diff --git a/CHANGELOG.md b/CHANGELOG.md
index 3976efccf..c9210dd18 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,5 +1,9 @@
 # Changelog
 
+## 5.0.0
+
+* [feat: Fixed issue with incorrect output path for declaration files](https://github.com/TypeStrong/ts-loader/pull/822) - thanks @JonWallsten! **BREAKING CHANGE**
+
 ## 4.5.0
 
 * [feat: Added support for TypeScript declaration map](https://github.com/TypeStrong/ts-loader/pull/821) - thanks @JonWallsten!
diff --git a/package.json b/package.json
index 7b325ba71..41b2bfaf9 100644
--- a/package.json
+++ b/package.json
@@ -1,6 +1,6 @@
 {
   "name": "ts-loader",
-  "version": "4.5.0",
+  "version": "5.0.0",
   "description": "TypeScript loader for webpack",
   "main": "index.js",
   "types": "dist/types/index.d.ts",
diff --git a/src/after-compile.ts b/src/after-compile.ts
index 5ba828dcb..105a31fce 100644
--- a/src/after-compile.ts
+++ b/src/after-compile.ts
@@ -251,7 +251,7 @@ function provideDeclarationFilesToWebpack(
 
     declarationFiles.forEach(declarationFile => {
       const assetPath = path.relative(
-        compilation.compiler.context,
+        compilation.compiler.outputPath,
         declarationFile.name
       );
       compilation.assets[assetPath] = {
diff --git a/src/interfaces.ts b/src/interfaces.ts
index a66395fdf..a8283f84b 100644
--- a/src/interfaces.ts
+++ b/src/interfaces.ts
@@ -149,6 +149,7 @@ export interface WebpackCompilation {
 export interface WebpackCompiler {
   isChild(): boolean;
   context: string; // a guess
+  outputPath: string;
   watchFileSystem: WebpackNodeWatchFileSystem;
   /** key is filepath and value is Date as a number */
   fileTimestamps: Map<string, number>;
diff --git a/test/comparison-tests/declarationOutput/tsconfig.json b/test/comparison-tests/declarationOutput/tsconfig.json
index 6c9058ec4..6a9e3a116 100644
--- a/test/comparison-tests/declarationOutput/tsconfig.json
+++ b/test/comparison-tests/declarationOutput/tsconfig.json
@@ -1,5 +1,6 @@
 {
 	"compilerOptions": {
-		"declaration": true
+		"declaration": true,
+		"declarationDir": ".output"
 	}
 }
diff --git a/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/app.d.ts.map b/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/app.d.ts.map
index 98087b66e..48bc3c227 100644
--- a/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/app.d.ts.map
+++ b/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/app.d.ts.map
@@ -1 +1 @@
-{"version":3,"file":"app.d.ts","sourceRoot":"","sources":["app.ts"],"names":[],"mappings":"AAAA,OAAO,GAAG,GAAG,QAAQ,WAAW,CAAC,CAAC;AAElC,cAAM,IAAK,SAAQ,GAAG;IACrB,WAAW;CAGX;AAED,SAAS,IAAI,CAAC"}
\ No newline at end of file
+{"version":3,"file":"app.d.ts","sourceRoot":"","sources":["../app.ts"],"names":[],"mappings":"AAAA,OAAO,GAAG,GAAG,QAAQ,WAAW,CAAC,CAAC;AAElC,cAAM,IAAK,SAAQ,GAAG;IACrB,WAAW;CAGX;AAED,SAAS,IAAI,CAAC"}
\ No newline at end of file
diff --git a/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/output.txt b/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/output.txt
index 311e5dc7d..eeeb27f95 100644
--- a/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/output.txt
+++ b/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/output.txt
@@ -1,8 +1,8 @@
            Asset       Size  Chunks             Chunk Names
        bundle.js   5.13 KiB    main  [emitted]  main
-    app.d.ts.map  194 bytes          [emitted]  
+    app.d.ts.map  197 bytes          [emitted]  
         app.d.ts  143 bytes          [emitted]  
-sub/dep.d.ts.map  142 bytes          [emitted]  
+sub/dep.d.ts.map  152 bytes          [emitted]  
     sub/dep.d.ts   96 bytes          [emitted]  
 Entrypoint main = bundle.js
 [./app.ts] 910 bytes {main} [built]
diff --git a/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/sub/dep.d.ts.map b/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/sub/dep.d.ts.map
index 6d719d956..9da4dc7f3 100644
--- a/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/sub/dep.d.ts.map
+++ b/test/comparison-tests/declarationOutputWithMaps/expectedOutput-3.0/sub/dep.d.ts.map
@@ -1 +1 @@
-{"version":3,"file":"dep.d.ts","sourceRoot":"","sources":["dep.ts"],"names":[],"mappings":"AACA,cAAM,IAAI;IACT,WAAW;CAGX;AAED,SAAS,IAAI,CAAC"}
\ No newline at end of file
+{"version":3,"file":"dep.d.ts","sourceRoot":"","sources":["../../sub/dep.ts"],"names":[],"mappings":"AACA,cAAM,IAAI;IACT,WAAW;CAGX;AAED,SAAS,IAAI,CAAC"}
\ No newline at end of file
diff --git a/test/comparison-tests/declarationOutputWithMaps/tsconfig.json b/test/comparison-tests/declarationOutputWithMaps/tsconfig.json
index 2437beaef..0357b08dc 100644
--- a/test/comparison-tests/declarationOutputWithMaps/tsconfig.json
+++ b/test/comparison-tests/declarationOutputWithMaps/tsconfig.json
@@ -1,6 +1,7 @@
 {
 	"compilerOptions": {
 		"declaration": true,
-		"declarationMap": true
+		"declarationMap": true,
+		"declarationDir": ".output"
 	}
 }