diff --git a/plugins/plugin-svelte/README.md b/plugins/plugin-svelte/README.md
index a86b136e6b..75d3fcc0b8 100644
--- a/plugins/plugin-svelte/README.md
+++ b/plugins/plugin-svelte/README.md
@@ -10,44 +10,19 @@ npm install --save-dev @snowpack/plugin-svelte
 // snowpack.config.json
 {
   "plugins": [
-    ["@snowpack/plugin-svelte", { /* see “Plugin Options” below */ }]
+    ["@snowpack/plugin-svelte", { /* see optional “Plugin Options” below */ }]
   ]
 }
 ```
 
 ## Plugin Options
 
-- `configFilePath: string` - relative URL to Svelte config, usually named `svelte.config.js`. Defaults to `svelte.config.js` in project root directory.
+By default, this plugin will look for a `svelte.config.js` file in your project directory to load `preprocess` and `compilerOptions` configuration from. However, you can also customize Svelte directly via the plugin options below.
 
-```js
-// Example usage
-   ...
-   ["@snowpack/plugin-svelte", { configFilePath: './dir/svelte.config.js' }]
-   ...
-```
-
-This plugin also supports all Svelte compiler options. See [here](https://svelte.dev/docs#svelte_compile) for a list of supported options.
+| Name              |                                  Type                                  | Description                                                                                                         |
+| :---------------- | :--------------------------------------------------------------------: | :------------------------------------------------------------------------------------------------------------------ |
+| `configFilePath`  |                                `string`                                | Relative path to a Svelte config file. Defaults to load `svelte.config.js` from the current project root directory. |
+| `preprocess`      | [svelte.preprocess options](https://svelte.dev/docs#svelte_preprocess) | Configure the Svelte pre-processor. If this option is given, the config file `preprocess` option will be ignored.   |
+| `compilerOptions` |    [svelte.compile options](https://svelte.dev/docs#svelte_compile)    | Configure the Svelte compiler.If this option is given, the config file `preprocess` option will be ignored.         |
+| `hmrOptions`      |        [svelte-hmr options](https://github.com/rixo/svelte-hmr)        | Configure HMR & "fast refresh" behavior for Svelte.                                                                 |
 
-### HMR Options
-
-You can pass Svelte HMR specific options through the `hot` option of the plugin. Here are the available options and their defaults:
-
-```js
-{
-  "plugins": [
-    ["@snowpack/plugin-svelte", {
-      hot: {
-        // don't preserve local state
-        noPreserveState: false,
-        // escape hatch from preserve local state -- if this string appears anywhere
-        // in the component's code, then state won't be preserved for this update
-        noPreserveStateKey: '@!hmr',
-        // don't reload on fatal error
-        noReload: false,
-        // try to recover after runtime errors during component init
-        optimistic: false,
-      },
-    }]
-  ]
-}
-```
diff --git a/plugins/plugin-svelte/plugin.js b/plugins/plugin-svelte/plugin.js
index 08b1450cee..db521aa109 100644
--- a/plugins/plugin-svelte/plugin.js
+++ b/plugins/plugin-svelte/plugin.js
@@ -3,47 +3,58 @@ const svelteRollupPlugin = require('rollup-plugin-svelte');
 const fs = require('fs');
 const path = require('path');
 const {createMakeHot} = require('svelte-hmr');
+const cwd = process.cwd();
 
 let makeHot = (...args) => {
   makeHot = createMakeHot({walk: svelte.walk});
   return makeHot(...args);
 };
 
-module.exports = function plugin(snowpackConfig, {hot: hotOptions, ...sveltePluginOptions} = {}) {
+module.exports = function plugin(snowpackConfig, pluginOptions = {}) {
   const isDev = process.env.NODE_ENV !== 'production';
+  const useSourceMaps = snowpackConfig.buildOptions.sourceMaps;
 
   // Support importing Svelte files when you install dependencies.
   snowpackConfig.installOptions.rollup.plugins.push(
     svelteRollupPlugin({include: '**/node_modules/**', dev: isDev}),
   );
 
-  let {configFilePath = 'svelte.config.js', ...svelteOptions} = sveltePluginOptions || {};
-  let userSvelteOptions;
-  let preprocessOptions;
+  if (
+    pluginOptions.generate !== undefined ||
+    pluginOptions.dev !== undefined ||
+    pluginOptions.hydratable !== undefined ||
+    pluginOptions.css !== undefined ||
+    pluginOptions.preserveComments !== undefined ||
+    pluginOptions.preserveWhitespace !== undefined ||
+    pluginOptions.sveltePath !== undefined
+  ) {
+    throw new Error(
+      `[plugin-svelte] Svelte.compile options moved to new config value: {compilerOptions: {...}}`,
+    );
+  }
+
+  if (pluginOptions.compileOptions !== undefined) {
+    throw new Error(
+      `[plugin-svelte] Could not recognize "compileOptions". Did you mean "compilerOptions"?`,
+    );
+  }
 
-  const userSvelteConfigLoc = path.resolve(process.cwd(), configFilePath);
+  let configFilePath = path.resolve(cwd, pluginOptions.configFilePath || 'svelte.config.js');
+  let compilerOptions = pluginOptions.compilerOptions;
+  let preprocessOptions = pluginOptions.preprocess;
+  const hmrOptions = pluginOptions.hmrOptions;
 
-  if (fs.existsSync(userSvelteConfigLoc)) {
-    const userSvelteConfig = require(userSvelteConfigLoc);
-    const {preprocess, compilerOptions} = userSvelteConfig;
-    preprocessOptions = preprocess;
-    userSvelteOptions = compilerOptions;
+  if (fs.existsSync(configFilePath)) {
+    const configFileConfig = require(configFilePath);
+    preprocessOptions = preprocessOptions || configFileConfig.preprocess;
+    compilerOptions = compilerOptions || configFileConfig.compilerOptions;
   } else {
     //user svelte.config.js is optional and should not error if not configured
-    if (configFilePath !== 'svelte.config.js')
-      console.error(
-        `[plugin-svelte] failed to find Svelte config file: could not locate "${userSvelteConfigLoc}"`,
-      );
+    if (pluginOptions.configFilePath) {
+      throw new Error(`[plugin-svelte] failed to find Svelte config file: "${configFilePath}"`);
+    }
   }
 
-  // Generate svelte options from user provided config (if given)
-  svelteOptions = {
-    dev: isDev,
-    css: false,
-    ...userSvelteOptions,
-    ...svelteOptions,
-  };
-
   return {
     name: '@snowpack/plugin-svelte',
     resolve: {
@@ -66,44 +77,43 @@ module.exports = function plugin(snowpackConfig, {hot: hotOptions, ...sveltePlug
         ).code;
       }
 
-      const compileOptions = {
+      const finalCompileOptions = {
         generate: isSSR ? 'ssr' : 'dom',
-        ...svelteOptions, // Note(drew) should take precedence over generate above
+        css: false,
+        ...compilerOptions, // Note(drew) should take precedence over generate above
+        dev: isDev,
         outputFilename: filePath,
         filename: filePath,
       };
 
-      const compiled = svelte.compile(codeToCompile, compileOptions);
-
+      const compiled = svelte.compile(codeToCompile, finalCompileOptions);
       const {js, css} = compiled;
-
-      const {sourceMaps} = snowpackConfig.buildOptions;
       const output = {
         '.js': {
           code: js.code,
-          map: sourceMaps ? js.map : undefined,
+          map: useSourceMaps ? js.map : undefined,
         },
       };
 
       if (isHmrEnabled && !isSSR) {
         output['.js'].code = makeHot({
           id: filePath,
-          compiledCode: compiled.js.code,
+          compiledCode: js.code,
           hotOptions: {
-            ...hotOptions,
+            ...hmrOptions,
             absoluteImports: false,
             injectCss: true,
           },
           compiled,
           originalCode: codeToCompile,
-          compileOptions,
+          compileOptions: finalCompileOptions,
         });
       }
 
-      if (!svelteOptions.css && css && css.code) {
+      if (!finalCompileOptions.css && css && css.code) {
         output['.css'] = {
           code: css.code,
-          map: sourceMaps ? css.map : undefined,
+          map: useSourceMaps ? css.map : undefined,
         };
       }
       return output;
diff --git a/plugins/plugin-svelte/test/custom-config.js b/plugins/plugin-svelte/test/custom-config.js
new file mode 100644
index 0000000000..e7b85b6f4a
--- /dev/null
+++ b/plugins/plugin-svelte/test/custom-config.js
@@ -0,0 +1,8 @@
+module.exports = {
+  preprocess: {
+    __test: 'custom-config.js::preprocess'
+  },
+  compilerOptions: {
+    __test: 'custom-config.js'
+  }
+};
diff --git a/plugins/plugin-svelte/test/mocked.test.js b/plugins/plugin-svelte/test/mocked.test.js
deleted file mode 100644
index 98a7963d5d..0000000000
--- a/plugins/plugin-svelte/test/mocked.test.js
+++ /dev/null
@@ -1,46 +0,0 @@
-const path = require('path');
-
-const mockCompiler = jest.fn().mockImplementation((code) => ({js: {code}}));
-const mockPreprocessor = jest.fn().mockImplementation((code) => code);
-jest.mock('svelte/compiler', () => ({compile: mockCompiler, preprocess: mockPreprocessor})); // important: mock before import
-
-const plugin = require('../plugin');
-
-const mockConfig = {buildOptions: {sourceMaps: false}, installOptions: {rollup: {plugins: []}}};
-const mockComponent = path.join(__dirname, 'Button.svelte');
-
-describe('@snowpack/plugin-svelte (mocked)', () => {
-  afterEach(() => {
-    mockCompiler.mockClear();
-    mockPreprocessor.mockClear();
-  });
-
-  it('passes options to compiler', async () => {
-    const options = {
-      generate: 'ssr',
-      isDev: false,
-    };
-    const optionsConfig = {configFilePath: './plugins/plugin-svelte/test/svelte.config.js'};
-
-    const sveltePlugin = plugin(mockConfig, {...options, ...optionsConfig});
-    await sveltePlugin.load({filePath: mockComponent});
-    const passedOptions = mockCompiler.mock.calls[0][1];
-
-    // this tests that all options passed above made it to the compiler
-    // objectContaining() allows additional options to be passed, but we only care that our options have been preserved
-    expect(passedOptions).toEqual(expect.objectContaining(options));
-    // `configFilePath` option is expected not to be passed into Svelte
-    expect(passedOptions).toEqual(expect.not.objectContaining(optionsConfig));
-  });
-
-  it('handles preprocessing', async () => {
-    const options = {configFilePath: './plugins/plugin-svelte/test/svelte.config.js'};
-
-    const sveltePlugin = plugin(mockConfig, options);
-
-    await sveltePlugin.load({filePath: mockComponent});
-
-    // as long as this function has been called, we can assume success
-    expect(mockPreprocessor).toHaveBeenCalled();
-  });
-});
diff --git a/plugins/plugin-svelte/test/plugin.test.js b/plugins/plugin-svelte/test/plugin.test.js
new file mode 100644
index 0000000000..983e694fa8
--- /dev/null
+++ b/plugins/plugin-svelte/test/plugin.test.js
@@ -0,0 +1,96 @@
+const path = require('path');
+
+const mockCompiler = jest.fn().mockImplementation((code) => ({js: {code}}));
+const mockPreprocessor = jest.fn().mockImplementation((code) => code);
+jest.mock('svelte/compiler', () => ({compile: mockCompiler, preprocess: mockPreprocessor})); // important: mock before import
+
+const plugin = require('../plugin');
+
+const mockConfig = {buildOptions: {sourceMaps: false}, installOptions: {rollup: {plugins: []}}};
+const mockComponent = path.join(__dirname, 'Button.svelte');
+
+describe('@snowpack/plugin-svelte (mocked)', () => {
+  afterEach(() => {
+    mockCompiler.mockClear();
+    mockPreprocessor.mockClear();
+  });
+
+  it('logs error if config options set but finds no file', async () => {
+    expect(() => {
+      plugin(mockConfig, {
+        configFilePath: './plugins/plugin-svelte/this-file-does-not-exist.js',
+      });
+    }).toThrow(/failed to find Svelte config file/);
+  });
+
+  it('logs error if compileOptions is used instead of compilerOptions', async () => {
+    expect(() => {
+      plugin(mockConfig, {
+        compileOptions: {__test: 'ignore'},
+      });
+    }).toThrow(
+      `[plugin-svelte] Could not recognize "compileOptions". Did you mean "compilerOptions"?`,
+    );
+  });
+
