diff --git a/packages/nitro/package.json b/packages/nitro/package.json
index 7e267ca741..6357535185 100644
--- a/packages/nitro/package.json
+++ b/packages/nitro/package.json
@@ -54,6 +54,7 @@
     "node-fetch": "^3.0.0",
     "ohmyfetch": "^0.3.1",
     "ora": "^6.0.1",
+    "p-debounce": "^4.0.0",
     "pathe": "^0.2.0",
     "pretty-bytes": "^5.6.0",
     "rollup": "^2.58.0",
diff --git a/packages/nuxt3/src/core/builder.ts b/packages/nuxt3/src/core/builder.ts
index bf37985a3f..8a34fd02ad 100644
--- a/packages/nuxt3/src/core/builder.ts
+++ b/packages/nuxt3/src/core/builder.ts
@@ -49,7 +49,7 @@ function watch (nuxt: Nuxt) {
 }
 
 async function bundle (nuxt: Nuxt) {
-  const useVite = !!nuxt.options.vite
+  const useVite = nuxt.options.vite !== false
   const { bundle } = await (useVite ? import('@nuxt/vite-builder') : import('@nuxt/webpack-builder'))
   return bundle(nuxt)
 }
diff --git a/packages/vite/src/client.ts b/packages/vite/src/client.ts
index acd9f32042..f71185a96e 100644
--- a/packages/vite/src/client.ts
+++ b/packages/vite/src/client.ts
@@ -30,8 +30,7 @@ export async function buildClient (ctx: ViteBuildContext) {
         }
       },
       manifest: true,
-      outDir: resolve(ctx.nuxt.options.buildDir, 'dist/client'),
-      assetsDir: '.'
+      outDir: resolve(ctx.nuxt.options.buildDir, 'dist/client')
     },
     plugins: [
       replace({ 'process.env': 'import.meta.env' }),
diff --git a/packages/vite/src/dev-bundler.ts b/packages/vite/src/dev-bundler.ts
new file mode 100644
index 0000000000..92acb2f7c3
--- /dev/null
+++ b/packages/vite/src/dev-bundler.ts
@@ -0,0 +1,184 @@
+import { builtinModules } from 'module'
+import { createHash } from 'crypto'
+import * as vite from 'vite'
+
+interface TransformChunk {
+  id: string,
+  code: string,
+  deps: string[],
+  parents: string[]
+}
+
+interface SSRTransformResult {
+  code: string,
+  map: object,
+  deps: string[]
+  dynamicDeps: string[]
+}
+
+async function transformRequest (viteServer: vite.ViteDevServer, id) {
+  // Virtual modules start with `\0`
+  if (id && id.startsWith('/@id/__x00__')) {
+    id = '\0' + id.slice('/@id/__x00__'.length)
+  }
+  if (id && id.startsWith('/@id/')) {
+    id = id.slice('/@id/'.length)
+  }
+
+  // Externals
+  if (builtinModules.includes(id) || id.includes('node_modules')) {
+    return {
+      code: `(global, exports, importMeta, ssrImport, ssrDynamicImport, ssrExportAll) => import('${id.replace(/^\/@fs/, '')}').then(r => { ssrExportAll(r) })`,
+      deps: [],
+      dynamicDeps: []
+    }
+  }
+
+  // Transform
+  const res: SSRTransformResult = await viteServer.transformRequest(id, { ssr: true }).catch((err) => {
+    // eslint-disable-next-line no-console
+    console.warn(`[SSR] Error transforming ${id}: ${err}`)
+    // console.error(err)
+  }) as SSRTransformResult || { code: '', map: {}, deps: [], dynamicDeps: [] }
+
+  // Wrap into a vite module
+  const code = `async function (global, __vite_ssr_exports__, __vite_ssr_import_meta__, __vite_ssr_import__, __vite_ssr_dynamic_import__, __vite_ssr_exportAll__) {
+${res.code || '/* empty */'};
+}`
+  return { code, deps: res.deps || [], dynamicDeps: res.dynamicDeps || [] }
+}
+
+async function transformRequestRecursive (viteServer: vite.ViteDevServer, id, parent = '<entry>', chunks: Record<string, TransformChunk> = {}) {
+  if (chunks[id]) {
+    chunks[id].parents.push(parent)
+    return
+  }
+  const res = await transformRequest(viteServer, id)
+  const deps = uniq([...res.deps, ...res.dynamicDeps])
+
+  chunks[id] = {
+    id,
+    code: res.code,
+    deps,
+    parents: [parent]
+  } as TransformChunk
+  for (const dep of deps) {
+    await transformRequestRecursive(viteServer, dep, id, chunks)
+  }
+  return Object.values(chunks)
+}
+
+export async function bundleRequest (viteServer: vite.ViteDevServer, entryURL) {
+  const chunks = await transformRequestRecursive(viteServer, entryURL)
+
+  const listIds = ids => ids.map(id => `// - ${id} (${hashId(id)})`).join('\n')
+  const chunksCode = chunks.map(chunk => `
+// --------------------
+// Request: ${chunk.id}
+// Parents: \n${listIds(chunk.parents)}
+// Dependencies: \n${listIds(chunk.deps)}
+// --------------------
+const ${hashId(chunk.id)} = ${chunk.code}
+`).join('\n')
+
+  const manifestCode = 'const __modules__ = {\n' +
+   chunks.map(chunk => ` '${chunk.id}': ${hashId(chunk.id)}`).join(',\n') + '\n}'
+
+  // https://github.com/vitejs/vite/blob/main/packages/vite/src/node/ssr/ssrModuleLoader.ts
+  const ssrModuleLoader = `
+const __pendingModules__ = new Map()
+const __pendingImports__ = new Map()
+const __ssrContext__ = { global: {} }
+
+function __ssrLoadModule__(url, urlStack = []) {
+  const pendingModule = __pendingModules__.get(url)
+  if (pendingModule) { return pendingModule }
+  const modulePromise = __instantiateModule__(url, urlStack)
+  __pendingModules__.set(url, modulePromise)
+  modulePromise.catch(() => { __pendingModules__.delete(url) })
+         .finally(() => { __pendingModules__.delete(url) })
+  return modulePromise
+}
+
+async function __instantiateModule__(url, urlStack) {
+  const mod = __modules__[url]
+  if (mod.stubModule) { return mod.stubModule }
+  const stubModule = { [Symbol.toStringTag]: 'Module' }
+  Object.defineProperty(stubModule, '__esModule', { value: true })
+  mod.stubModule = stubModule
+  const importMeta = { url, hot: { accept() {} } }
+  urlStack = urlStack.concat(url)
+  const isCircular = url => urlStack.includes(url)
+  const pendingDeps = []
+  const ssrImport = async (dep) => {
+    // TODO: Handle externals if dep[0] !== '.' | '/'
+    if (!isCircular(dep) && !__pendingImports__.get(dep)?.some(isCircular)) {
+      pendingDeps.push(dep)
+      if (pendingDeps.length === 1) {
+        __pendingImports__.set(url, pendingDeps)
+      }
+      await __ssrLoadModule__(dep, urlStack)
+      if (pendingDeps.length === 1) {
+        __pendingImports__.delete(url)
+      } else {
+        pendingDeps.splice(pendingDeps.indexOf(dep), 1)
+      }
+    }
+    return __modules__[dep].stubModule
+  }
+  function ssrDynamicImport (dep) {
+    // TODO: Handle dynamic import starting with . relative to url
+    return ssrImport(dep)
+  }
+
+  function ssrExportAll(sourceModule) {
+    for (const key in sourceModule) {
+      if (key !== 'default') {
+        try {
+          Object.defineProperty(stubModule, key, {
+            enumerable: true,
+            configurable: true,
+            get() { return sourceModule[key] }
+          })
+        } catch (_err) { }
+      }
+    }
+  }
+
+  await mod(
+    __ssrContext__.global,
+    stubModule,
+    importMeta,
+    ssrImport,
+    ssrDynamicImport,
+    ssrExportAll
+  )
+
+  return stubModule
+}
+`
+
+  const code = [
+    chunksCode,
+    manifestCode,
+    ssrModuleLoader,
+    `export default await __ssrLoadModule__('${entryURL}')`
+  ].join('\n\n')
+
+  return { code }
+}
+
+function hashId (id: string) {
+  return '$id_' + hash(id)
+}
+
+function hash (input: string, length = 8) {
+  return createHash('sha256')
+    .update(input)
+    .digest('hex')
+    .substr(0, length)
+}
+
+export function uniq<T> (arr: T[]): T[] {
+  return Array.from(new Set(arr))
+}
diff --git a/packages/vite/src/server.ts b/packages/vite/src/server.ts
index 17624a790c..9ddc4ba029 100644
--- a/packages/vite/src/server.ts
+++ b/packages/vite/src/server.ts
@@ -1,10 +1,13 @@
 import { resolve } from 'pathe'
 import * as vite from 'vite'
 import vuePlugin from '@vitejs/plugin-vue'
+import fse from 'fs-extra'
+import pDebounce from 'p-debounce'
 import consola from 'consola'
 import { ViteBuildContext, ViteOptions } from './vite'
 import { wpfs } from './utils/wpfs'
 import { cacheDirPlugin } from './plugins/cache-dir'
+import { bundleRequest } from './dev-bundler'
 
