diff --git a/plugins/virtualenv/README.md b/plugins/virtualenv/README.md
index 5e6116497..3a934a9f4 100644
--- a/plugins/virtualenv/README.md
+++ b/plugins/virtualenv/README.md
@@ -7,9 +7,14 @@ To use it, add `virtualenv` to the plugins array of your zshrc file:
 plugins=(... virtualenv)
 ```
 
-The plugin creates a `virtualenv_prompt_info` function that you can use in your theme. It
-displays the prompt string set when creating the virtual environment (via the `--prompt` option),
-falling back to the basename of the current `$VIRTUAL_ENV`.
+The plugin creates a `virtualenv_prompt_info` function that you can use in your
+theme. It displays the prompt string set in the `$VIRTUAL_ENV_PROMPT`
+environment variable. The `activate` scripts for most Python virtual environment
+implementations set this variable to the value provided via the `--prompt`
+option when creating the virtual environment, or the basename of the environment
+directory if the option was not provided. For implementations that do not set
+`$VIRTUAL_ENV_PROMPT`, the plugin will display the basename of the virtual
+environment directory instead.
 
 It uses two variables to control how that is shown: