diff --git a/package.json b/package.json
index 0eda8dd9f41143..b86b1cf7d54823 100644
--- a/package.json
+++ b/package.json
@@ -115,8 +115,6 @@
     ]
   },
   "dependencies": {
-    "@babel/core": "^7.11.1",
-    "@babel/register": "^7.10.5",
     "@elastic/datemath": "5.0.3",
     "@elastic/elasticsearch": "7.9.1",
     "@elastic/eui": "29.0.0",
@@ -128,7 +126,6 @@
     "@hapi/wreck": "^15.0.2",
     "@kbn/analytics": "1.0.0",
     "@kbn/apm-config-loader": "1.0.0",
-    "@kbn/babel-preset": "1.0.0",
     "@kbn/config": "1.0.0",
     "@kbn/config-schema": "1.0.0",
     "@kbn/i18n": "1.0.0",
@@ -214,6 +211,7 @@
     "rxjs": "^6.5.5",
     "seedrandom": "^3.0.5",
     "semver": "^5.7.0",
+    "source-map-support": "^0.5.19",
     "style-it": "^2.1.3",
     "symbol-observable": "^1.2.0",
     "tar": "4.4.13",
@@ -227,7 +225,9 @@
     "yauzl": "^2.10.0"
   },
   "devDependencies": {
+    "@babel/core": "^7.11.1",
     "@babel/parser": "^7.11.2",
+    "@babel/register": "^7.10.5",
     "@babel/types": "^7.11.0",
     "@elastic/apm-rum": "^5.6.1",
     "@elastic/charts": "21.1.2",
@@ -238,6 +238,7 @@
     "@elastic/github-checks-reporter": "0.0.20b3",
     "@elastic/makelogs": "^6.0.0",
     "@elastic/ui-ace": "0.2.3",
+    "@kbn/babel-preset": "1.0.0",
     "@kbn/dev-utils": "1.0.0",
     "@kbn/es": "1.0.0",
     "@kbn/es-archiver": "1.0.0",
diff --git a/packages/kbn-babel-preset/node_preset.js b/packages/kbn-babel-preset/node_preset.js
index 45afe5d5ebc32b..86817ed253e7cd 100644
--- a/packages/kbn-babel-preset/node_preset.js
+++ b/packages/kbn-babel-preset/node_preset.js
@@ -49,13 +49,5 @@ module.exports = (_, options = {}) => {
       ],
       require('./common_preset'),
     ],
-    plugins: [
-      [
-        require.resolve('babel-plugin-transform-define'),
-        {
-          'global.__BUILT_WITH_BABEL__': 'true',
-        },
-      ],
-    ],
   };
 };
diff --git a/packages/kbn-babel-preset/package.json b/packages/kbn-babel-preset/package.json
index d6d1a78dd4a23a..e2122b82941c8f 100644
--- a/packages/kbn-babel-preset/package.json
+++ b/packages/kbn-babel-preset/package.json
@@ -14,7 +14,6 @@
     "@babel/preset-typescript": "^7.10.4",
     "babel-plugin-add-module-exports": "^1.0.2",
     "babel-plugin-styled-components": "^1.10.7",
-    "babel-plugin-transform-define": "^1.3.1",
     "react-is": "^16.8.0",
     "styled-components": "^5.1.0"
   }
diff --git a/packages/kbn-test/src/functional_tests/lib/babel_register_for_test_plugins.js b/packages/kbn-test/src/functional_tests/lib/babel_register_for_test_plugins.js
new file mode 100644
index 00000000000000..44ff579411bd9b
--- /dev/null
+++ b/packages/kbn-test/src/functional_tests/lib/babel_register_for_test_plugins.js
@@ -0,0 +1,39 @@
+/*
+ * Licensed to Elasticsearch B.V. under one or more contributor
+ * license agreements. See the NOTICE file distributed with
+ * this work for additional information regarding copyright
+ * ownership. Elasticsearch B.V. licenses this file to you under
+ * the Apache License, Version 2.0 (the "License"); you may
+ * not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *    http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing,
+ * software distributed under the License is distributed on an
+ * "AS IS" BASIS, WITHOUT WARRANTIES OR CONDITIONS OF ANY
+ * KIND, either express or implied.  See the License for the
+ * specific language governing permissions and limitations
+ * under the License.
+ */
+
+const Path = require('path');
+
+const { REPO_ROOT } = require('@kbn/dev-utils');
+
+// modifies all future calls to require() to automatically
+// compile the required source with babel
+require('@babel/register')({
+  ignore: [/[\/\\](node_modules|target|dist)[\/\\]/],
+  only: [
+    Path.resolve(REPO_ROOT, 'test'),
+    Path.resolve(REPO_ROOT, 'x-pack/test'),
+    Path.resolve(REPO_ROOT, 'examples'),
+    Path.resolve(REPO_ROOT, 'x-pack/examples'),
+    // TODO: should should probably remove this link back to the source
+    Path.resolve(REPO_ROOT, 'x-pack/plugins/task_manager/server/config.ts'),
+  ],
+  babelrc: false,
+  presets: [require.resolve('@kbn/babel-preset/node_preset')],
+  extensions: ['.js', '.ts', '.tsx'],
+});
diff --git a/packages/kbn-test/src/functional_tests/lib/run_kibana_server.js b/packages/kbn-test/src/functional_tests/lib/run_kibana_server.js
index fb9f8f7a52408c..e7ec99467ecfd8 100644
--- a/packages/kbn-test/src/functional_tests/lib/run_kibana_server.js
+++ b/packages/kbn-test/src/functional_tests/lib/run_kibana_server.js
@@ -17,9 +17,26 @@
  * under the License.
  */
 
