diff --git a/README.md b/README.md
index 668fa2a6..60baadcb 100644
--- a/README.md
+++ b/README.md
@@ -5,3 +5,7 @@ Q3Rally is a standalone game based on ioquake3.
 
 For compiling, see [engine/README.md](engine/README.md).
 
+## License
+The source code (engine directory) is licensed under the GPLv2 or later unless specified otherwise.
+
+The data files (baseq3r directory) do not have have a known license and should be treated as non-commericial / non-free.