diff --git a/bin/next b/bin/next
index 7e2a46e6..79ab5e9d 100755
--- a/bin/next
+++ b/bin/next
@@ -26,6 +26,6 @@ const bin = resolve(__dirname, 'next-' + cmd)
 const proc = spawn(bin, args, { stdio: 'inherit', customFds: [0, 1, 2] })
 proc.on('close', (code) => process.exit(code))
 proc.on('error', (err) => {
-  console.log(err)
+  console.error(err)
   process.exit(1)
 })
diff --git a/bin/next-dev b/bin/next-dev
index 6e9dc8f5..6b7b72d5 100755
--- a/bin/next-dev
+++ b/bin/next-dev
@@ -3,7 +3,8 @@ import { exec } from 'child_process'
 import { resolve, join } from 'path'
 import parseArgs from 'minimist'
 import Server from '../server'
-import build from '../server/build'
+import HotReloader from '../server/hot-reloader'
+import webpack from '../server/build/webpack'
 import { exists } from 'mz/fs'
 
 const argv = parseArgs(process.argv.slice(2), {
@@ -25,9 +26,10 @@ const open = url => {
 
 const dir = resolve(argv._[0] || '.')
 
-build(dir)
-.then(async () => {
-  const srv = new Server({ dir, dev: true })
+webpack(dir, { hotReload: true })
+.then(async (compiler) => {
+  const hotReloader = new HotReloader(compiler)
+  const srv = new Server({ dir, dev: true, hotReloader })
   await srv.start(argv.port)
   console.log('> Ready on http://localhost:%d', argv.port)
 
diff --git a/client/next-dev.js b/client/next-dev.js
index b1516d2a..041e7a20 100644
--- a/client/next-dev.js
+++ b/client/next-dev.js
@@ -1 +1,7 @@
-import './next'
+import 'react-hot-loader/patch'
+import 'webpack-dev-server/client?http://localhost:3030'
+import * as next from './next'
+
+module.exports = next
+
+window.next = next
diff --git a/client/next.js b/client/next.js
index 7e1c9d1d..1f0b3e4f 100644
--- a/client/next.js
+++ b/client/next.js
@@ -13,10 +13,11 @@ const {
 const App = app ? evalScript(app).default : DefaultApp
 const Component = evalScript(component).default
 
-const router = new Router(window.location.href, { Component })
+export const router = new Router(window.location.href, { Component })
+
 const headManager = new HeadManager()
 const container = document.getElementById('__next')
 const appProps = { Component, props, router, headManager }
 
 StyleSheet.rehydrate(classNames)
-render(createElement(App, { ...appProps }), container)
+render(createElement(App, appProps), container)
diff --git a/gulpfile.js b/gulpfile.js
index 1b8c55a0..224e0702 100644
--- a/gulpfile.js
+++ b/gulpfile.js
@@ -67,6 +67,16 @@ gulp.task('compile-test', () => {
   .pipe(notify('Compiled test files'))
 })
 
