diff --git a/packages/js/src/generators/init/init.spec.ts b/packages/js/src/generators/init/init.spec.ts
index b6ab997d39be5..f4e9454a960c6 100644
--- a/packages/js/src/generators/init/init.spec.ts
+++ b/packages/js/src/generators/init/init.spec.ts
@@ -26,6 +26,7 @@ describe('js init generator', () => {
     const prettierignore = tree.read('.prettierignore', 'utf-8');
     expect(prettierignore).toMatch(/\n\/coverage/);
     expect(prettierignore).toMatch(/\n\/dist/);
+    expect(prettierignore).toMatch(/\n\/\.nx\/cache/);
   });
 
   it('should not overwrite existing .prettierrc and .prettierignore files', async () => {
diff --git a/packages/js/src/generators/init/init.ts b/packages/js/src/generators/init/init.ts
index b2db674b0daa7..94b1c80dca404 100644
--- a/packages/js/src/generators/init/init.ts
+++ b/packages/js/src/generators/init/init.ts
@@ -121,6 +121,7 @@ export async function initGenerator(
         # Add files here to ignore them from prettier formatting
         /dist
         /coverage
+        /.nx/cache
       `
     );
   }
diff --git a/packages/nx/migrations.json b/packages/nx/migrations.json
index b0a038c80ade6..49cb44c679ead 100644
--- a/packages/nx/migrations.json
+++ b/packages/nx/migrations.json
@@ -59,6 +59,12 @@
       "version": "16.8.0-beta.3",
       "description": "Escape $ in env variables",
       "implementation": "./src/migrations/update-16-8-0/escape-dollar-sign-env-variables"
+    },
+    "17.0.0-move-cache-directory": {
+      "cli": "nx",
+      "version": "17.0.0-beta.1",
+      "description": "Updates the default cache directory to .nx/cache",
+      "implementation": "./src/migrations/update-17-0-0/move-cache-directory"
     }
   }
 }
diff --git a/packages/nx/src/migrations/update-17-0-0/move-cache-directory.spec.ts b/packages/nx/src/migrations/update-17-0-0/move-cache-directory.spec.ts
new file mode 100644
index 0000000000000..6d4376ca71f77
--- /dev/null
+++ b/packages/nx/src/migrations/update-17-0-0/move-cache-directory.spec.ts
@@ -0,0 +1,71 @@
+import { createTree } from '../../generators/testing-utils/create-tree';
+import { createTreeWithEmptyWorkspace } from '../../generators/testing-utils/create-tree-with-empty-workspace';
+import migrate from './move-cache-directory';
+
+describe('move-cache-directory', () => {
+  it('should add .nx/cache to the gitignore', () => {
+    const tree = createTreeWithEmptyWorkspace();
+    tree.write('.gitignore', 'node_modules');
+    migrate(tree);
+    expect(tree.read('.gitignore', 'utf-8')).toMatchInlineSnapshot(`
+      "node_modules
+      .nx/cache"
+    `);
+  });
+
+  it('should work if .gitignore is not present', () => {
+    const tree = createTreeWithEmptyWorkspace();
+    tree.delete('.gitignore');
+    migrate(tree);
+    expect(tree.read('.gitignore', 'utf-8')).toMatchInlineSnapshot(
+      `".nx/cache"`
+    );
+  });
+
+  it('should not change gitignore if directly ignored', () => {
+    const tree = createTreeWithEmptyWorkspace();
+    tree.write('.gitignore', 'node_modules\n.nx/cache');
+    migrate(tree);
+    expect(tree.read('.gitignore', 'utf-8')).toMatchInlineSnapshot(`
+      "node_modules
+      .nx/cache"
+    `);
+  });
+
+  it('should not change gitignore if ignored by another pattern', () => {
+    const tree = createTreeWithEmptyWorkspace();
+    tree.write('.gitignore', 'node_modules\n.*/cache');
+    migrate(tree);
+    expect(tree.read('.gitignore', 'utf-8')).toMatchInlineSnapshot(`
+      "node_modules
+      .*/cache"
+    `);
+  });
+
+  it('should not update gitignore for lerna repos without nx.json', () => {
+    const tree = createTree();
+    tree.write('.gitignore', 'node_modules');
+    tree.write('lerna.json', '{}');
+    migrate(tree);
+    expect(tree.read('.gitignore', 'utf-8')).toMatchInlineSnapshot(
+      `"node_modules"`
+    );
+  });
+
+  it('should handle prettierignore', () => {
+    const tree = createTree();
+    tree.write('.prettierignore', '/dist');
+    migrate(tree);
+    expect(tree.read('.prettierignore', 'utf-8')).toMatchInlineSnapshot(`
+      "/dist
+      /.nx/cache"
+    `);
+  });
+
+  it('should handle missing prettierignore', () => {
+    const tree = createTree();
+    tree.delete('.prettierignore');
+    migrate(tree);
+    expect(tree.exists('.prettierignore')).toBeFalsy();
+  });
+});
diff --git a/packages/nx/src/migrations/update-17-0-0/move-cache-directory.ts b/packages/nx/src/migrations/update-17-0-0/move-cache-directory.ts
new file mode 100644
index 0000000000000..e214dbad541aa
--- /dev/null
+++ b/packages/nx/src/migrations/update-17-0-0/move-cache-directory.ts
@@ -0,0 +1,37 @@
+import { Tree } from '../../generators/tree';
+import ignore from 'ignore';
+
+export default function moveCacheDirectory(tree: Tree) {
+  // If nx.json doesn't exist the repo can't utilize
+  // caching, so .nx/cache is less relevant. Lerna users
+  // that don't want to fully opt in to Nx at this time
+  // may also be caught off guard by the appearance of
+  // a .nx directory, so we are going to special case
+  // this for the time being.
+  if (tree.exists('lerna.json') && !tree.exists('nx.json')) {
+    return;
+  }
+
+  updateGitIgnore(tree);
+
+  if (tree.exists('.prettierignore')) {
+    const ignored = tree.read('.prettierignore', 'utf-8');
+    if (!ignored.includes('.nx/cache')) {
+      tree.write('.prettierignore', [ignored, '/.nx/cache'].join('\n'));
+    }
+  }
+}
+
+function updateGitIgnore(tree: Tree) {
+  const gitignore = tree.exists('.gitignore')
+    ? tree.read('.gitignore', 'utf-8')
+    : '';
+  const ig = ignore();
+  ig.add(gitignore);
+  if (!ig.ignores('.nx/cache')) {
+    const updatedLines = gitignore.length
+      ? [gitignore, '.nx/cache']
+      : ['.nx/cache'];
+    tree.write('.gitignore', updatedLines.join('\n'));
+  }
+}
diff --git a/packages/nx/src/utils/cache-directory.ts b/packages/nx/src/utils/cache-directory.ts
index 93e4e982e4d58..16bd772b45afc 100644
--- a/packages/nx/src/utils/cache-directory.ts
+++ b/packages/nx/src/utils/cache-directory.ts
@@ -37,9 +37,19 @@ function cacheDirectory(root: string, cacheDirectory: string) {
 }
 
 function defaultCacheDirectory(root: string) {
-  return existsSync(join(root, '.nx'))
-    ? join(root, '.nx', 'cache')
-    : join(root, 'node_modules', '.cache', 'nx');
+  // If nx.json doesn't exist the repo can't utilize
+  // caching, so .nx/cache is less relevant. Lerna users
+  // that don't want to fully opt in to Nx at this time
+  // may also be caught off guard by the appearance of
+  // a .nx directory, so we are going to special case
+  // this for the time being.
+  if (
+    existsSync(join(root, 'lerna.json')) &&
+    !existsSync(join(root, 'nx.json'))
+  ) {
+    return join(root, 'node_modules', '.cache', 'nx');
+  }
+  return join(root, '.nx', 'cache');
 }
 
 /**
diff --git a/packages/workspace/src/generators/new/files-integrated-repo/__dot__gitignore b/packages/workspace/src/generators/new/files-integrated-repo/__dot__gitignore
index 51b9af5269c1d..98a6e38939fa2 100644
--- a/packages/workspace/src/generators/new/files-integrated-repo/__dot__gitignore
+++ b/packages/workspace/src/generators/new/files-integrated-repo/__dot__gitignore
@@ -37,3 +37,5 @@ testem.log
 # System Files
 .DS_Store
 Thumbs.db
+
+.nx/cache
\ No newline at end of file
diff --git a/packages/workspace/src/generators/new/files-package-based-repo/__dot__gitignore b/packages/workspace/src/generators/new/files-package-based-repo/__dot__gitignore
index 51b9af5269c1d..ef9dcfb186332 100644
--- a/packages/workspace/src/generators/new/files-package-based-repo/__dot__gitignore
+++ b/packages/workspace/src/generators/new/files-package-based-repo/__dot__gitignore
@@ -37,3 +37,5 @@ testem.log
 # System Files
 .DS_Store
 Thumbs.db
+
+.nx/cache
diff --git a/packages/workspace/src/generators/new/files-root-app/__dot__gitignore b/packages/workspace/src/generators/new/files-root-app/__dot__gitignore
index 51b9af5269c1d..98a6e38939fa2 100644
--- a/packages/workspace/src/generators/new/files-root-app/__dot__gitignore
+++ b/packages/workspace/src/generators/new/files-root-app/__dot__gitignore
@@ -37,3 +37,5 @@ testem.log
 # System Files
 .DS_Store
 Thumbs.db
+
+.nx/cache
\ No newline at end of file