diff --git a/README.md b/README.md
index 4b2c21ea..6d761aac 100644
--- a/README.md
+++ b/README.md
@@ -78,7 +78,11 @@ Then build it:
 `bazel build //path/to/package:target`
 
 The resulting `.d.ts` file paths will be printed. Additionally, the `.js`
-outputs from TypeScript will be written to disk, next to the `.d.ts` files.
+outputs from TypeScript will be written to disk, next to the `.d.ts` files <sup>1</sup>.
+
+> <sup>1</sup> The
+> [declarationDir](https://www.typescriptlang.org/docs/handbook/compiler-options.html)
+> compiler option will be silently overwritten if present.
 
 ## Notes
 
@@ -92,4 +96,3 @@ In the meantime, we suggest associating the `.bazel` extension with Python in
 your editor, so that you get useful syntax highlighting.
 
 [gazelle]: https://github.com/bazelbuild/rules_go/tree/master/go/tools/gazelle
-
diff --git a/internal/common/tsconfig.bzl b/internal/common/tsconfig.bzl
index 219230a9..2e12e04e 100644
--- a/internal/common/tsconfig.bzl
+++ b/internal/common/tsconfig.bzl
@@ -156,6 +156,10 @@ def create_tsconfig(ctx, files, srcs,
 
       "noEmitOnError": False,
       "declaration": True,
+
+      # We don't support this compiler option (See github #32), so
+      # always emit declaration files in the same location as outDir.
+      "declarationDir": "/".join([workspace_path, outdir_path]),
       "stripInternal": True,
 
       # Embed source maps and sources in .js outputs