-import { resolve } from 'path';
+import { resolve, relative } from 'path';
 import { KIBANA_ROOT, KIBANA_EXEC, KIBANA_EXEC_PATH } from './paths';
 
+function extendNodeOptions(installDir) {
+  if (!installDir) {
+    return {};
+  }
+
+  const testOnlyRegisterPath = relative(
+    installDir,
+    require.resolve('./babel_register_for_test_plugins')
+  );
+
+  return {
+    NODE_OPTIONS: `--require=${testOnlyRegisterPath}${
+      process.env.NODE_OPTIONS ? ` ${process.env.NODE_OPTIONS}` : ''
+    }`,
+  };
+}
+
 export async function runKibanaServer({ procs, config, options }) {
   const { installDir } = options;
 
@@ -29,6 +46,7 @@ export async function runKibanaServer({ procs, config, options }) {
     env: {
       FORCE_COLOR: 1,
       ...process.env,
+      ...extendNodeOptions(installDir),
     },
     cwd: installDir || KIBANA_ROOT,
     wait: /http server running/,
diff --git a/scripts/build_plugin_list_docs.js b/scripts/build_plugin_list_docs.js
index 54821a1b10ee8d..6f184ca7b14c69 100644
--- a/scripts/build_plugin_list_docs.js
+++ b/scripts/build_plugin_list_docs.js
@@ -17,5 +17,5 @@
  * under the License.
  */
 
-require('../src/setup_node_env/prebuilt_dev_only_entry');
+require('../src/setup_node_env/no_transpilation');
 require('@kbn/dev-utils').runPluginListCli();
diff --git a/scripts/es.js b/scripts/es.js
index 2d56496f2fdd23..53b01d8cb44140 100644
--- a/scripts/es.js
+++ b/scripts/es.js
@@ -17,7 +17,7 @@
  * under the License.
  */
 
-require('../src/setup_node_env/prebuilt_dev_only_entry');
+require('../src/setup_node_env/no_transpilation');
 
 var resolve = require('path').resolve;
 var pkg = require('../package.json');
diff --git a/scripts/generate_plugin.js b/scripts/generate_plugin.js
index f695eabb30f219..af3d31048ecfc6 100644
--- a/scripts/generate_plugin.js
+++ b/scripts/generate_plugin.js
@@ -17,5 +17,5 @@
  * under the License.
  */
 
-require('../src/setup_node_env/prebuilt_dev_only_entry');
+require('../src/setup_node_env/no_transpilation');
 require('@kbn/plugin-generator').runCli();
diff --git a/scripts/plugin_helpers.js b/scripts/plugin_helpers.js
index a07ba7a9185f80..f28bf8fcfff903 100644
--- a/scripts/plugin_helpers.js
+++ b/scripts/plugin_helpers.js
@@ -17,5 +17,5 @@
  * under the License.
  */
 