+  it('logs error if old style config format is used', async () => {
+    const badOptionCheck = /Svelte\.compile options moved to new config value/;
+    expect(() =>
+      plugin(mockConfig, {
+        css: false,
+      }),
+    ).toThrow(badOptionCheck);
+    expect(() =>
+      plugin(mockConfig, {
+        generate: 'dom',
+      }),
+    ).toThrow(badOptionCheck);
+  });
+
+  it('passes compilerOptions to compiler', async () => {
+    const compilerOptions = {
+      __test: 'compilerOptions',
+    };
+    const sveltePlugin = plugin(mockConfig, {compilerOptions});
+    await sveltePlugin.load({filePath: mockComponent});
+    expect(mockCompiler.mock.calls[0][1]).toEqual({
+      __test: 'compilerOptions',
+      css: false,
+      dev: true,
+      filename: mockComponent,
+      generate: 'dom',
+      outputFilename: mockComponent,
+    });
+  });
+
+  it('passes preprocess options to compiler', async () => {
+    const preprocess = {__test: 'preprocess'};
+    const sveltePlugin = plugin(mockConfig, {preprocess});
+    await sveltePlugin.load({filePath: mockComponent});
+    expect(mockPreprocessor.mock.calls[0][1]).toEqual(preprocess);
+  });
+
+  // For our users we load from the current working directory, but in jest that doesn't make sense
+  it.skip('load config from a default svelte config file', async () => {
+    const sveltePlugin = plugin(mockConfig, {});
+    await sveltePlugin.load({filePath: mockComponent});
+    expect(mockCompiler.mock.calls[0][1]).toEqual({__test: 'svelte.config.js'});
+    expect(mockPreprocessor.mock.calls[0][1]).toEqual({__test: 'svelte.config.js::preprocess'});
+  });
+
+  it('load config from a custom svelte config file', async () => {
+    const sveltePlugin = plugin(mockConfig, {
+      configFilePath: './plugins/plugin-svelte/test/custom-config.js',
+    });
+    await sveltePlugin.load({filePath: mockComponent});
+    expect(mockCompiler.mock.calls[0][1]).toEqual({
+      __test: 'custom-config.js',
+      css: false,
+      dev: true,
+      filename: mockComponent,
+      generate: 'dom',
+      outputFilename: mockComponent,
+    });
+    expect(mockPreprocessor.mock.calls[0][1]).toEqual({__test: 'custom-config.js::preprocess'});
+  });
+});
diff --git a/plugins/plugin-svelte/test/svelte.config.js b/plugins/plugin-svelte/test/svelte.config.js
index 95365a7e0e..d117eb2152 100644
--- a/plugins/plugin-svelte/test/svelte.config.js
+++ b/plugins/plugin-svelte/test/svelte.config.js
@@ -1,7 +1,8 @@
-const {sass} = require('svelte-preprocess-sass');
-
 module.exports = {
   preprocess: {
-    style: sass({}, {name: 'css'}),
+    __test: 'svelte.config.js::preprocess'
   },
+  compilerOptions: {
+    __test: 'svelte.config.js'
+  }
 };
diff --git a/plugins/plugin-svelte/test/unmocked.test.js b/plugins/plugin-svelte/test/unmocked.test.js
deleted file mode 100644
index 6e7b63b6d9..0000000000
--- a/plugins/plugin-svelte/test/unmocked.test.js
+++ /dev/null
@@ -1,25 +0,0 @@
-const path = require('path');
-const plugin = require('../plugin');
-
-const mockConfig = {buildOptions: {sourceMaps: false}, installOptions: {rollup: {plugins: []}}};
-const mockComponent = path.join(__dirname, 'Button.svelte');
-
-describe('@snowpack/plugin-svelte (unmocked)', () => {
-  it('generates code', async () => {
-    const options = {configFilePath: './plugins/plugin-svelte/test/svelte.config.js'};
-    const sveltePlugin = plugin(mockConfig, options);
-    const result = await sveltePlugin.load({filePath: mockComponent});
-
-    // assume if some CSS & JS were returned, it transformed successfully
-    expect(result['.css'].code).toBeTruthy();
-    expect(result['.js'].code).toBeTruthy();
-  });
-  it('logs error if config options set but finds no file', async () => {
-    const consoleSpy = await jest.spyOn(console, 'error').mockImplementation(() => {});
-    const options = {configFilePath: './plugins/plugin-svelte/svelte.config.js'};
-    const sveltePlugin = plugin(mockConfig, options);
-    const result = await sveltePlugin.load({filePath: mockComponent});
-
-    expect(consoleSpy).toHaveBeenCalled();
-  });
-});