+gulp.task('copy', [
+  'copy-pages',
+  'copy-test-fixtures'
+])
+
+gulp.task('copy-pages', () => {
+  return gulp.src('pages/**/*.js')
+  .pipe(gulp.dest('dist/pages'))
+})
+
 gulp.task('copy-test-fixtures', () => {
   return gulp.src('test/fixtures/**/*')
   .pipe(gulp.dest('dist/test/fixtures'))
@@ -98,7 +108,21 @@ gulp.task('build-dev-client', ['compile-lib', 'compile-client'], () => {
   .src('dist/client/next-dev.js')
   .pipe(webpack({
     quiet: true,
-    output: { filename: 'next-dev.bundle.js' }
+    output: { filename: 'next-dev.bundle.js' },
+    module: {
+      loaders: [
+        {
+          test: /eval-script\.js$/,
+          exclude: /node_modules/,
+          loader: 'babel',
+          query: {
+            plugins: [
+              'babel-plugin-transform-remove-strict-mode'
+            ]
+          }
+        }
+      ]
+    }
   }))
   .pipe(gulp.dest('dist/client'))
   .pipe(notify('Built dev client'))
@@ -117,7 +141,21 @@ gulp.task('build-release-client', ['compile-lib', 'compile-client'], () => {
         }
       }),
       new webpack.webpack.optimize.UglifyJsPlugin()
-    ]
+    ],
+    module: {
+      loaders: [
+        {
+          test: /eval-script\.js$/,
+          exclude: /node_modules/,
+          loader: 'babel',
+          query: {
+            plugins: [
+              'babel-plugin-transform-remove-strict-mode'
+            ]
+          }
+        }
+      ]
+    }
   }))
   .pipe(gulp.dest('dist/client'))
   .pipe(notify('Built release client'))
@@ -179,6 +217,7 @@ gulp.task('clean-test', () => {
 gulp.task('default', [
   'compile',
   'build',
+  'copy',
   'test',
   'watch'
 ])
@@ -187,6 +226,7 @@ gulp.task('release', (cb) => {
   sequence('clean', [
     'compile',
     'build-release',
+    'copy',
     'test'
   ], 'clean-test', cb)
 })
diff --git a/lib/app.js b/lib/app.js
index 52696b8c..fac1a37f 100644
--- a/lib/app.js
+++ b/lib/app.js
@@ -1,4 +1,5 @@
 import React, { Component, PropTypes } from 'react'
+import { AppContainer } from 'react-hot-loader'
 
 export default class App extends Component {
   static childContextTypes = {
@@ -51,7 +52,15 @@ export default class App extends Component {
 
   render () {
     const { Component, props } = this.state
-    return React.createElement(Component, { ...props })
+
+    if (typeof window === 'undefined') {
+      // workaround for https://github.com/gaearon/react-hot-loader/issues/283
+      return <Component {...props} />
+    }
+
+    return <AppContainer>
+      <Component {...props} />
+    </AppContainer>
   }
 }
 
diff --git a/package.json b/package.json
index 837dfa1c..840dffc9 100644
--- a/package.json
+++ b/package.json
@@ -33,20 +33,25 @@
     "glob-promise": "1.0.6",
     "gulp-benchmark": "^1.1.1",
     "htmlescape": "1.1.1",
+    "loader-utils": "0.2.16",
     "minimist": "1.2.0",
     "mkdirp-then": "1.2.0",
     "mz": "2.4.0",
     "path-match": "1.2.4",
     "react": "15.3.2",
     "react-dom": "15.3.2",
+    "react-hot-loader": "3.0.0-beta.6",
     "resolve": "1.1.7",
     "run-sequence": "1.2.2",
     "send": "0.14.1",
     "url": "0.11.0",
-    "webpack": "1.13.2"
+    "webpack": "1.13.2",
+    "webpack-dev-server": "1.16.2",
+    "write-file-webpack-plugin": "3.3.0"
   },
   "devDependencies": {
     "babel-eslint": "^7.0.0",
+    "babel-plugin-transform-remove-strict-mode": "0.0.2",
     "del": "2.2.2",
     "gulp": "3.9.1",
     "gulp-ava": "0.14.1",
diff --git a/lib/pages/_error.js b/pages/_error.js
similarity index 100%
rename from lib/pages/_error.js
rename to pages/_error.js
diff --git a/server/build/bundle.js b/server/build/bundle.js
deleted file mode 100644
index b8816f37..00000000
--- a/server/build/bundle.js
+++ /dev/null
@@ -1,53 +0,0 @@
-import { resolve, dirname, basename } from 'path'
-import webpack from 'webpack'
-
-export default function bundle (src, dst) {
-  const compiler = webpack({
-    entry: src,
-    output: {
-      path: dirname(dst),
-      filename: basename(dst),
-      libraryTarget: 'commonjs2'
-    },
-    externals: [
-      'react',
-      'react-dom',
-      {
-        [require.resolve('react')]: 'react',
-        [require.resolve('../../lib/link')]: 'next/link',
-        [require.resolve('../../lib/css')]: 'next/css',
-        [require.resolve('../../lib/head')]: 'next/head'
-      }
-    ],
-    resolveLoader: {
-      root: resolve(__dirname, '..', '..', 'node_modules')
-    },
-    plugins: [
-      new webpack.optimize.UglifyJsPlugin({
-        compress: { warnings: false },
-        sourceMap: false
-      })
-    ],
-    module: {
-      preLoaders: [
-        { test: /\.json$/, loader: 'json-loader' }
-      ]
-    }
-  })
-
-  return new Promise((resolve, reject) => {
-    compiler.run((err, stats) => {
-      if (err) return reject(err)
-
-      const jsonStats = stats.toJson()
-      if (jsonStats.errors.length > 0) {
-        const error = new Error(jsonStats.errors[0])
-        error.errors = jsonStats.errors
-        error.warnings = jsonStats.warnings
-        return reject(error)
-      }
-
-      resolve()
-    })
-  })
-}
diff --git a/server/build/index.js b/server/build/index.js
index 1b29f9d0..f8aff5a5 100644
--- a/server/build/index.js
+++ b/server/build/index.js
@@ -1,26 +1,21 @@
-import { resolve } from 'path'
-import glob from 'glob-promise'
-import transpile from './transpile'
-import bundle from './bundle'
+import webpack from './webpack'
 
