diff --git a/packages/babel-config/src/__tests__/common.test.ts b/packages/babel-config/src/__tests__/common.test.ts
index 3045aa68e985..f5fa4f55eefc 100644
--- a/packages/babel-config/src/__tests__/common.test.ts
+++ b/packages/babel-config/src/__tests__/common.test.ts
@@ -1,14 +1,6 @@
 import { vol } from 'memfs'
 
-import { ensurePosixPath } from '@redwoodjs/project-config'
-
-import {
-  getCommonPlugins,
-  getPathsFromTypeScriptConfig,
-  parseTypeScriptConfigFiles,
-} from '../common'
-
-jest.mock('fs', () => require('memfs').fs)
+import { getCommonPlugins } from '../common'
 
 const redwoodProjectPath = '/redwood-app'
 process.env.RWJS_CWD = redwoodProjectPath
@@ -17,11 +9,10 @@ afterEach(() => {
   vol.reset()
 })
 
-describe('common', () => {
-  it("common plugins haven't changed unintentionally", () => {
-    const commonPlugins = getCommonPlugins()
+test("common plugins haven't changed unintentionally", () => {
+  const commonPlugins = getCommonPlugins()
 
-    expect(commonPlugins).toMatchInlineSnapshot(`
+  expect(commonPlugins).toMatchInlineSnapshot(`
       [
         [
           "@babel/plugin-transform-class-properties",
@@ -43,195 +34,4 @@ describe('common', () => {
         ],
       ]
     `)
-  })
-
-  describe('TypeScript config files', () => {
-    it("returns `null` if it can't find TypeScript config files", () => {
-      vol.fromNestedJSON(
-        {
-          'redwood.toml': '',
-          api: {},
-          web: {},
-        },
-        redwoodProjectPath
-      )
-
-      const typeScriptConfig = parseTypeScriptConfigFiles()
-      expect(typeScriptConfig).toHaveProperty('api', null)
-      expect(typeScriptConfig).toHaveProperty('web', null)
-    })
-
-    it('finds and parses tsconfig.json files', () => {
-      const apiTSConfig = '{"compilerOptions": {"noEmit": true}}'
-      const webTSConfig = '{"compilerOptions": {"allowJs": true}}'
-
-      vol.fromNestedJSON(
-        {
-          'redwood.toml': '',
-          api: {
-            'tsconfig.json': apiTSConfig,
-          },
-          web: {
-            'tsconfig.json': webTSConfig,
-          },
-        },
-        redwoodProjectPath
-      )
-
-      const typeScriptConfig = parseTypeScriptConfigFiles()
-      expect(typeScriptConfig.api).toMatchObject(JSON.parse(apiTSConfig))
-      expect(typeScriptConfig.web).toMatchObject(JSON.parse(webTSConfig))
-    })
-
-    it('finds and parses jsconfig.json files', () => {
-      const apiJSConfig = '{"compilerOptions": {"noEmit": true}}'
-      const webJSConfig = '{"compilerOptions": {"allowJs": true}}'
-
-      vol.fromNestedJSON(
-        {
-          'redwood.toml': '',
-          api: {
-            'jsconfig.json': apiJSConfig,
-          },
-          web: {
-            'jsconfig.json': webJSConfig,
-          },
-        },
-        redwoodProjectPath
-      )
-
-      const typeScriptConfig = parseTypeScriptConfigFiles()
-      expect(typeScriptConfig.api).toMatchObject(JSON.parse(apiJSConfig))
-      expect(typeScriptConfig.web).toMatchObject(JSON.parse(webJSConfig))
-    })
-
-    describe('getPathsFromTypeScriptConfig', () => {
-      it("returns an empty object if there's no TypeScript config files", () => {
-        vol.fromNestedJSON(
-          {
-            'redwood.toml': '',
-            api: {},
-            web: {},
-          },
-          redwoodProjectPath
-        )
-
-        const typeScriptConfig = parseTypeScriptConfigFiles()
-
-        const apiPaths = getPathsFromTypeScriptConfig(typeScriptConfig.api)
-        expect(apiPaths).toMatchObject({})
-
-        const webPaths = getPathsFromTypeScriptConfig(typeScriptConfig.web)
-        expect(webPaths).toMatchObject({})
-      })
-
-      it("returns an empty object if there's no compilerOptions, baseUrl, or paths", () => {
-        const apiTSConfig = '{}'
-        const webTSConfig = '{"compilerOptions":{"allowJs": true}}'
-
-        vol.fromNestedJSON(
-          {
-            'redwood.toml': '',
-            api: {
-              'tsconfig.json': apiTSConfig,
-            },
-            web: {
-              'tsconfig.json': webTSConfig,
-            },
-          },
-          redwoodProjectPath
-        )
-
-        const typeScriptConfig = parseTypeScriptConfigFiles()
-
-        const apiPaths = getPathsFromTypeScriptConfig(typeScriptConfig.api)
-        expect(apiPaths).toMatchInlineSnapshot(`{}`)
-
-        const webPaths = getPathsFromTypeScriptConfig(typeScriptConfig.web)
-        expect(webPaths).toMatchInlineSnapshot(`{}`)
-      })
-
-      it('excludes "src/*", "$api/*", "types/*", and "@redwoodjs/testing"', () => {
-        const apiTSConfig =
-          '{"compilerOptions":{"baseUrl":"./","paths":{"src/*":["./src/*","../.redwood/types/mirror/api/src/*"],"types/*":["./types/*","../types/*"],"@redwoodjs/testing":["../node_modules/@redwoodjs/testing/api"]}}}'
-        const webTSConfig =
-          '{"compilerOptions":{"baseUrl":"./","paths":{"src/*":["./src/*","../.redwood/types/mirror/web/src/*"],"$api/*":[ "../api/*" ],"types/*":["./types/*", "../types/*"],"@redwoodjs/testing":["../node_modules/@redwoodjs/testing/web"]}}}'
-
-        vol.fromNestedJSON(
-          {
-            'redwood.toml': '',
-            api: {
-              'tsconfig.json': apiTSConfig,
-            },
-            web: {
-              'tsconfig.json': webTSConfig,
-            },
-          },
-          redwoodProjectPath
-        )
-
-        const typeScriptConfig = parseTypeScriptConfigFiles()
-
-        const apiPaths = getPathsFromTypeScriptConfig(typeScriptConfig.api)
-        expect(apiPaths).toMatchInlineSnapshot(`{}`)
-
-        const webPaths = getPathsFromTypeScriptConfig(typeScriptConfig.web)
-        expect(webPaths).toMatchInlineSnapshot(`{}`)
-      })
-
-      it('gets and formats paths', () => {
-        const apiTSConfig =
-          '{"compilerOptions":{"baseUrl":"./","paths":{"@services/*":["./src/services/*"]}}}'
-        const webTSConfig =
-          '{"compilerOptions":{"baseUrl":"./","paths":{"@ui/*":["./src/ui/*"]}}}'
-
-        vol.fromNestedJSON(
-          {
-            'redwood.toml': '',
-            api: {
-              'tsconfig.json': apiTSConfig,
-            },
-            web: {
-              'tsconfig.json': webTSConfig,
-            },
-          },
-          redwoodProjectPath
-        )
-
-        const typeScriptConfig = parseTypeScriptConfigFiles()
-
-        const apiPaths = getPathsFromTypeScriptConfig(typeScriptConfig.api)
-        expect(ensurePosixPath(apiPaths['@services'])).toMatchInlineSnapshot(
-          `"src/services"`
-        )
-
-        const webPaths = getPathsFromTypeScriptConfig(typeScriptConfig.web)
-        expect(ensurePosixPath(webPaths['@ui'])).toMatchInlineSnapshot(
-          `"src/ui"`
-        )
-      })
-    })
-
-    it('handles invalid JSON', () => {
-      const apiTSConfig =
-        '{"compilerOptions": {"noEmit": true,"allowJs": true,"esModuleInterop": true,"target": "esnext","module": "esnext","moduleResolution": "node","baseUrl": "./","rootDirs": ["./src","../.redwood/types/mirror/api/src"],"paths": {"src/*": ["./src/*","../.redwood/types/mirror/api/src/*"],"types/*": ["./types/*", "../types/*"],"@redwoodjs/testing": ["../node_modules/@redwoodjs/testing/api"]},"typeRoots": ["../node_modules/@types","./node_modules/@types"],"types": ["jest"],},"include": ["src","../.redwood/types/includes/all-*","../.redwood/types/includes/api-*","../types"]}'
-      const webTSConfig =
-        '{"compilerOptions": {"noEmit": true,"allowJs": true,"esModuleInterop": true,"target": "esnext","module": "esnext","moduleResolution": "node","baseUrl": "./","rootDirs": ["./src","../.redwood/types/mirror/web/src","../api/src","../.redwood/types/mirror/api/src"],"paths": {"src/*": ["./src/*","../.redwood/types/mirror/web/src/*","../api/src/*","../.redwood/types/mirror/api/src/*"],"$api/*": [ "../api/*" ],"types/*": ["./types/*", "../types/*"],"@redwoodjs/testing": ["../node_modules/@redwoodjs/testing/web"]},"typeRoots": ["../node_modules/@types", "./node_modules/@types"],"types": ["jest", "@testing-library/jest-dom"],"jsx": "preserve",},"include": ["src","../.redwood/types/includes/all-*","../.redwood/types/includes/web-*","../types","./types"]}'
-
-      vol.fromNestedJSON(
-        {
-          'redwood.toml': '',
-          api: {
-            'tsconfig.json': apiTSConfig,
-          },
-          web: {
-            'tsconfig.json': webTSConfig,
-          },
-        },
-        redwoodProjectPath
-      )
-
-      expect(parseTypeScriptConfigFiles).not.toThrow()
-    })
-  })
 })
diff --git a/packages/babel-config/src/__tests__/tsconfigParsing.test.ts b/packages/babel-config/src/__tests__/tsconfigParsing.test.ts
new file mode 100644
index 000000000000..3ca80f58fa43
--- /dev/null
+++ b/packages/babel-config/src/__tests__/tsconfigParsing.test.ts
@@ -0,0 +1,237 @@
+import { vol } from 'memfs'
+
+import { ensurePosixPath } from '@redwoodjs/project-config'
+
+import {
+  getPathsFromTypeScriptConfig,
+  parseTypeScriptConfigFiles,
+} from '../common'
+
+jest.mock('fs', () => require('memfs').fs)
+
+const redwoodProjectPath = '/redwood-app'
+process.env.RWJS_CWD = redwoodProjectPath
+
+afterEach(() => {
+  vol.reset()
+})
+
+describe('TypeScript config file parsing', () => {
+  it("returns `null` if it can't find TypeScript config files", () => {
+    vol.fromNestedJSON(
+      {
+        'redwood.toml': '',
+        api: {},
+        web: {},
+      },
+      redwoodProjectPath
+    )
+
+    const typeScriptConfig = parseTypeScriptConfigFiles()
+    expect(typeScriptConfig).toHaveProperty('api', null)
+    expect(typeScriptConfig).toHaveProperty('web', null)
+  })
+
+  it('finds and parses tsconfig.json files', () => {
+    const apiTSConfig = '{"compilerOptions": {"noEmit": true}}'
+    const webTSConfig = '{"compilerOptions": {"allowJs": true}}'
+
+    vol.fromNestedJSON(
+      {
+        'redwood.toml': '',
+        api: {
+          'tsconfig.json': apiTSConfig,
+        },
+        web: {
+          'tsconfig.json': webTSConfig,
+        },
+      },
+      redwoodProjectPath
+    )
+
+    const typeScriptConfig = parseTypeScriptConfigFiles()
+    expect(typeScriptConfig.api).toMatchObject(JSON.parse(apiTSConfig))
+    expect(typeScriptConfig.web).toMatchObject(JSON.parse(webTSConfig))
+  })
+
+  it('finds and parses jsconfig.json files', () => {
+    const apiJSConfig = '{"compilerOptions": {"noEmit": true}}'
+    const webJSConfig = '{"compilerOptions": {"allowJs": true}}'
+
+    vol.fromNestedJSON(
+      {
+        'redwood.toml': '',
+        api: {
+          'jsconfig.json': apiJSConfig,
+        },
+        web: {
+          'jsconfig.json': webJSConfig,
+        },
+      },
+      redwoodProjectPath
+    )
+
+    const typeScriptConfig = parseTypeScriptConfigFiles()
+    expect(typeScriptConfig.api).toMatchObject(JSON.parse(apiJSConfig))
+    expect(typeScriptConfig.web).toMatchObject(JSON.parse(webJSConfig))
+  })
+
+  it('handles invalid JSON', () => {
+    const apiTSConfig =
+      '{"compilerOptions": {"noEmit": true,"allowJs": true,"esModuleInterop": true,"target": "esnext","module": "esnext","moduleResolution": "node","baseUrl": "./","rootDirs": ["./src","../.redwood/types/mirror/api/src"],"paths": {"src/*": ["./src/*","../.redwood/types/mirror/api/src/*"],"types/*": ["./types/*", "../types/*"],"@redwoodjs/testing": ["../node_modules/@redwoodjs/testing/api"]},"typeRoots": ["../node_modules/@types","./node_modules/@types"],"types": ["jest"],},"include": ["src","../.redwood/types/includes/all-*","../.redwood/types/includes/api-*","../types"]}'
+    const webTSConfig =
+      '{"compilerOptions": {"noEmit": true,"allowJs": true,"esModuleInterop": true,"target": "esnext","module": "esnext","moduleResolution": "node","baseUrl": "./","rootDirs": ["./src","../.redwood/types/mirror/web/src","../api/src","../.redwood/types/mirror/api/src"],"paths": {"src/*": ["./src/*","../.redwood/types/mirror/web/src/*","../api/src/*","../.redwood/types/mirror/api/src/*"],"$api/*": [ "../api/*" ],"types/*": ["./types/*", "../types/*"],"@redwoodjs/testing": ["../node_modules/@redwoodjs/testing/web"]},"typeRoots": ["../node_modules/@types", "./node_modules/@types"],"types": ["jest", "@testing-library/jest-dom"],"jsx": "preserve",},"include": ["src","../.redwood/types/includes/all-*","../.redwood/types/includes/web-*","../types","./types"]}'
+
+    vol.fromNestedJSON(
+      {
+        'redwood.toml': '',
+        api: {
+          'tsconfig.json': apiTSConfig,
+        },
+        web: {
+          'tsconfig.json': webTSConfig,
+        },
+      },
+      redwoodProjectPath
+    )
+
+    expect(parseTypeScriptConfigFiles).not.toThrow()
+  })
+})
+
+describe('getPathsFromTypeScriptConfig', () => {
+  const FAKE_API_ROOT =
+    process.platform === 'win32' ? '/d/redwood-app/api' : '/redwood-app/api'
+  const FAKE_WEB_ROOT =
+    process.platform === 'win32' ? '/d/redwood-app/web' : '/redwood-app/web'
+
+  it("returns an empty object if there's no TypeScript config files", () => {
+    vol.fromNestedJSON(
+      {
+        'redwood.toml': '',
+        api: {},
+        web: {},
+      },
+      redwoodProjectPath
+    )
+
+    const typeScriptConfig = parseTypeScriptConfigFiles()
+
+    const apiPaths = getPathsFromTypeScriptConfig(
+      typeScriptConfig.api,
+      FAKE_API_ROOT
+    )
+    expect(apiPaths).toMatchObject({})
+
+    const webPaths = getPathsFromTypeScriptConfig(
+      typeScriptConfig.web,
+      FAKE_WEB_ROOT
+    )
+    expect(webPaths).toMatchObject({})
+  })
+
+  it("returns an empty object if there's no compilerOptions, baseUrl, or paths", () => {
+    const apiTSConfig = '{}'
+    const webTSConfig = '{"compilerOptions":{"allowJs": true}}'
+
+    vol.fromNestedJSON(
+      {
+        'redwood.toml': '',
+        api: {
+          'tsconfig.json': apiTSConfig,
+        },
+        web: {
+          'tsconfig.json': webTSConfig,
+        },
+      },
+      redwoodProjectPath
+    )
+
+    const typeScriptConfig = parseTypeScriptConfigFiles()
+
+    const apiPaths = getPathsFromTypeScriptConfig(
+      typeScriptConfig.api,
+      FAKE_API_ROOT
+    )
+    expect(apiPaths).toMatchInlineSnapshot(`{}`)
+
+    const webPaths = getPathsFromTypeScriptConfig(
+      typeScriptConfig.web,
+      FAKE_WEB_ROOT
+    )
+    expect(webPaths).toMatchInlineSnapshot(`{}`)
+  })
+
+  it('excludes "src/*", "$api/*", "types/*", and "@redwoodjs/testing"', () => {
+    const apiTSConfig =
+      '{"compilerOptions":{"baseUrl":"./","paths":{"src/*":["./src/*","../.redwood/types/mirror/api/src/*"],"types/*":["./types/*","../types/*"],"@redwoodjs/testing":["../node_modules/@redwoodjs/testing/api"]}}}'
+    const webTSConfig =
+      '{"compilerOptions":{"baseUrl":"./","paths":{"src/*":["./src/*","../.redwood/types/mirror/web/src/*"],"$api/*":[ "../api/*" ],"types/*":["./types/*", "../types/*"],"@redwoodjs/testing":["../node_modules/@redwoodjs/testing/web"]}}}'
+
+    vol.fromNestedJSON(
+      {
+        'redwood.toml': '',
+        api: {
+          'tsconfig.json': apiTSConfig,
+        },
+        web: {
+          'tsconfig.json': webTSConfig,
+        },
+      },
+      redwoodProjectPath
+    )
+
+    const typeScriptConfig = parseTypeScriptConfigFiles()
+
+    const apiPaths = getPathsFromTypeScriptConfig(
+      typeScriptConfig.api,
+      FAKE_API_ROOT
+    )
+    expect(apiPaths).toMatchInlineSnapshot(`{}`)
+
+    const webPaths = getPathsFromTypeScriptConfig(
+      typeScriptConfig.web,
+      FAKE_WEB_ROOT
+    )
+    expect(webPaths).toMatchInlineSnapshot(`{}`)
+  })
+
+  it('gets and formats paths', () => {
+    const apiTSConfig =
+      '{"compilerOptions":{"baseUrl":"./","paths":{"@services/*":["./src/services/*"]}}}'
+    const webTSConfig =
+      '{"compilerOptions":{"baseUrl":"./","paths":{"@ui/*":["./src/ui/*"]}}}'
+
+    vol.fromNestedJSON(
+      {
+        'redwood.toml': '',
+        api: {
+          'tsconfig.json': apiTSConfig,
+        },
+        web: {
+          'tsconfig.json': webTSConfig,
+        },
+      },
+      redwoodProjectPath
+    )
+
+    const typeScriptConfig = parseTypeScriptConfigFiles()
+
+    const apiPaths = getPathsFromTypeScriptConfig(
+      typeScriptConfig.api,
+      FAKE_API_ROOT
+    )
+
+    expect(ensurePosixPath(apiPaths['@services'])).toEqual(
+      ensurePosixPath(`${FAKE_API_ROOT}/src/services`)
+    )
+
+    const webPaths = getPathsFromTypeScriptConfig(
+      typeScriptConfig.web,
+      FAKE_WEB_ROOT
+    )
+    expect(ensurePosixPath(webPaths['@ui'])).toEqual(
+      ensurePosixPath(`${FAKE_WEB_ROOT}/src/ui`)
+    )
+  })
+})
diff --git a/packages/babel-config/src/api.ts b/packages/babel-config/src/api.ts
index 604a02c7a7aa..73dcaceacf51 100644
--- a/packages/babel-config/src/api.ts
+++ b/packages/babel-config/src/api.ts
@@ -87,7 +87,7 @@ export const getApiSideBabelPlugins = (
         alias: {
           src: './src',
           // adds the paths from [ts|js]config.json to the module resolver
-          ...getPathsFromTypeScriptConfig(tsConfig.api),
+          ...getPathsFromTypeScriptConfig(tsConfig.api, getPaths().api.base),
         },
         root: [getPaths().api.base],
         cwd: 'packagejson',
diff --git a/packages/babel-config/src/common.ts b/packages/babel-config/src/common.ts
index 7987da35a661..17e737b01c77 100644
--- a/packages/babel-config/src/common.ts
+++ b/packages/babel-config/src/common.ts
@@ -99,14 +99,19 @@ export const parseTypeScriptConfigFiles = () => {
   }
 }
 
+type CompilerOptionsForPaths = {
+  compilerOptions: { baseUrl: string; paths: string }
+}
 /**
  * Extracts and formats the paths from the [ts|js]config.json file
  * @param config The config object
+ * @param rootDir {string} Where the jsconfig/tsconfig is loaded from
  * @returns {Record<string, string>} The paths object
  */
-export const getPathsFromTypeScriptConfig = (config: {
-  compilerOptions: { baseUrl: string; paths: string }
-}): Record<string, string> => {
+export const getPathsFromTypeScriptConfig = (
+  config: CompilerOptionsForPaths,
+  rootDir: string
+): Record<string, string> => {
   if (!config) {
     return {}
   }
@@ -116,6 +121,12 @@ export const getPathsFromTypeScriptConfig = (config: {
   }
 
   const { baseUrl, paths } = config.compilerOptions
+
+  // Convert it to absolute path - on windows the baseUrl is already absolute
+  const absoluteBase = path.isAbsolute(baseUrl)
+    ? baseUrl
+    : path.join(rootDir, baseUrl)
+
   const pathsObj: Record<string, string> = {}
   for (const [key, value] of Object.entries(paths)) {
     // exclude the default paths that are included in the tsconfig.json file
@@ -128,9 +139,10 @@ export const getPathsFromTypeScriptConfig = (config: {
     }
     const aliasKey = key.replace('/*', '')
     const aliasValue = path.join(
-      baseUrl,
+      absoluteBase,
       (value as string)[0].replace('/*', '')
     )
+
     pathsObj[aliasKey] = aliasValue
   }
   return pathsObj
diff --git a/packages/babel-config/src/web.ts b/packages/babel-config/src/web.ts
index 22c99ee1f897..e7b1f011db9b 100644
--- a/packages/babel-config/src/web.ts
+++ b/packages/babel-config/src/web.ts
@@ -36,7 +36,7 @@ export const getWebSideBabelPlugins = (
             // the `cwd`: https://github.com/facebook/jest/issues/7359
             forJest ? rwjsPaths.web.src : './src',
           // adds the paths from [ts|js]config.json to the module resolver
-          ...getPathsFromTypeScriptConfig(tsConfigs.web),
+          ...getPathsFromTypeScriptConfig(tsConfigs.web, rwjsPaths.web.base),
         },
         root: [rwjsPaths.web.base],
         cwd: 'packagejson',