-require('../src/setup_node_env/prebuilt_dev_only_entry');
+require('../src/setup_node_env/no_transpilation');
 require('@kbn/plugin-helpers').runCli();
diff --git a/scripts/register_git_hook.js b/scripts/register_git_hook.js
index af3f54619bcecc..50dfeaf46109fc 100644
--- a/scripts/register_git_hook.js
+++ b/scripts/register_git_hook.js
@@ -17,5 +17,5 @@
  * under the License.
  */
 
-require('../src/setup_node_env/prebuilt_dev_only_entry');
+require('../src/setup_node_env/no_transpilation');
 require('@kbn/dev-utils/target/precommit_hook/cli');
diff --git a/scripts/release_notes.js b/scripts/release_notes.js
index f46ee5823d70d1..ee9275194ae94a 100644
--- a/scripts/release_notes.js
+++ b/scripts/release_notes.js
@@ -17,5 +17,5 @@
  * under the License.
  */
 
-require('../src/setup_node_env/prebuilt_dev_only_entry');
+require('../src/setup_node_env/no_transpilation');
 require('@kbn/release-notes').runReleaseNotesCli();
diff --git a/scripts/telemetry_check.js b/scripts/telemetry_check.js
index 06b3ed46bdba6a..22a22b401cb15f 100644
--- a/scripts/telemetry_check.js
+++ b/scripts/telemetry_check.js
@@ -17,5 +17,5 @@
  * under the License.
  */
 
-require('../src/setup_node_env/prebuilt_dev_only_entry');
+require('../src/setup_node_env/no_transpilation');
 require('@kbn/telemetry-tools').runTelemetryCheck();
diff --git a/scripts/telemetry_extract.js b/scripts/telemetry_extract.js
index 051bee26537b9b..e2fbb64c267196 100644
--- a/scripts/telemetry_extract.js
+++ b/scripts/telemetry_extract.js
@@ -17,5 +17,5 @@
  * under the License.
  */
 
-require('../src/setup_node_env/prebuilt_dev_only_entry');
+require('../src/setup_node_env/no_transpilation');
 require('@kbn/telemetry-tools').runTelemetryExtract();
diff --git a/src/cli/index.js b/src/cli/index.js
index 45f88eaf82a5b8..e5480d21376249 100644
--- a/src/cli/index.js
+++ b/src/cli/index.js
@@ -18,5 +18,6 @@
  */
 
 require('../apm')();
-require('../setup_node_env');
+require('../setup_node_env/no_transpilation');
+require('../setup_node_env/babel_register/polyfill');
 require('./cli');
diff --git a/src/cli/serve/integration_tests/invalid_config.test.ts b/src/cli/serve/integration_tests/invalid_config.test.ts
index fd6fa1bf192fc3..a72142faa22fe6 100644
--- a/src/cli/serve/integration_tests/invalid_config.test.ts
+++ b/src/cli/serve/integration_tests/invalid_config.test.ts
@@ -18,10 +18,10 @@
  */
 
 import { spawnSync } from 'child_process';
-import { resolve } from 'path';
 
-const ROOT_DIR = resolve(__dirname, '../../../../');
-const INVALID_CONFIG_PATH = resolve(__dirname, '__fixtures__/invalid_config.yml');
+import { REPO_ROOT } from '@kbn/dev-utils';
+
+const INVALID_CONFIG_PATH = require.resolve('./__fixtures__/invalid_config.yml');
 
 interface LogEntry {
   message: string;
@@ -35,11 +35,11 @@ describe('cli invalid config support', function () {
     function () {
       // Unused keys only throw once LegacyService starts, so disable migrations so that Core
       // will finish the start lifecycle without a running Elasticsearch instance.
-      const { error, status, stdout } = spawnSync(
+      const { error, status, stdout, stderr } = spawnSync(
         process.execPath,
-        ['src/cli', '--config', INVALID_CONFIG_PATH, '--migrations.skip=true'],
+        ['scripts/kibana', '--config', INVALID_CONFIG_PATH, '--migrations.skip=true'],
         {
-          cwd: ROOT_DIR,
+          cwd: REPO_ROOT,
         }
       );
 