 export default async function build (dir) {
-  const dstDir = resolve(dir, '.next')
-  const templateDir = resolve(__dirname, '..', '..', 'lib', 'pages')
+  const compiler = await webpack(dir)
 
-  // create `.next/pages/_error.js`
-  // which may be overwriten by the user script, `pages/_error.js`
-  const templatPaths = await glob('**/*.js', { cwd: templateDir })
-  await Promise.all(templatPaths.map(async (p) => {
-    await transpile(resolve(templateDir, p), resolve(dstDir, 'pages', p))
-  }))
+  return new Promise((resolve, reject) => {
+    compiler.run((err, stats) => {
+      if (err) return reject(err)
 
-  const paths = await glob('**/*.js', { cwd: dir, ignore: 'node_modules/**' })
-  await Promise.all(paths.map(async (p) => {
-    await transpile(resolve(dir, p), resolve(dstDir, p))
-  }))
+      const jsonStats = stats.toJson()
+      if (jsonStats.errors.length > 0) {
+        const error = new Error(jsonStats.errors[0])
+        error.errors = jsonStats.errors
+        error.warnings = jsonStats.warnings
+        return reject(error)
+      }
 
-  const pagePaths = await glob('pages/**/*.js', { cwd: dstDir })
-  await Promise.all(pagePaths.map(async (p) => {
-    await bundle(resolve(dstDir, p), resolve(dstDir, '_bundles', p))
-  }))
+      resolve()
+    })
+  })
 }
diff --git a/server/build/loaders/emit-file-loader.js b/server/build/loaders/emit-file-loader.js
new file mode 100644
index 00000000..01ccf39d
--- /dev/null
+++ b/server/build/loaders/emit-file-loader.js
@@ -0,0 +1,16 @@
+import loaderUrils from 'loader-utils'
+
+module.exports = function (content) {
+  this.cacheable()
+
+  const query = loaderUrils.parseQuery(this.query)
+  const name = query.name || '[hash].[ext]'
+  const context = query.context || this.options.context
+  const regExp = query.regExp
+  const opts = { context, content, regExp }
+  const interpolatedName = loaderUrils.interpolateName(this, name, opts)
+
+  this.emitFile(interpolatedName, content)
+
+  return content
+}
diff --git a/server/build/loaders/hot-self-accept-loader.js b/server/build/loaders/hot-self-accept-loader.js
new file mode 100644
index 00000000..d7c63e91
--- /dev/null
+++ b/server/build/loaders/hot-self-accept-loader.js
@@ -0,0 +1,14 @@
+
+module.exports = function (content) {
+  this.cacheable()
+
+  return content + `
+    if (module.hot) {
+      module.hot.accept()
+      if ('idle' !== module.hot.status()) {
+        const Component = module.exports.default || module.exports
+        next.router.notify({ Component })
+      }
+    }
+  `
+}
diff --git a/server/build/transpile.js b/server/build/transpile.js
deleted file mode 100644
index 949692ed..00000000
--- a/server/build/transpile.js
+++ /dev/null
@@ -1,51 +0,0 @@
-import { dirname } from 'path'
-import fs from 'mz/fs'
-import mkdirp from 'mkdirp-then'
-import { transformFile } from 'babel-core'
-import preset2015 from 'babel-preset-es2015'
-import presetReact from 'babel-preset-react'
-import transformAsyncToGenerator from 'babel-plugin-transform-async-to-generator'
-import transformClassProperties from 'babel-plugin-transform-class-properties'
-import transformObjectRestSpread from 'babel-plugin-transform-object-rest-spread'
-import transformRuntime from 'babel-plugin-transform-runtime'
-import moduleAlias from 'babel-plugin-module-alias'
