MySQL Installation Error

This is probably something very easy and simple but here is my story:
Installed from source...
shell> groupadd mysql
shell> useradd -g mysql mysql
shell> gunzip < mysql-VERSION.tar.gz | tar -xvf -
shell> cd mysql-VERSION
shell> ./configure --prefix=/usr/local/mysql
shell> make
shell> make install
shell> cp support-files/my-medium.cnf /etc/my.cnf
shell> cd /usr/local/mysql
shell> bin/mysql_install_db --user=mysql
shell> chown -R root .
shell> chown -R mysql var
shell> chgrp -R mysql .
shell> bin/mysqld_safe --user=mysql &

Running bin/mysql_install_db --user=mysql produces this error msg:
/usr/local/mysql/libexec/mysqld: ERROR: unknown variable 'dir=/var/lib/mysql'
Installation of grant tables failed!

I've searched everywhere known and I cannot solve this problem.

Thanks for your help!

 

 

 

 

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