diff --git a/.changeset/clever-chicken-end.md b/.changeset/clever-chicken-end.md
new file mode 100644
index 00000000..5c95c307
--- /dev/null
+++ b/.changeset/clever-chicken-end.md
@@ -0,0 +1,5 @@
+---
+'microbundle': patch
+---
+
+Ensures TS plugin will begin its search for a 'tsconfig.json' in the set cwd
diff --git a/src/index.js b/src/index.js
index deae019b..05e70c46 100644
--- a/src/index.js
+++ b/src/index.js
@@ -522,6 +522,7 @@ function createConfig(options, entry, format, writeMeta) {
 					},
 					(useTypescript || emitDeclaration) &&
 						typescript({
+							cwd: options.cwd,
 							typescript: require(resolveFrom.silent(
 								options.cwd,
 								'typescript',