diff --git a/packages/gatsby-plugin-sharp/README.md b/packages/gatsby-plugin-sharp/README.md
index 71c2ee80513fe..572430ff20311 100644
--- a/packages/gatsby-plugin-sharp/README.md
+++ b/packages/gatsby-plugin-sharp/README.md
@@ -30,18 +30,30 @@ plugins: [
   {
     resolve: `gatsby-plugin-sharp`,
     options: {
-      // Available options and their defaults:
+      // Defaults used for gatsbyImageData and StaticImage
+      defaults: {},
+      // Set to false to allow builds to continue on image errors
+      failOnError: true,
+      // deprecated options and their defaults:
       base64Width: 20,
       forceBase64Format: ``, // valid formats: png,jpg,webp
       useMozJpeg: process.env.GATSBY_JPEG_ENCODER === `MOZJPEG`,
       stripMetadata: true,
       defaultQuality: 50,
-      failOnError: true,
     },
   },
 ]
 ```
 
+## Options
+
+- `defaults`: default values used for `gatsbyImageData` and `StaticImage` from [gatsby-plugin-image](https://www.gatsbyjs.com/plugins/gatsby-plugin-image).
+  Available options are: `formats`,`placeholder`,`quality`,`breakpoints`,`backgroundColor`,`tracedSVGOptions`,`blurredOptions`,`jpgOptions`,`pngOptions`,`webpOptions`,`avifOptions`.
+  For details of these, see [the reference guide](https://www.gatsbyjs.com/docs/reference/built-in-components/gatsby-plugin-image).
+- `failOnError`: default = `true`. By default builds will fail if there is a corrupted image. Set to false to continue the build on error. The image will return `undefined`.
+
+Other options are deprecated, and should only be used for the legacy `fixed` and `fluid` functions.
+
 ## Methods
 
 ### resize
diff --git a/packages/gatsby-plugin-sharp/src/__tests__/plugin-options.ts b/packages/gatsby-plugin-sharp/src/__tests__/plugin-options.ts
index 39826017dec26..e9d74afa5fcf5 100644
--- a/packages/gatsby-plugin-sharp/src/__tests__/plugin-options.ts
+++ b/packages/gatsby-plugin-sharp/src/__tests__/plugin-options.ts
@@ -1,5 +1,20 @@
 import { testPluginOptionsSchema } from "gatsby-plugin-utils"
 import { pluginOptionsSchema } from "../../gatsby-node"
+import { doMergeDefaults } from "../plugin-options"
+
+const defaults = {
+  formats: [`auto`, `webp`],
+  placeholder: `dominantColor`,
+  quality: 50,
+  breakpoints: [100, 200],
+  backgroundColor: `rebeccapurple`,
+  tracedSVGOptions: {},
+  blurredOptions: { quality: 20 },
+  jpgOptions: { quality: 20 },
+  pngOptions: { quality: 20 },
+  webpOptions: { quality: 20 },
+  avifOptions: { quality: 20 },
+}
 
 describe(`pluginOptionsSchema`, () => {
   it(`should reject incorrect options`, async () => {
@@ -40,21 +55,7 @@ describe(`pluginOptionsSchema`, () => {
   })
 
   it(`should accept correct options`, async () => {
-    const options = {
-      defaults: {
-        formats: [`auto`, `webp`],
-        placeholder: `dominantColor`,
-        quality: 50,
-        breakpoints: [100, 200],
-        backgroundColor: `rebeccapurple`,
-        tracedSVGOptions: {},
-        blurredOptions: { quality: 20 },
-        jpgOptions: { quality: 20 },
-        pngOptions: { quality: 20 },
-        webpOptions: { quality: 20 },
-        avifOptions: { quality: 20 },
-      },
-    }
+    const options = { defaults }
     const { isValid } = await testPluginOptionsSchema(
       pluginOptionsSchema,
       options
@@ -62,3 +63,62 @@ describe(`pluginOptionsSchema`, () => {
     expect(isValid).toBe(true)
   })
 })
+
+describe(`plugin defaults`, () => {
+  it(`uses defaults`, () => {
+    const output = doMergeDefaults({}, defaults)
+    expect(output).toMatchInlineSnapshot(`
+      Object {
+        "avifOptions": Object {
+          "quality": 20,
+        },
+        "backgroundColor": "rebeccapurple",
+        "blurredOptions": Object {
+          "quality": 20,
+        },
+        "breakpoints": Array [
+          100,
+          200,
+        ],
+        "formats": Array [
+          "auto",
+          "webp",
+        ],
+        "jpgOptions": Object {
+          "quality": 20,
+        },
+        "placeholder": "dominantColor",
+        "pngOptions": Object {
+          "quality": 20,
+        },
+        "quality": 50,
+        "tracedSVGOptions": Object {},
+        "webpOptions": Object {
+          "quality": 20,
+        },
+      }
+    `)
+  })
+
+  it(`allows overrides`, () => {
+    const output = doMergeDefaults({ backgroundColor: `papayawhip` }, defaults)
+    expect(output.backgroundColor).toEqual(`papayawhip`)
+    expect(output.quality).toEqual(50)
+  })
+
+  it(`allows overrides of arrays`, () => {
+    const output = doMergeDefaults({ formats: [`auto`, `avif`] }, defaults)
+    expect(output.formats).toEqual([`auto`, `avif`])
+    expect(output.breakpoints).toEqual([100, 200])
+  })
+
+  it(`allows override of deep objects`, () => {
+    const output = doMergeDefaults({ avifOptions: { quality: 50 } }, defaults)
+    expect(output.avifOptions).toEqual({ quality: 50 })
+  })
+
+  it(`allows extra keys in objects`, () => {
+    const output = doMergeDefaults({ avifOptions: { speed: 50 } }, defaults)
+    expect(output.avifOptions).toEqual({ quality: 20, speed: 50 })
+  })
+})
diff --git a/packages/gatsby-plugin-sharp/src/plugin-options.js b/packages/gatsby-plugin-sharp/src/plugin-options.js
index 92195c779d8a4..7e4c6c8f36db2 100644
--- a/packages/gatsby-plugin-sharp/src/plugin-options.js
+++ b/packages/gatsby-plugin-sharp/src/plugin-options.js
@@ -74,14 +74,20 @@ exports.createTransformObject = args => {
 /**
  * Used for gatsbyImageData and StaticImage only
  */
-exports.mergeDefaults = args => {
-  const { defaults } = pluginOptions
+exports.mergeDefaults = args => doMergeDefaults(args, pluginOptions.defaults)
+
+const customizer = (objValue, srcValue) =>
+  Array.isArray(objValue) ? srcValue : undefined
+
+function doMergeDefaults(args, defaults) {
   if (!defaults) {
     return args
   }
-  return _.defaultsDeep(args, defaults)
+  return _.mergeWith({}, defaults, args, customizer)
 }
 
+exports.doMergeDefaults = doMergeDefaults
+
 exports.healOptions = (
   { defaultQuality: quality, base64Width },
   args,