diff --git a/pkgs/development/libraries/libiio/default.nix b/pkgs/development/libraries/libiio/default.nix
index 03324c15d8f7..c4136428035c 100644
--- a/pkgs/development/libraries/libiio/default.nix
+++ b/pkgs/development/libraries/libiio/default.nix
@@ -1,49 +1,62 @@
-{ stdenv, fetchFromGitHub
-, cmake, flex, bison
-, libxml2, python
-, libusb1, runtimeShell
+{ stdenv
+, fetchFromGitHub
+, cmake
+, flex
+, bison
+, libxml2
+, python
+, libusb1
+, runtimeShell
 }:
 
 stdenv.mkDerivation rec {
   pname = "libiio";
-  version = "0.20";
-
-  src = fetchFromGitHub {
-    owner  = "analogdevicesinc";
-    repo   = "libiio";
-    rev    = "refs/tags/v${version}";
-    sha256 = "1929gvizkqmm9cwh3vihxxszfxvgcp5saq9q6chdk3fpdhzajc00";
-  };
+  version = "0.21";
 
   outputs = [ "out" "lib" "dev" "python" ];
 
-  nativeBuildInputs = [ cmake flex bison ];
-  buildInputs = [ libxml2 libusb1 ];
+  src = fetchFromGitHub {
+    owner = "analogdevicesinc";
+    repo = "libiio";
+    rev = "v${version}";
+    sha256 = "0psw67mzysdb8fkh8xpcwicm7z94k8plkcc8ymxyvl6inshq0mc7";
+  };
+
+  nativeBuildInputs = [
+    cmake
+    flex
+    bison
+  ];
+
+  buildInputs = [
+    python
+    libxml2
+    libusb1
+  ];
+
+  cmakeFlags = [
+    "-DUDEV_RULES_INSTALL_DIR=${placeholder "out"}/lib/udev/rules.d"
+    "-DPYTHON_BINDINGS=on"
+  ];
 
   postPatch = ''
+    # Hardcode path to the shared library into the bindings.
+    sed "s#@libiio@#$lib/lib/libiio${stdenv.hostPlatform.extensions.sharedLibrary}#g" ${./hardcode-library-path.patch} | patch -p1
+
     substituteInPlace libiio.rules.cmakein \
       --replace /bin/sh ${runtimeShell}
   '';
 
-  # since we can't expand $out in cmakeFlags
-  preConfigure = ''
-    cmakeFlags="$cmakeFlags -DUDEV_RULES_INSTALL_DIR=$out/etc/udev/rules.d"
-  '';
-
   postInstall = ''
-    mkdir -p $python/lib/${python.libPrefix}/site-packages/
-    touch $python/lib/${python.libPrefix}/site-packages/
-    cp ../bindings/python/iio.py $python/lib/${python.libPrefix}/site-packages/
-
-    substitute ../bindings/python/iio.py $python/lib/${python.libPrefix}/site-packages/iio.py \
-      --replace 'libiio.so.0' $lib/lib/libiio.so.0
+    # Move Python bindings into a separate output.
+    moveToOutput ${python.sitePackages} "$python"
   '';
 
   meta = with stdenv.lib; {
     description = "API for interfacing with the Linux Industrial I/O Subsystem";
-    homepage    = "https://github.com/analogdevicesinc/libiio";
-    license     = licenses.lgpl21;
-    platforms   = platforms.linux;
+    homepage = "https://github.com/analogdevicesinc/libiio";
+    license = licenses.lgpl21Plus;
+    platforms = platforms.linux;
     maintainers = with maintainers; [ thoughtpolice ];
   };
 }
diff --git a/pkgs/development/libraries/libiio/hardcode-library-path.patch b/pkgs/development/libraries/libiio/hardcode-library-path.patch
new file mode 100644
index 000000000000..dad35851cdc6
--- /dev/null
+++ b/pkgs/development/libraries/libiio/hardcode-library-path.patch
@@ -0,0 +1,38 @@
+diff --git a/bindings/python/iio.py b/bindings/python/iio.py
+index 5306daa..f8962ee 100644
+--- a/bindings/python/iio.py
++++ b/bindings/python/iio.py
+@@ -229,9 +229,9 @@ if "Windows" in _system():
+     _iiolib = "libiio.dll"
+ else:
+     # Non-windows, possibly Posix system
+-    _iiolib = "iio"
++    _iiolib = "@libiio@"
+ 
+-_lib = _cdll(find_library(_iiolib), use_errno=True, use_last_error=True)
++_lib = _cdll(_iiolib, use_errno=True, use_last_error=True)
+ 
+ _get_backends_count = _lib.iio_get_backends_count
+ _get_backends_count.restype = c_uint
+diff --git a/bindings/python/setup.py.cmakein b/bindings/python/setup.py.cmakein
+index cd14e2e..516c409 100644
+--- a/bindings/python/setup.py.cmakein
++++ b/bindings/python/setup.py.cmakein
+@@ -62,7 +62,7 @@ class InstallWrapper(install):
+             _iiolib = "libiio.dll"
+         else:
+             # Non-windows, possibly Posix system
+-            _iiolib = "iio"
++            _iiolib = "@libiio@"
+         try:
+             import os
+ 
+@@ -72,7 +72,7 @@ class InstallWrapper(install):
+                 fulllibpath = find_recursive(destdir, "libiio.so")
+                 _lib = _cdll(fulllibpath, use_errno=True, use_last_error=True)
+             else:
+-                _lib = _cdll(find_library(_iiolib), use_errno=True, use_last_error=True)
++                _lib = _cdll(_iiolib, use_errno=True, use_last_error=True)
+             if not _lib._name:
+                 raise OSError
+         except OSError: