desktop, right click the My Computer icon.
2. Choose Properties from the context menu.
3. Click the Advanced tab (Advanced system settings link in Vista).
4. Click Environment Variables. In the section System Variables, find the PATH environment variable and select it. Click Edit. If the PATH environment variable does not exist, click New.
5. In the Edit System Variable (or New System Variable) window, specify the value of the PATH environment variable. Click OK. Close all remaining windows by clicking OK.

Windows 7:

1. From the desktop, right click the Computer icon.
2. Choose Properties from the context menu.
3. Click the Advanced system settings link.
4. Click Environment Variables. In the section System Variables, find the PATH environment variable and select it. Click Edit. If the PATH environment variable does not exist, click New.
5. In the Edit System Variable (or New System Variable) window, specify the value of the PATH environment variable. Click OK. Close all remaining windows by clicking OK.

For Details