diff --git a/e2e/jest/src/jest.test.ts b/e2e/jest/src/jest.test.ts
index 981f75faacd071..395af4348533db 100644
--- a/e2e/jest/src/jest.test.ts
+++ b/e2e/jest/src/jest.test.ts
@@ -97,4 +97,16 @@ describe('Jest', () => {
     ); // text
     expect(result.stdout).toContain('Coverage summary'); // text-summary
   }, 90000);
+
+  it('should be able to test node lib with babel-jest', async () => {
+    const libName = uniq('babel-test-lib');
+    runCLI(
+      `generate @nrwl/node:lib ${libName} --buildable --importPath=@some-org/babel-test --publishable --babelJest`
+    );
+
+    const cliResults = await runCLIAsync(`test ${libName}`);
+    expect(cliResults.combinedOutput).toContain(
+      'Test Suites: 1 passed, 1 total'
+    );
+  });
 });
diff --git a/packages/jest/src/generators/jest-project/jest-project.spec.ts b/packages/jest/src/generators/jest-project/jest-project.spec.ts
index e0aec2052ec5c7..2ca08441815ab8 100644
--- a/packages/jest/src/generators/jest-project/jest-project.spec.ts
+++ b/packages/jest/src/generators/jest-project/jest-project.spec.ts
@@ -55,6 +55,15 @@ describe('jestProject', () => {
     expect(tree.exists('libs/lib1/tsconfig.spec.json')).toBeTruthy();
   });
 
+  it('should generate files w/babel-jest', async () => {
+    await jestProjectGenerator(tree, {
+      ...defaultOptions,
+      project: 'lib1',
+      babelJest: true,
+    } as JestProjectSchema);
+    expect(tree.exists('babel.config.json')).toBeTruthy();
+  });
+
   it('should alter workspace.json', async () => {
     await jestProjectGenerator(tree, {
       ...defaultOptions,
diff --git a/packages/jest/src/generators/jest-project/lib/create-files.ts b/packages/jest/src/generators/jest-project/lib/create-files.ts
index b432153985ff9f..f0151fe4d46da9 100644
--- a/packages/jest/src/generators/jest-project/lib/create-files.ts
+++ b/packages/jest/src/generators/jest-project/lib/create-files.ts
@@ -4,6 +4,7 @@ import {
   offsetFromRoot,
   generateFiles,
   readProjectConfiguration,
+  stripIndents,
 } from '@nrwl/devkit';
 import { join } from 'path';
 
@@ -24,4 +25,13 @@ export function createFiles(tree: Tree, options: JestProjectSchema) {
   if (options.setupFile === 'none') {
     tree.delete(join(projectConfig.root, './src/test-setup.ts'));
   }
+
+  if (options.babelJest && !tree.exists('babel.config.json')) {
+    tree.write(
+      'babel.config.json',
+      JSON.stringify({
+        babelrcRoots: ['*'],
+      })
+    );
+  }
 }