@@ -57,13 +57,21 @@ describe('cli invalid config support', function () {
         }));
 
       expect(error).toBe(undefined);
-      expect(status).toBe(64);
+
+      if (!fatalLogLine) {
+        throw new Error(
+          `cli did not log the expected fatal error message:\n\nstdout: \n${stdout}\n\nstderr:\n${stderr}`
+        );
+      }
+
       expect(fatalLogLine.message).toContain(
         'Error: Unknown configuration key(s): "unknown.key", "other.unknown.key", "other.third", "some.flat.key", ' +
           '"some.array". Check for spelling errors and ensure that expected plugins are installed.'
       );
       expect(fatalLogLine.tags).toEqual(['fatal', 'root']);
       expect(fatalLogLine.type).toEqual('log');
+
+      expect(status).toBe(64);
     },
     20 * 1000
   );
diff --git a/src/dev/build/tasks/copy_source_task.ts b/src/dev/build/tasks/copy_source_task.ts
index 948e2357effb04..78e1395586a17f 100644
--- a/src/dev/build/tasks/copy_source_task.ts
+++ b/src/dev/build/tasks/copy_source_task.ts
@@ -37,6 +37,8 @@ export const CopySource: Task = {
         '!src/cli/repl/**',
         '!src/functional_test_runner/**',
         '!src/dev/**',
+        '!src/setup_node_env/babel_register/index.js',
+        '!src/setup_node_env/babel_register/register.js',
         '!**/public/**',
         'typings/**',
         'config/kibana.yml',
diff --git a/src/setup_node_env/babel_register/register.js b/src/setup_node_env/babel_register/register.js
index 6d573d89222449..3c0bd387c8e44d 100644
--- a/src/setup_node_env/babel_register/register.js
+++ b/src/setup_node_env/babel_register/register.js
@@ -46,26 +46,12 @@ var ignore = [
 
   // ignore paths matching `/canvas/canvas_plugin/`
   /[\/\\]canvas[\/\\]canvas_plugin[\/\\]/,
-];
 
-if (global.__BUILT_WITH_BABEL__) {
-  // when building the Kibana source we replace the statement
-  // `global.__BUILT_WITH_BABEL__` with the value `true` so that
-  // when @babel/register is required for the first time by users
-  // it will exclude kibana's `src` directory.
-  //
-  // We still need @babel/register for plugins though, we've been
-  // building their server code at require-time since version 4.2
-  // TODO: the plugin install process could transpile plugin server code...
-  ignore.push(resolve(__dirname, '../../../src'));
-} else {
-  ignore.push(
-    // ignore any path in the packages, unless it is in the package's
-    // root `src` directory, in any test or __tests__ directory, or it
-    // ends with .test.js, .test.ts, or .test.tsx
-    /[\/\\]packages[\/\\](eslint-|kbn-)[^\/\\]+[\/\\](?!src[\/\\].*|(.+[\/\\])?(test|__tests__)[\/\\].+|.+\.test\.(js|ts|tsx)$)(.+$)/
-  );
-}
+  // ignore any path in the packages, unless it is in the package's
+  // root `src` directory, in any test or __tests__ directory, or it
+  // ends with .test.js, .test.ts, or .test.tsx
+  /[\/\\]packages[\/\\](eslint-|kbn-)[^\/\\]+[\/\\](?!src[\/\\].*|(.+[\/\\])?(test|__tests__)[\/\\].+|.+\.test\.(js|ts|tsx)$)(.+$)/,
+];
 
 // modifies all future calls to require() to automatically
 // compile the required source with babel
diff --git a/src/setup_node_env/index.js b/src/setup_node_env/index.js
index d84249df7fd8f0..60f0982f50d209 100644
--- a/src/setup_node_env/index.js
+++ b/src/setup_node_env/index.js
@@ -17,5 +17,5 @@
  * under the License.
  */
 