 export async function buildServer (ctx: ViteBuildContext) {
   const serverConfig: vite.InlineConfig = vite.mergeConfig(ctx.config, {
@@ -19,7 +22,14 @@ export async function buildServer (ctx: ViteBuildContext) {
     },
     resolve: {
       alias: {
-        '#build/plugins': resolve(ctx.nuxt.options.buildDir, 'plugins/server')
+        '#build/plugins': resolve(ctx.nuxt.options.buildDir, 'plugins/server'),
+        // Alias vue
+        'vue/server-renderer': 'vue/server-renderer',
+        'vue/compiler-sfc': 'vue/compiler-sfc',
+        '@vue/reactivity': `@vue/reactivity/dist/reactivity.cjs${ctx.nuxt.options.dev ? '' : '.prod'}.js`,
+        '@vue/shared': `@vue/shared/dist/shared.cjs${ctx.nuxt.options.dev ? '' : '.prod'}.js`,
+        'vue-router': `vue-router/dist/vue-router.cjs${ctx.nuxt.options.dev ? '' : '.prod'}.js`,
+        vue: `vue/dist/vue.cjs${ctx.nuxt.options.dev ? '' : '.prod'}.js`
       }
     },
     ssr: {
@@ -57,36 +67,49 @@ export async function buildServer (ctx: ViteBuildContext) {
 
   const onBuild = () => ctx.nuxt.callHook('build:resources', wpfs)
 
+  // Production build
+  if (!ctx.nuxt.options.dev) {
+    const start = Date.now()
+    consola.info('Building server...')
+    await vite.build(serverConfig)
+    await onBuild()
+    consola.success(`Server built in ${Date.now() - start}ms`)
+    return
+  }
+
   if (!ctx.nuxt.options.ssr) {
     await onBuild()
     return
   }
 
-  let lastBuild = 0
-  const build = async () => {
-    let start = Date.now()
-    // debounce
-    if (start - lastBuild < 300) {
-      await sleep(300 - (start - lastBuild) + 1)
-      start = Date.now()
-      if (start - lastBuild < 300) {
-        return
-      }
-    }
-    lastBuild = start
-    await vite.build(serverConfig)
+  // Start development server
+  const viteServer = await vite.createServer(serverConfig)
+
+  // Close server on exit
+  ctx.nuxt.hook('close', () => viteServer.close())
+
+  // Initialize plugins
+  await viteServer.pluginContainer.buildStart({})
+
+  // Build and watch
+  const _doBuild = async () => {
+    const start = Date.now()
+    const { code } = await bundleRequest(viteServer, resolve(ctx.nuxt.options.appDir, 'entry'))
+    await fse.writeFile(resolve(ctx.nuxt.options.buildDir, 'dist/server/server.mjs'), code, 'utf-8')
+    const time = (Date.now() - start)
+    consola.success(`Vite server built in ${time}ms`)
     await onBuild()
-    consola.info(`Server built in ${Date.now() - start}ms`)
   }
+  const doBuild = pDebounce(_doBuild, 100)
 
-  await build()
+  // Initial build
+  await _doBuild()
 
-  ctx.nuxt.hook('builder:watch', () => build())
-  ctx.nuxt.hook('app:templatesGenerated', () => build())
-}
-
-function sleep (ms:number) {
-  return new Promise((resolve) => {
-    setTimeout(resolve, ms)
+  // Watch
+  viteServer.watcher.on('all', (_event, file) => {
+    if (file.indexOf(ctx.nuxt.options.buildDir) === 0) { return }
+    doBuild()
   })
+  // ctx.nuxt.hook('builder:watch', () => doBuild())
+  ctx.nuxt.hook('app:templatesGenerated', () => doBuild())
 }
diff --git a/playground/nuxt.config.ts b/playground/nuxt.config.ts
index e50dc842b0..854fc6bfc5 100644
--- a/playground/nuxt.config.ts
+++ b/playground/nuxt.config.ts
@@ -1,5 +1,4 @@
 import { defineNuxtConfig } from '@nuxt/kit'
 
 export default defineNuxtConfig({
-  // vite: true
 })
diff --git a/yarn.lock b/yarn.lock
index b1a3903511..49c10cfb5c 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -1566,6 +1566,7 @@ __metadata:
     node-fetch: ^3.0.0
     ohmyfetch: ^0.3.1
     ora: ^6.0.1
+    p-debounce: ^4.0.0
     pathe: ^0.2.0
     pretty-bytes: ^5.6.0
     rollup: ^2.58.0
@@ -10395,6 +10396,13 @@ fsevents@~2.3.2:
   languageName: node
   linkType: hard
 
+"p-debounce@npm:^4.0.0":
+  version: 4.0.0
+  resolution: "p-debounce@npm:4.0.0"
+  checksum: 7f796f6ed264cb964b83601e70c4c0d94dd52d54e1361400ee80df7527217a59074aa14ab746d4d3089b352181c4ffb5329158fd679cb4b4b52c208574e9e56d
+  languageName: node
+  linkType: hard
+
 "p-finally@npm:^1.0.0":
   version: 1.0.0
   resolution: "p-finally@npm:1.0.0"