How do I modify the PATH environment variable when running an Inno Setup Installer?

I had the same problem but despite the answers above I've ended up with a custom solution and I'd like to share it with you.

First of all I've created the environment.iss file with 2 methods - one for adding path to the environment's Path variable and second to remove it:

[Code]
const EnvironmentKey = 'SYSTEM\CurrentControlSet\Control\Session Manager\Environment';

procedure EnvAddPath(Path: string);
var
    Paths: string;
begin
    { Retrieve current path (use empty string if entry not exists) }
    if not RegQueryStringValue(HKEY_LOCAL_MACHINE, EnvironmentKey, 'Path', Paths)
    then Paths := '';

    { Skip if string already found in path }
    if Pos(';' + Uppercase(Path) + ';', ';' + Uppercase(Paths) + ';') > 0 then exit;

    { App string to the end of the path variable }
    Paths := Paths + ';'+ Path +';'

    { Overwrite (or create if missing) path environment variable }
    if RegWriteStringValue(HKEY_LOCAL_MACHINE, EnvironmentKey, 'Path', Paths)
    then Log(Format('The [%s] added to PATH: [%s]', [Path, Paths]))
    else Log(Format('Error while adding the [%s] to PATH: [%s]', [Path, Paths]));
end;

procedure EnvRemovePath(Path: string);
var
    Paths: string;
    P: Integer;
begin
    { Skip if registry entry not exists }
    if not RegQueryStringValue(HKEY_LOCAL_MACHINE, EnvironmentKey, 'Path', Paths) then
        exit;

    { Skip if string not found in path }
    P := Pos(';' + Uppercase(Path) + ';', ';' + Uppercase(Paths) + ';');
    if P = 0 then exit;

    { Update path variable }
    Delete(Paths, P - 1, Length(Path) + 1);

    { Overwrite path environment variable }
    if RegWriteStringValue(HKEY_LOCAL_MACHINE, EnvironmentKey, 'Path', Paths)
    then Log(Format('The [%s] removed from PATH: [%s]', [Path, Paths]))
    else Log(Format('Error while removing the [%s] from PATH: [%s]', [Path, Paths]));
end;

Reference: RegQueryStringValue, RegWriteStringValue

Now in main .iss file I could include this file and listen for the 2 events (more about events you can learn in Event Functions section in documentation), CurStepChanged to add path after installation and CurUninstallStepChanged to remove it when user uninstall an application. In below example script add/remove the bin directory (relative to the installation directory):

#include "environment.iss"

[Setup]
ChangesEnvironment=true

; More options in setup section as well as other sections like Files, Components, Tasks...

[Code]
procedure CurStepChanged(CurStep: TSetupStep);
begin
    if CurStep = ssPostInstall 
     then EnvAddPath(ExpandConstant('{app}') +'\bin');
end;

procedure CurUninstallStepChanged(CurUninstallStep: TUninstallStep);
begin
    if CurUninstallStep = usPostUninstall
    then EnvRemovePath(ExpandConstant('{app}') +'\bin');
end;

Reference: ExpandConstant

Note #1: Install step add path only once (ensures repeatability of the installation).

Note #2: Uninstall step remove only one occurrence of the path from variable.

Bonus: Installation step with checkbox "Add to PATH variable".

To add installation step with checkbox "Add to PATH variable" define new task in [Tasks] section (checked by default):

[Tasks]
Name: envPath; Description: "Add to PATH variable" 

Then you can check it in CurStepChanged event:

procedure CurStepChanged(CurStep: TSetupStep);
begin
    if (CurStep = ssPostInstall) and IsTaskSelected('envPath')
    then EnvAddPath(ExpandConstant('{app}') +'\bin');
end;

You can use LegRoom.net's modpath.iss script in your InnoSetup script file:

#define MyTitleName "MyApp" 

[Setup]
ChangesEnvironment=yes

[CustomMessages]
AppAddPath=Add application directory to your environmental path (required)

[Files]
Source: "install\*"; DestDir: "{app}"; Flags: ignoreversion recursesubdirs createallsubdirs; 

[Icons]
Name: "{group}\{cm:UninstallProgram,{#MyTitleName}}"; Filename: "{uninstallexe}"; Comment: "Uninstalls {#MyTitleName}"
Name: "{group}\{#MyTitleName}"; Filename: "{app}\{#MyTitleName}.EXE"; WorkingDir: "{app}"; AppUserModelID: "{#MyTitleName}"; Comment: "Runs {#MyTitleName}"
Name: "{commondesktop}\{#MyTitleName}"; Filename: "{app}\{#MyTitleName}.EXE"; WorkingDir: "{app}"; AppUserModelID: "{#MyTitleName}"; Comment: "Runs {#MyTitleName}"

[Registry]
Root: HKLM; Subkey: "SYSTEM\CurrentControlSet\Control\Session Manager\Environment"; ValueType: expandsz; ValueName: "Path"; ValueData: "{olddata};{app}"

