diff --git a/fixtures/vuejs-css-modules/App.vue b/fixtures/vuejs-css-modules/App.vue
new file mode 100644
index 00000000..d75d3bdc
--- /dev/null
+++ b/fixtures/vuejs-css-modules/App.vue
@@ -0,0 +1,15 @@
+<template>
+  <div id="app" class="red" :class="$style.italic"></div>
+</template>
+
+<style>
+  .red {
+    color: red;
+  }
+</style>
+
+<style module>
+  .italic {
+    font-style: italic;
+  }
+</style>
diff --git a/fixtures/vuejs-css-modules/main.js b/fixtures/vuejs-css-modules/main.js
new file mode 100644
index 00000000..8845066e
--- /dev/null
+++ b/fixtures/vuejs-css-modules/main.js
@@ -0,0 +1,8 @@
+import Vue from 'vue'
+import App from './App'
+
+new Vue({
+  el: '#app',
+  template: '<App/>',
+  components: { App }
+})
diff --git a/lib/config-generator.js b/lib/config-generator.js
index d6c5839c..e7993bcf 100644
--- a/lib/config-generator.js
+++ b/lib/config-generator.js
@@ -229,7 +229,21 @@ class ConfigGenerator {
             },
             {
                 test: /\.css$/,
-                use: cssExtractLoaderUtil.prependLoaders(this.webpackConfig, cssLoaderUtil.getLoaders(this.webpackConfig))
+                oneOf: [
+                    {
+                        resourceQuery: /module/,
+                        use: cssExtractLoaderUtil.prependLoaders(
+                            this.webpackConfig,
+                            cssLoaderUtil.getLoaders(this.webpackConfig, true)
+                        )
+                    },
+                    {
+                        use: cssExtractLoaderUtil.prependLoaders(
+                            this.webpackConfig,
+                            cssLoaderUtil.getLoaders(this.webpackConfig)
+                        )
+                    }
+                ]
             }
         ];
 
diff --git a/lib/loaders/css.js b/lib/loaders/css.js
index 7685fbee..190a3b58 100644
--- a/lib/loaders/css.js
+++ b/lib/loaders/css.js
@@ -15,9 +15,10 @@ const applyOptionsCallback = require('../utils/apply-options-callback');
 module.exports = {
     /**
      * @param {WebpackConfig} webpackConfig
+     * @param {boolean} useCssModules
      * @return {Array} of loaders to use for CSS files
      */
-    getLoaders(webpackConfig) {
+    getLoaders(webpackConfig, useCssModules = false) {
         const usePostCssLoader = webpackConfig.usePostCssLoader;
 
         const options = {
@@ -27,7 +28,9 @@ module.exports = {
             // be applied to those imports? This defaults to 0. When postcss-loader
             // is used, we set it to 1, so that postcss-loader is applied
             // to @import resources.
-            importLoaders: usePostCssLoader ? 1 : 0
+            importLoaders: usePostCssLoader ? 1 : 0,
+            modules: useCssModules,
+            localIdentName: '[local]_[hash:base64:5]',
         };
 
         const cssLoaders = [
diff --git a/test/functional.js b/test/functional.js
index 3b717b63..14e3d460 100644
--- a/test/functional.js
+++ b/test/functional.js
@@ -1354,6 +1354,61 @@ module.exports = {
             });
         });
 
+        it('Vue.js supports CSS modules', (done) => {
+            const appDir = testSetup.createTestAppDir();
+            const config = testSetup.createWebpackConfig(appDir, 'www/build', 'dev');
+            config.enableSingleRuntimeChunk();
+            config.setPublicPath('/build');
+            config.addEntry('main', './vuejs-css-modules/main');
+            config.enableVueLoader();
+            config.enableSassLoader();
+            config.enableLessLoader();
+            config.configureCssLoader(options => {
+                // Remove hashes from local ident names
+                // since they are not always the same.
+                options.localIdentName = '[local]_foo';
+            });
+
+            testSetup.runWebpack(config, (webpackAssert) => {
+                expect(config.outputPath).to.be.a.directory().with.deep.files([
+                    'main.js',
+                    'main.css',
+                    'manifest.json',
+                    'entrypoints.json',
+                    'runtime.js',
+                ]);
+
+                // Standard CSS
+                webpackAssert.assertOutputFileContains(
+                    'main.css',
+                    '.red {'
+                );
+
+                // CSS modules
+                webpackAssert.assertOutputFileContains(
+                    'main.css',
+                    '.italic_foo {'
+                );
+
+                testSetup.requestTestPage(
+                    path.join(config.getContext(), 'www'),
+                    [
+                        'build/runtime.js',
+                        'build/main.js'
+                    ],
+                    (browser) => {
+                        // Standard CSS
+                        browser.assert.hasClass('#app', 'red');
+
+                        // CSS modules
+                        browser.assert.hasClass('#app', 'italic_foo');
+
+                        done();
+                    }
+                );
+            });
+        });
+
         it('Vue.js error when using non-activated loaders', (done) => {
             const config = createWebpackConfig('www/build', 'dev');
             config.setPublicPath('/build');
diff --git a/test/loaders/css.js b/test/loaders/css.js
index d7ebbc68..ddf72fb7 100644
--- a/test/loaders/css.js
+++ b/test/loaders/css.js
@@ -31,6 +31,7 @@ describe('loaders/css', () => {
         expect(actualLoaders).to.have.lengthOf(1);
         expect(actualLoaders[0].options.sourceMap).to.be.true;
         expect(actualLoaders[0].options.minimize).to.be.false;
+        expect(actualLoaders[0].options.modules).to.be.false;
     });
 
     it('getLoaders() for production', () => {
@@ -42,6 +43,7 @@ describe('loaders/css', () => {
         expect(actualLoaders).to.have.lengthOf(1);
         expect(actualLoaders[0].options.sourceMap).to.be.false;
         expect(actualLoaders[0].options.minimize).to.be.true;
+        expect(actualLoaders[0].options.modules).to.be.false;
     });
 
     it('getLoaders() with options callback', () => {
@@ -56,6 +58,22 @@ describe('loaders/css', () => {
         expect(actualLoaders).to.have.lengthOf(1);
         expect(actualLoaders[0].options.minimize).to.be.true;
         expect(actualLoaders[0].options.url).to.be.false;
+        expect(actualLoaders[0].options.modules).to.be.false;
+    });
+
+    it('getLoaders() with CSS modules enabled', () => {
+        const config = createConfig();
+
+        config.configureCssLoader(function(options) {
+            options.minimize = true;
+            options.url = false;
+        });
+
+        const actualLoaders = cssLoader.getLoaders(config, true);
+        expect(actualLoaders).to.have.lengthOf(1);
+        expect(actualLoaders[0].options.minimize).to.be.true;
+        expect(actualLoaders[0].options.url).to.be.false;
+        expect(actualLoaders[0].options.modules).to.be.true;
     });
 
     describe('getLoaders() with PostCSS', () => {