diff --git a/packages/nuxi/src/commands/build.ts b/packages/nuxi/src/commands/build.ts
index 7cd50c3b3d..f4a9793b19 100644
--- a/packages/nuxi/src/commands/build.ts
+++ b/packages/nuxi/src/commands/build.ts
@@ -29,7 +29,9 @@ export default defineNuxtCommand({
       },
       overrides: {
         logLevel: args['log-level'],
+        // TODO: remove in 3.8
         _generate: args.prerender,
+        ...(args.prerender ? { nitro: { static: true } } : {}),
         ...(options?.overrides || {})
       }
     })
diff --git a/packages/nuxt/src/core/nitro.ts b/packages/nuxt/src/core/nitro.ts
index 36bfb0280c..d5ba2f2c4c 100644
--- a/packages/nuxt/src/core/nitro.ts
+++ b/packages/nuxt/src/core/nitro.ts
@@ -38,7 +38,6 @@ export async function initNitro (nuxt: Nuxt & { _nitro?: Nitro }) {
   }
 
   const nitroConfig: NitroConfig = defu(_nitroConfig, {
-    static: nuxt.options._generate,
     debug: nuxt.options.debug,
     rootDir: nuxt.options.rootDir,
     workspaceDir: nuxt.options.workspaceDir,
@@ -133,10 +132,7 @@ export async function initNitro (nuxt: Nuxt & { _nitro?: Nitro }) {
     prerender: {
       failOnError: true,
       concurrency: cpus().length * 4 || 4,
-      crawlLinks: nuxt.options._generate ?? undefined,
-      routes: ([] as string[])
-        .concat(nuxt.options.generate.routes)
-        .concat(nuxt.options._generate ? [nuxt.options.ssr ? '/' : '/index.html', '/200.html', '/404.html'] : [])
+      routes: ([] as string[]).concat(nuxt.options.generate.routes)
     },
     sourceMap: nuxt.options.sourcemap.server,
     externals: {
@@ -360,6 +356,14 @@ export async function initNitro (nuxt: Nuxt & { _nitro?: Nitro }) {
     opts.references.push({ path: resolve(nuxt.options.buildDir, 'types/nitro.d.ts') })
   })
 
+  if (nitro.options.static) {
+    nitro.hooks.hook('prerender:routes', (routes) => {
+      for (const route of [nuxt.options.ssr ? '/' : '/index.html', '/200.html', '/404.html']) {
+        routes.add(route)
+      }
+    })
+  }
+
   // nuxt build/dev
   nuxt.hook('build:done', async () => {
     await nuxt.callHook('nitro:build:before', nitro)
@@ -375,7 +379,7 @@ export async function initNitro (nuxt: Nuxt & { _nitro?: Nitro }) {
       await build(nitro)
       logger.wrapAll()
 
-      if (nuxt.options._generate) {
+      if (nitro.options.static) {
         const distDir = resolve(nuxt.options.rootDir, 'dist')
         if (!existsSync(distDir)) {
           await fsp.symlink(nitro.options.output.publicDir, distDir, 'junction').catch(() => {})
diff --git a/packages/nuxt/src/core/nuxt.ts b/packages/nuxt/src/core/nuxt.ts
index 12bc21c8a6..9f227cf8a1 100644
--- a/packages/nuxt/src/core/nuxt.ts
+++ b/packages/nuxt/src/core/nuxt.ts
@@ -1,7 +1,7 @@
 import { join, normalize, relative, resolve } from 'pathe'
 import { createDebugger, createHooks } from 'hookable'
 import type { LoadNuxtOptions } from '@nuxt/kit'
-import { addBuildPlugin, addComponent, addPlugin, addVitePlugin, addWebpackPlugin, installModule, loadNuxtConfig, logger, nuxtCtx, resolveAlias, resolveFiles, resolvePath, tryResolveModule } from '@nuxt/kit'
+import { addBuildPlugin, addComponent, addPlugin, addVitePlugin, addWebpackPlugin, installModule, loadNuxtConfig, logger, nuxtCtx, resolveAlias, resolveFiles, resolvePath, tryResolveModule, useNitro } from '@nuxt/kit'
 import type { Nuxt, NuxtHooks, NuxtOptions } from 'nuxt/schema'
 
 import escapeRE from 'escape-string-regexp'
@@ -271,15 +271,6 @@ async function initNuxt (nuxt: Nuxt) {
     })
   }
 
-  // Add prerender payload support
-  if (nuxt.options._generate && nuxt.options.experimental.payloadExtraction === undefined) {
-    console.warn('Using experimental payload extraction for full-static output. You can opt-out by setting `experimental.payloadExtraction` to `false`.')
-    nuxt.options.experimental.payloadExtraction = true
-  }
-  if (!nuxt.options.dev && nuxt.options.experimental.payloadExtraction) {
-    addPlugin(resolve(nuxt.options.appDir, 'plugins/payload.client'))
-  }
-
   // Add experimental cross-origin prefetch support using Speculation Rules API
   if (nuxt.options.experimental.crossOriginPrefetch) {
     addPlugin(resolve(nuxt.options.appDir, 'plugins/cross-origin-prefetch.client'))
@@ -381,6 +372,16 @@ async function initNuxt (nuxt: Nuxt) {
   // Init nitro
   await initNitro(nuxt)
 
+  // TODO: remove when app manifest support is landed in https://github.com/nuxt/nuxt/pull/21641
+  // Add prerender payload support
+  if (useNitro().options.static && nuxt.options.experimental.payloadExtraction === undefined) {
+    console.warn('Using experimental payload extraction for full-static output. You can opt-out by setting `experimental.payloadExtraction` to `false`.')
+    nuxt.options.experimental.payloadExtraction = true
+  }
+  if (!nuxt.options.dev && nuxt.options.experimental.payloadExtraction) {
+    addPlugin(resolve(nuxt.options.appDir, 'plugins/payload.client'))
+  }
+
   await nuxt.callHook('ready', nuxt)
 }
 
diff --git a/packages/nuxt/src/pages/module.ts b/packages/nuxt/src/pages/module.ts
index 9744f7d7ef..726c3a0ffb 100644
--- a/packages/nuxt/src/pages/module.ts
+++ b/packages/nuxt/src/pages/module.ts
@@ -201,8 +201,9 @@ export default defineNuxtModule({
       })
     })
 
-    // Prerender all non-dynamic page routes when generating app
-    if (!nuxt.options.dev && nuxt.options._generate) {
+    nuxt.hook('nitro:init', (nitro) => {
+      if (nuxt.options.dev || !nitro.options.static) { return }
+      // Prerender all non-dynamic page routes when generating app
       const prerenderRoutes = new Set<string>()
       nuxt.hook('modules:done', () => {
         nuxt.hook('pages:extend', (pages) => {
@@ -230,7 +231,7 @@ export default defineNuxtModule({
         }
         nitro.options.prerender.routes = Array.from(prerenderRoutes)
       })
-    }
+    })
 
     nuxt.hook('imports:extend', (imports) => {
       imports.push(