diff --git a/packages/plugin-vue/README.md b/packages/plugin-vue/README.md
index 39056216..ebc660cc 100644
--- a/packages/plugin-vue/README.md
+++ b/packages/plugin-vue/README.md
@@ -82,23 +82,27 @@ export default {
 
 ## Using Vue SFCs as Custom Elements
 
-> Requires `vue@^3.2.0`
+> Requires `vue@^3.2.0` & `@vitejs/plugin-vue@^1.4.0`
 
-By default, files ending in `*.ce.vue` will be processed as native Custom Elements when imported (created with `defineCustomElement` from Vue core):
+Vue 3.2 introduces the `defineCustomElement` method, which works with SFCs. By default, `<style>` tags inside SFCs are extracted and merged into CSS files during build. However when shipping a library of custom elements, it may be desirable to inline the styles as JavaScript strings and inject them into the custom elements' shadow root instead.
+
+Starting in 1.4.0, files ending with `*.ce.vue` will be compiled in "custom elements" mode: its `<style>` tags are compiled into inlined CSS strings and attached to the component as its `styles` property:
 
 ```js
+import { defineCustomElement } from 'vue'
 import Example from './Example.ce.vue'
 
-// register
-customElements.define('my-example', Example)
+console.log(Example.styles) // ['/* css content */']
 
-// can also be instantiated
-const myExample = new Example()
+// register
+customElements.define('my-example', defineCustomElement(Example))
 ```
 
+Note in custom elements mode there is no need to use `<style scoped>` since the CSS is already scoped inside the shadow DOM.
+
 The `customElement` plugin option can be used to configure the behavior:
 
-- `{ customElement: true }` will import all `*.vue` files as Custom Elements.
+- `{ customElement: true }` will import all `*.vue` files in custom element mode.
 - Use a string or regex pattern to change how files should be loaded as Custom Elements (this check is applied after `include` and `exclude` matches).
 
 ## License
diff --git a/packages/plugin-vue/src/main.ts b/packages/plugin-vue/src/main.ts
index cbd03fab..b4893b89 100644
--- a/packages/plugin-vue/src/main.ts
+++ b/packages/plugin-vue/src/main.ts
@@ -136,9 +136,7 @@ export async function transformMain(
       output.push(`export const _rerender_only = true`)
     }
     output.push(
-      `import.meta.hot.accept(({ default: ${
-        asCustomElement ? `{ def: updated }` : `updated`
-      }, _rerender_only }) => {`,
+      `import.meta.hot.accept(({ default: updated, _rerender_only }) => {`,
       `  if (_rerender_only) {`,
       `    __VUE_HMR_RUNTIME__.rerender(updated.__hmrId, updated.render)`,
       `  } else {`,
@@ -191,14 +189,7 @@ export async function transformMain(
     resolvedMap.sourcesContent = templateMap.sourcesContent
   }
 
-  if (asCustomElement) {
-    output.push(
-      `import { defineCustomElement as __ce } from 'vue'`,
-      `export default __ce(_sfc_main)`
-    )
-  } else {
-    output.push(`export default _sfc_main`)
-  }
+  output.push(`export default _sfc_main`)
 
   return {
     code: output.join('\n'),