-require('./prebuilt_dev_only_entry');
+require('./no_transpilation');
 require('./babel_register');
diff --git a/src/setup_node_env/prebuilt_dev_only_entry.js b/src/setup_node_env/no_transpilation.js
similarity index 100%
rename from src/setup_node_env/prebuilt_dev_only_entry.js
rename to src/setup_node_env/no_transpilation.js
diff --git a/x-pack/package.json b/x-pack/package.json
index f9b193bb4da06d..7f577017dfd4b5 100644
--- a/x-pack/package.json
+++ b/x-pack/package.json
@@ -32,6 +32,7 @@
     "@cypress/webpack-preprocessor": "^4.1.0",
     "@elastic/apm-rum-react": "^1.2.5",
     "@elastic/maki": "6.3.0",
+    "@kbn/babel-preset": "1.0.0",
     "@kbn/dev-utils": "1.0.0",
     "@kbn/es": "1.0.0",
     "@kbn/expect": "1.0.0",
@@ -280,7 +281,6 @@
     "@elastic/node-crypto": "1.2.1",
     "@elastic/numeral": "^2.5.0",
     "@elastic/safer-lodash-set": "0.0.0",
-    "@kbn/babel-preset": "1.0.0",
     "@kbn/config-schema": "1.0.0",
     "@kbn/i18n": "1.0.0",
     "@kbn/interpreter": "1.0.0",
diff --git a/yarn.lock b/yarn.lock
index 77e3a399c43137..3751816b220252 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -7577,14 +7577,6 @@ babel-plugin-syntax-jsx@^6.18.0:
   resolved "https://registry.yarnpkg.com/babel-plugin-syntax-jsx/-/babel-plugin-syntax-jsx-6.18.0.tgz#0af32a9a6e13ca7a3fd5069e62d7b0f58d0d8946"
   integrity sha1-CvMqmm4Tyno/1QaeYtew9Y0NiUY=
 
-babel-plugin-transform-define@^1.3.1:
-  version "1.3.1"
-  resolved "https://registry.yarnpkg.com/babel-plugin-transform-define/-/babel-plugin-transform-define-1.3.1.tgz#b21b7bad3b84cf8e3f07cdc8c660b99cbbc01213"
-  integrity sha512-JXZ1xE9jIbKCGYZ4wbSMPSI5mdS4DRLi5+SkTHgZqWn5YIf/EucykkzUsPmzJlpkX8fsMVdLnA5vt/LvT97Zbg==
-  dependencies:
-    lodash "^4.17.11"
-    traverse "0.6.6"
-
 babel-plugin-transform-inline-consecutive-adds@^0.4.3:
   version "0.4.3"
   resolved "https://registry.yarnpkg.com/babel-plugin-transform-inline-consecutive-adds/-/babel-plugin-transform-inline-consecutive-adds-0.4.3.tgz#323d47a3ea63a83a7ac3c811ae8e6941faf2b0d1"
@@ -27294,10 +27286,10 @@ source-map-support@^0.3.2:
   dependencies:
     source-map "0.1.32"
 
-source-map-support@^0.5.1, source-map-support@^0.5.16, source-map-support@^0.5.6, source-map-support@^0.5.9, source-map-support@~0.5.12:
-  version "0.5.16"
-  resolved "https://registry.yarnpkg.com/source-map-support/-/source-map-support-0.5.16.tgz#0ae069e7fe3ba7538c64c98515e35339eac5a042"
-  integrity sha512-efyLRJDr68D9hBBNIPWFjhpFzURh+KJykQwvMyW5UiZzYwoF6l4YMMDIJJEyFWxWCqfyxLzz6tSfUFR+kXXsVQ==
+source-map-support@^0.5.1, source-map-support@^0.5.16, source-map-support@^0.5.19, source-map-support@^0.5.6, source-map-support@^0.5.9, source-map-support@~0.5.12:
+  version "0.5.19"
+  resolved "https://registry.yarnpkg.com/source-map-support/-/source-map-support-0.5.19.tgz#a98b62f86dcaf4f67399648c085291ab9e8fed61"
+  integrity sha512-Wonm7zOCIJzBGQdB+thsPar0kYuCIzYvxZwlBa87yi/Mdjv7Tip2cyVbLj5o0cFPN4EVkuTwb3GDDyUx2DGnGw==
   dependencies:
     buffer-from "^1.0.0"
     source-map "^0.6.0"
@@ -29146,7 +29138,7 @@ traverse-chain@~0.1.0:
   resolved "https://registry.yarnpkg.com/traverse-chain/-/traverse-chain-0.1.0.tgz#61dbc2d53b69ff6091a12a168fd7d433107e40f1"
   integrity sha1-YdvC1Ttp/2CRoSoWj9fUMxB+QPE=
 
-traverse@0.6.6, traverse@^0.6.6, traverse@~0.6.6:
+traverse@^0.6.6, traverse@~0.6.6:
   version "0.6.6"
   resolved "https://registry.yarnpkg.com/traverse/-/traverse-0.6.6.tgz#cbdf560fd7b9af632502fed40f918c157ea97137"
   integrity sha1-y99WD9e5r2MlAv7UD5GMFX6pcTc=