diff --git a/.gitignore b/.gitignore
index 8aea04b2..4958559e 100644
--- a/.gitignore
+++ b/.gitignore
@@ -2,6 +2,7 @@ node_modules/
 *.swp
 .lock-wscript
 lib/
+lib-headless/
 out/
 out-test/
 .nyc_output/
diff --git a/node-test/README.md b/node-test/README.md
index b7a67aeb..0da50146 100644
--- a/node-test/README.md
+++ b/node-test/README.md
@@ -2,8 +2,8 @@ Cursory test that 'xterm-core' works:
 
 ```
 # From root of this repo
-npm run compile # Outputs to xterm-core
-npx webpack --config webpack.config.core.js # Outputs to lib
+npm run compile # Outputs to out/headless
+npx webpack --config webpack.config.headless.js # Outputs to lib
 cd node-test
 npm link ../lib/
 node index.js
diff --git a/src/headless/tsconfig.json b/src/headless/tsconfig.json
index 39f71bda..6085a07f 100644
--- a/src/headless/tsconfig.json
+++ b/src/headless/tsconfig.json
@@ -5,7 +5,7 @@
       "es2015",
       "es2016.Array.Include"
     ],
-    "outDir": "../../out/headless", // Temporary outdir to avoid collisions with 'xterm'
+    "outDir": "../../out",
     "types": [
       "../../node_modules/@types/mocha",
       "../../node_modules/@types/node"
diff --git a/webpack.config.headless.js b/webpack.config.headless.js
new file mode 100644
index 00000000..2010e190
--- /dev/null
+++ b/webpack.config.headless.js
@@ -0,0 +1,41 @@
+/**
+ * Copyright (c) 2019 The xterm.js authors. All rights reserved.
+ * @license MIT
+ */
+
+const path = require('path');
+
+/**
+ * This webpack config does a production build for xterm.js. It works by taking the output from tsc
+ * (via `yarn watch` or `yarn prebuild`) which are put into `out/` and webpacks them into a
+ * production mode umd library module in `lib/`. The aliases are used fix up the absolute paths
+ * output by tsc (because of `baseUrl` and `paths` in `tsconfig.json`.
+ */
+module.exports = {
+  entry: './out/headless/public/Terminal.js',
+  devtool: 'source-map',
+  module: {
+    rules: [
+      {
+        test: /\.js$/,
+        use: ["source-map-loader"],
+        enforce: "pre",
+        exclude: /node_modules/
+      }
+    ]
+  },
+  resolve: {
+    modules: ['./node_modules'],
+    extensions: [ '.js' ],
+    alias: {
+      common: path.resolve('./out/common'),
+      headless: path.resolve('./out/headless')
+    }
+  },
+  output: {
+    filename: 'xterm.js',
+    path: path.resolve('./lib-headless'),
+    libraryTarget: 'umd'
+  },
+  mode: 'production'
+};