-
-const babelRuntimePath = require.resolve('babel-runtime/package')
-.replace(/[\\\/]package\.json$/, '')
-
-const babelOptions = {
-  presets: [preset2015, presetReact],
-  plugins: [
-    transformAsyncToGenerator,
-    transformClassProperties,
-    transformObjectRestSpread,
-    transformRuntime,
-    [
-      moduleAlias,
-      [
-        { src: `npm:${babelRuntimePath}`, expose: 'babel-runtime' },
-        { src: `npm:${require.resolve('react')}`, expose: 'react' },
-        { src: `npm:${require.resolve('../../lib/link')}`, expose: 'next/link' },
-        { src: `npm:${require.resolve('../../lib/css')}`, expose: 'next/css' },
-        { src: `npm:${require.resolve('../../lib/head')}`, expose: 'next/head' }
-      ]
-    ]
-  ],
-  ast: false
-}
-
-export default async function transpile (src, dst) {
-  const code = await new Promise((resolve, reject) => {
-    transformFile(src, babelOptions, (err, result) => {
-      if (err) return reject(err)
-      resolve(result.code)
-    })
-  })
-
-  await writeFile(dst, code)
-}
-
-async function writeFile (path, data) {
-  await mkdirp(dirname(path))
-  await fs.writeFile(path, data, { encoding: 'utf8', flag: 'w+' })
-}
diff --git a/server/build/webpack.js b/server/build/webpack.js
new file mode 100644
index 00000000..8b15b8d0
--- /dev/null
+++ b/server/build/webpack.js
@@ -0,0 +1,126 @@
+import { resolve, join } from 'path'
+import webpack from 'webpack'
+import glob from 'glob-promise'
+import WriteFilePlugin from 'write-file-webpack-plugin'
+
+export default async function createCompiler (dir, { hotReload = false } = {}) {
+  dir = resolve(dir)
+
+  const pages = await glob('pages/**/*.js', { cwd: dir })
+
+  const entry = {}
+  const defaultEntries = hotReload ? ['webpack/hot/only-dev-server'] : []
+  for (const p of pages) {
+    entry[join('_bundles', p)] = defaultEntries.concat(['./' + p])
+  }
+
+  const errEntry = join('_bundles', 'pages', '_error.js')
+  const defaultErrorPath = resolve(__dirname, '..', '..', 'pages', '_error.js')
+  if (!entry[errEntry]) entry[errEntry] = defaultErrorPath
+
+  const nodeModulesDir = resolve(__dirname, '..', '..', '..', 'node_modules')
+
+  const plugins = [
+    hotReload
+    ? new webpack.HotModuleReplacementPlugin()
+    : new webpack.optimize.UglifyJsPlugin({
+      compress: { warnings: false },
+      sourceMap: false
+    }),
+    new WriteFilePlugin({ log: false })
+  ]
+
+  const babelRuntimePath = require.resolve('babel-runtime/package')
+  .replace(/[\\\/]package\.json$/, '')
+
+  const loaders = [{
+    test: /\.js$/,
+    loader: 'emit-file-loader',
+    include: [
+      dir,
+      resolve(__dirname, '..', '..', 'pages')
+    ],
+    exclude: /node_modules/,
+    query: {
+      name: '[path][name].[ext]'
+    }
+  }, {
+    test: /\.js$/,
+    loader: 'babel',
+    include: [
+      dir,
+      resolve(__dirname, '..', '..', 'pages')
+    ],
+    exclude: /node_modules/,
+    query: {
+      presets: ['es2015', 'react'],
+      plugins: [
+        'transform-async-to-generator',
+        'transform-object-rest-spread',
+        'transform-class-properties',
+        'transform-runtime',
+        [
+          'module-alias',
+          [
+            { src: `npm:${babelRuntimePath}`, expose: 'babel-runtime' },
+            { src: `npm:${require.resolve('react')}`, expose: 'react' },