[Tasks]
Name: modifypath; Description:{cm:AppAddPath};   

[Code]

const
    ModPathName = 'modifypath';
    ModPathType = 'system';

function ModPathDir(): TArrayOfString;
begin
    setArrayLength(Result, 1)
    Result[0] := ExpandConstant('{app}');
end;

#include "modpath.iss"

The NeedsAddPath in the answer by @mghie doesn't check trailing \ and letter case. Fix it.

function NeedsAddPath(Param: string): boolean;
var
  OrigPath: string;
begin
  if not RegQueryStringValue(
    HKEY_LOCAL_MACHINE,
    'SYSTEM\CurrentControlSet\Control\Session Manager\Environment',
    'Path', OrigPath)
  then begin
    Result := True;
    exit;
  end;
  { look for the path with leading and trailing semicolon }
  { Pos() returns 0 if not found }
  Result :=
    (Pos(';' + UpperCase(Param) + ';', ';' + UpperCase(OrigPath) + ';') = 0) and
    (Pos(';' + UpperCase(Param) + '\;', ';' + UpperCase(OrigPath) + ';') = 0); 
end;

I want to thank everyone for their contributions to this question. I've incorporated about 95% of the code posted by Wojciech Mleczek into my app's installer. I do have some corrections to that code that may prove useful to others. My changes:

• Renamed formal argument Path to instlPath. Cuts down on multiple uses of "Path" in code (easier to read, IMO).

• When installing/uninstalling, add an existence check for an instlPath that ends with \;.

• During installation, don't double up ; in the current %PATH%.

• Handle missing or empty %PATH% during installation.

• During uninstall, make sure that a starting index of 0 is not passed to Delete().

Here's my updated version of EnvAddPath():

const EnvironmentKey = 'Environment';

procedure EnvAddPath(instlPath: string);
var
    Paths: string;
begin
    { Retrieve current path (use empty string if entry not exists) }
    if not RegQueryStringValue(HKEY_CURRENT_USER, EnvironmentKey, 'Path', Paths) then
        Paths := '';

    if Paths = '' then
        Paths := instlPath + ';'
    else
    begin
        { Skip if string already found in path }
        if Pos(';' + Uppercase(instlPath) + ';',  ';' + Uppercase(Paths) + ';') > 0 then exit;
        if Pos(';' + Uppercase(instlPath) + '\;', ';' + Uppercase(Paths) + ';') > 0 then exit;

        { Append App Install Path to the end of the path variable }
        Log(Format('Right(Paths, 1): [%s]', [Paths[length(Paths)]]));
        if Paths[length(Paths)] = ';' then
            Paths := Paths + instlPath + ';'  { don't double up ';' in env(PATH) }
        else
            Paths := Paths + ';' + instlPath + ';' ;
    end;

    { Overwrite (or create if missing) path environment variable }
    if RegWriteStringValue(HKEY_CURRENT_USER, EnvironmentKey, 'Path', Paths)
    then Log(Format('The [%s] added to PATH: [%s]', [instlPath, Paths]))
    else Log(Format('Error while adding the [%s] to PATH: [%s]', [instlPath, Paths]));
end;

And an updated version of EnvRemovePath():

procedure EnvRemovePath(instlPath: string);
var
    Paths: string;
    P, Offset, DelimLen: Integer;
begin
    { Skip if registry entry not exists }
    if not RegQueryStringValue(HKEY_CURRENT_USER, EnvironmentKey, 'Path', Paths) then
        exit;

    { Skip if string not found in path }
    DelimLen := 1;     { Length(';') }
    P := Pos(';' + Uppercase(instlPath) + ';', ';' + Uppercase(Paths) + ';');
    if P = 0 then
    begin
        { perhaps instlPath lives in Paths, but terminated by '\;' }
        DelimLen := 2; { Length('\;') }
        P := Pos(';' + Uppercase(instlPath) + '\;', ';' + Uppercase(Paths) + ';');
        if P = 0 then exit;
    end;

    { Decide where to start string subset in Delete() operation. }
    if P = 1 then
        Offset := 0
    else
        Offset := 1;
    { Update path variable }
    Delete(Paths, P - Offset, Length(instlPath) + DelimLen);

    { Overwrite path environment variable }
    if RegWriteStringValue(HKEY_CURRENT_USER, EnvironmentKey, 'Path', Paths)
    then Log(Format('The [%s] removed from PATH: [%s]', [instlPath, Paths]))
    else Log(Format('Error while removing the [%s] from PATH: [%s]', [instlPath, Paths]));
end;

If you are ok with using an external DLL, PathMgr.dll could also be an option.

There is a sample .iss script that demonstrates how to use the DLL in Inno Setup 6 or later.

PathMgr.dll is covered by the LPGL license.