diff --git a/src/createRollupConfig.ts b/src/createRollupConfig.ts
index 0092baf28..b8255c881 100644
--- a/src/createRollupConfig.ts
+++ b/src/createRollupConfig.ts
@@ -165,6 +165,9 @@ export async function createRollupConfig(
           },
         },
         check: !opts.transpileOnly,
+        useTsconfigDeclarationDir: Boolean(
+          tsconfigJSON?.compilerOptions?.declarationDir
+        ),
       }),
       babelPluginTsdx({
         exclude: 'node_modules/**',
diff --git a/test/fixtures/README.md b/test/fixtures/README.md
index c7b211d90..709ceef47 100644
--- a/test/fixtures/README.md
+++ b/test/fixtures/README.md
@@ -5,3 +5,4 @@ here are some fixtures for manual testing things we don't have Jest tests for.
 - `build-default` focuses on our zero config defaults
 - `build-invalid` lets us check what happens when we have invalid builds due to type errors
 - `build-withConfig` lets us check that `tsdx.config.js` works as expected
+- `build-withTsconfig` lets us check that `tsconfig.json` options are correctly used
diff --git a/test/fixtures/build-withTsconfig/package.json b/test/fixtures/build-withTsconfig/package.json
new file mode 100644
index 000000000..bfd75cf3f
--- /dev/null
+++ b/test/fixtures/build-withTsconfig/package.json
@@ -0,0 +1,7 @@
+{
+  "scripts": {
+    "build": "tsdx build"
+  },
+  "name": "build-withtsconfig",
+  "license": "MIT"
+}
diff --git a/test/fixtures/build-withTsconfig/src/index.ts b/test/fixtures/build-withTsconfig/src/index.ts
new file mode 100644
index 000000000..af27ae37d
--- /dev/null
+++ b/test/fixtures/build-withTsconfig/src/index.ts
@@ -0,0 +1,6 @@
+export const sum = (a: number, b: number) => {
+  if ('development' === process.env.NODE_ENV) {
+    console.log('fuck');
+  }
+  return a + b;
+};
diff --git a/test/fixtures/build-withTsconfig/test/blah.test.ts b/test/fixtures/build-withTsconfig/test/blah.test.ts
new file mode 100644
index 000000000..c14b0da80
--- /dev/null
+++ b/test/fixtures/build-withTsconfig/test/blah.test.ts
@@ -0,0 +1,7 @@
+import { sum } from '../src';
+
+describe('fuck', () => {
+  it('works', () => {
+    expect(sum(1, 1)).toEqual(2);
+  });
+});
diff --git a/test/fixtures/build-withTsconfig/tsconfig.json b/test/fixtures/build-withTsconfig/tsconfig.json
new file mode 100644
index 000000000..db72d3a9d
--- /dev/null
+++ b/test/fixtures/build-withTsconfig/tsconfig.json
@@ -0,0 +1,30 @@
+{
+  "compilerOptions": {
+    "module": "ESNext",
+    "lib": ["dom", "esnext"],
+    "declaration": true,
+    "declarationDir": "typings",
+    "declarationMap": true,
+    "sourceMap": true,
+    "rootDir": "./src",
+    "strict": true,
+    "noImplicitAny": true,
+    "strictNullChecks": true,
+    "strictFunctionTypes": true,
+    "strictPropertyInitialization": true,
+    "noImplicitThis": true,
+    "alwaysStrict": true,
+    "noUnusedLocals": true,
+    "noUnusedParameters": true,
+    "noImplicitReturns": true,
+    "noFallthroughCasesInSwitch": true,
+    "moduleResolution": "node",
+    "baseUrl": "./",
+    "paths": {
+      "*": ["src/*", "node_modules/*"]
+    },
+    "jsx": "react",
+    "esModuleInterop": true
+  },
+  "include": ["src", "types"]
+}
diff --git a/test/tests/tsdx-build.test.js b/test/tests/tsdx-build.test.js
index b91bc9808..b38887193 100644
--- a/test/tests/tsdx-build.test.js
+++ b/test/tests/tsdx-build.test.js
@@ -102,6 +102,27 @@ describe('tsdx build', () => {
     expect(code).toBe(0);
   });
 
+  it('should use the declarationDir when set in tsconfig', () => {
+    util.setupStageWithFixture(stageName, 'build-withTsconfig');
+
+    const output = shell.exec('node ../dist/index.js build --format esm,cjs');
+
+    expect(shell.test('-f', 'dist/index.js')).toBeTruthy();
+    expect(
+      shell.test('-f', 'dist/build-withtsconfig.cjs.development.js')
+    ).toBeTruthy();
+    expect(
+      shell.test('-f', 'dist/build-withtsconfig.cjs.production.min.js')
+    ).toBeTruthy();
+    expect(shell.test('-f', 'dist/build-withtsconfig.esm.js')).toBeTruthy();
+
+    expect(shell.test('-f', 'dist/index.d.ts')).toBeFalsy();
+    expect(shell.test('-f', 'typings/index.d.ts')).toBeTruthy();
+    expect(shell.test('-f', 'typings/index.d.ts.map')).toBeTruthy();
+
+    expect(output.code).toBe(0);
+  });
+
   afterEach(() => {
     util.teardownStage(stageName);
   });