+            { src: `npm:${require.resolve('../../lib/link')}`, expose: 'next/link' },
+            { src: `npm:${require.resolve('../../lib/css')}`, expose: 'next/css' },
+            { src: `npm:${require.resolve('../../lib/head')}`, expose: 'next/head' }
+          ]
+        ]
+      ]
+    }
+  }]
+  .concat(hotReload ? [{
+    test: /\.js$/,
+    loader: 'hot-self-accept-loader',
+    include: resolve(dir, 'pages')
+  }] : [])
+
+  return webpack({
+    context: dir,
+    entry,
+    output: {
+      path: resolve(dir, '.next'),
+      filename: '[name]',
+      libraryTarget: 'commonjs2',
+      publicPath: hotReload ? 'http://localhost:3030/' : null
+    },
+    externals: [
+      'react',
+      'react-dom',
+      {
+        [require.resolve('react')]: 'react',
+        [require.resolve('../../lib/link')]: 'next/link',
+        [require.resolve('../../lib/css')]: 'next/css',
+        [require.resolve('../../lib/head')]: 'next/head'
+      }
+    ],
+    resolve: {
+      root: [
+        nodeModulesDir,
+        resolve(dir, 'node_modules')
+      ]
+    },
+    resolveLoader: {
+      root: [
+        nodeModulesDir,
+        resolve(__dirname, 'loaders')
+      ]
+    },
+    plugins,
+    module: {
+      preLoaders: [
+        { test: /\.json$/, loader: 'json-loader' }
+      ],
+      loaders
+    },
+    customInterpolateName: function (url, name, opts) {
+      if (defaultErrorPath === this.resourcePath) {
+        return 'pages/_error.js'
+      }
+      return url
+    }
+  })
+}
diff --git a/server/hot-reloader.js b/server/hot-reloader.js
new file mode 100644
index 00000000..a697e0dd
--- /dev/null
+++ b/server/hot-reloader.js
@@ -0,0 +1,56 @@
+import WebpackDevServer from 'webpack-dev-server'
+import read from './read'
+
+export default class HotReloader {
+  constructor (compiler) {
+    this.server = new WebpackDevServer(compiler, {
+      publicPath: '/',
+      hot: true,
+      noInfo: true,
+      clientLogLevel: 'warning'
+    })
+
+    compiler.plugin('after-emit', (compilation, callback) => {
+      const { assets } = compilation
+      for (const f of Object.keys(assets)) {
+        const source = assets[f]
+        // delete updated file caches
+        delete require.cache[source.existsAt]
+        delete read.cache[source.existsAt]
+      }
+      callback()
+    })
+  }
+
+  async start () {
+    await this.waitBuild()
+    await this.listen()
+  }
+
+  async waitBuild () {
+    const stats = await new Promise((resolve) => {
+      this.server.middleware.waitUntilValid(resolve)
+    })
+
+    const jsonStats = stats.toJson()
+    if (jsonStats.errors.length > 0) {
+      const err = new Error(jsonStats.errors[0])
+      err.errors = jsonStats.errors
+      err.warnings = jsonStats.warnings
+      throw err
+    }
+  }
+
+  listen () {
+    return new Promise((resolve, reject) => {
+      this.server.listen(3030, (err) => {
+        if (err) return reject(err)
+        resolve()
+      })
+    })
+  }
+
+  get fileSystem () {
+    return this.server.middleware.fileSystem
+  }
+}
diff --git a/server/index.js b/server/index.js
index 70d441a4..f7f67c0e 100644
--- a/server/index.js
+++ b/server/index.js
@@ -5,9 +5,10 @@ import Router from './router'
 import { render, renderJSON } from './render'
 
 export default class Server {
-  constructor ({ dir = '.', dev = false }) {
+  constructor ({ dir = '.', dev = false, hotReloader }) {
     this.dir = resolve(dir)
     this.dev = dev
+    this.hotReloader = hotReloader
     this.router = new Router()
 
     this.http = http.createServer((req, res) => {
@@ -39,6 +40,10 @@ export default class Server {
       await this.render(req, res)
     })
 
+    if (this.hotReloader) {
+      await this.hotReloader.start()
+    }
+
     await new Promise((resolve, reject) => {
       this.http.listen(port, (err) => {
         if (err) return reject(err)
diff --git a/server/read.js b/server/read.js
index 747207cc..d39d1fdd 100644
--- a/server/read.js
+++ b/server/read.js
@@ -1,8 +1,6 @@
 import fs from 'mz/fs'
 import resolve from './resolve'
 
-const cache = {}
-
 /**
  * resolve a file like `require.resolve`,
  * and read and cache the file content
@@ -10,13 +8,16 @@ const cache = {}
 
 async function read (path) {
   const f = await resolve(path)
-  let promise = cache[f]
-  if (!promise) {
-    promise = cache[f] = fs.readFile(f, 'utf8')
+  if (cache.hasOwnProperty(f)) {
+    return cache[f]
   }
-  return promise
+
+  const data = fs.readFile(f, 'utf8')
+  cache[f] = data
+  return data
 }
 
-module.exports = read
+export default read
+export const cache = {}
 
-exports.cache = cache
+read.cache = cache
diff --git a/server/render.js b/server/render.js
index 8bdd7752..7e14fe7b 100644
--- a/server/render.js
+++ b/server/render.js
@@ -2,7 +2,7 @@ import { resolve } from 'path'
 import { parse } from 'url'
 import { createElement } from 'react'
 import { renderToString, renderToStaticMarkup } from 'react-dom/server'
-import requireResolve from './resolve'
+import requireModule from './require'
 import read from './read'
 import Router from '../lib/router'
 import Document from '../lib/document'
@@ -16,8 +16,7 @@ export async function render (url, ctx = {}, {
   staticMarkup = false
 } = {}) {
   const path = getPath(url)
-  const p = await requireResolve(resolve(dir, '.next', 'pages', path))
-  const mod = require(p)
+  const mod = await requireModule(resolve(dir, '.next', 'pages', path))
   const Component = mod.default || mod
 
   const props = await (Component.getInitialProps ? Component.getInitialProps(ctx) : {})
diff --git a/server/require.js b/server/require.js
new file mode 100644
index 00000000..3ca13f32
--- /dev/null
+++ b/server/require.js
@@ -0,0 +1,6 @@
+import resolve from './resolve'
+
+export default async function requireModule (path) {
+  const f = await resolve(path)
+  return require(f)
+}
diff --git a/server/resolve.js b/server/resolve.js
index 6b56fed0..03ad5d7d 100644
--- a/server/resolve.js
+++ b/server/resolve.js
@@ -4,9 +4,8 @@ export default function resolve (id, opts) {
   return new Promise((resolve, reject) => {
     _resolve(id, opts, (err, path) => {
       if (err) {
-        const e = new Error(err)
-        e.code = 'ENOENT'
-        return reject(e)
+        err.code = 'ENOENT'
+        return reject(err)
       }
       resolve(path)
     })