diff --git a/.changeset/afraid-lies-explain.md b/.changeset/afraid-lies-explain.md
new file mode 100644
index 000000000..3f304b95f
--- /dev/null
+++ b/.changeset/afraid-lies-explain.md
@@ -0,0 +1,7 @@
+---
+"@callstack/repack": major
+---
+
+BREAKING: `config.devtool` is now used to control the behaviour of generated sourcemaps. To enable sourcemaps again, please remove `devtool: false` from your config or set it explicitly to one of valid values (e.g. `source-map`).
+
+Introduced a dedicated `SourceMapPlugin` that consolidates sourcemap configuration and improves sourcemap handling by relying on the `devtool` option. The plugin is part of the Repack plugin and does not need to be added separately.
diff --git a/apps/tester-app/rspack.config.mjs b/apps/tester-app/rspack.config.mjs
index fdeefbfd9..768aef0d9 100644
--- a/apps/tester-app/rspack.config.mjs
+++ b/apps/tester-app/rspack.config.mjs
@@ -27,7 +27,6 @@ export default (env) => {
 
   return {
     mode,
-    devtool: false,
     context,
     entry: './index.js',
     resolve: {
diff --git a/apps/tester-app/webpack.config.mjs b/apps/tester-app/webpack.config.mjs
index 3f524f5dc..79369d689 100644
--- a/apps/tester-app/webpack.config.mjs
+++ b/apps/tester-app/webpack.config.mjs
@@ -27,7 +27,6 @@ export default (env) => {
 
   return {
     mode,
-    devtool: false,
     context,
     cache: process.env.USE_CACHE
       ? {
diff --git a/apps/tester-federation-v2/configs/rspack.host-app.mjs b/apps/tester-federation-v2/configs/rspack.host-app.mjs
index cf9f8490a..98e29fb8e 100644
--- a/apps/tester-federation-v2/configs/rspack.host-app.mjs
+++ b/apps/tester-federation-v2/configs/rspack.host-app.mjs
@@ -23,7 +23,6 @@ export default (env) => {
 
   return {
     mode,
-    devtool: false,
     context,
     entry: './src/host/index.js',
     resolve: {
diff --git a/apps/tester-federation-v2/configs/rspack.mini-app.mjs b/apps/tester-federation-v2/configs/rspack.mini-app.mjs
index ffdcf2aa1..2bedf8f9a 100644
--- a/apps/tester-federation-v2/configs/rspack.mini-app.mjs
+++ b/apps/tester-federation-v2/configs/rspack.mini-app.mjs
@@ -20,7 +20,6 @@ export default (env) => {
 
   return {
     mode,
-    devtool: false,
     context,
     entry: './src/mini/index.js',
     resolve: {
diff --git a/apps/tester-federation-v2/configs/webpack.host-app.mjs b/apps/tester-federation-v2/configs/webpack.host-app.mjs
index 030bd2da0..9581ec7a3 100644
--- a/apps/tester-federation-v2/configs/webpack.host-app.mjs
+++ b/apps/tester-federation-v2/configs/webpack.host-app.mjs
@@ -25,7 +25,6 @@ export default (env) => {
 
   return {
     mode,
-    devtool: false,
     context,
     entry: './src/host/index.js',
     resolve: {
diff --git a/apps/tester-federation-v2/configs/webpack.mini-app.mjs b/apps/tester-federation-v2/configs/webpack.mini-app.mjs
index 6fef51f68..24336e28e 100644
--- a/apps/tester-federation-v2/configs/webpack.mini-app.mjs
+++ b/apps/tester-federation-v2/configs/webpack.mini-app.mjs
@@ -22,7 +22,6 @@ export default (env) => {
 
   return {
     mode,
-    devtool: false,
     context,
     entry: './src/mini/index.js',
     resolve: {
diff --git a/apps/tester-federation/configs/rspack.host-app.mjs b/apps/tester-federation/configs/rspack.host-app.mjs
index be88c4301..b6a883516 100644
--- a/apps/tester-federation/configs/rspack.host-app.mjs
+++ b/apps/tester-federation/configs/rspack.host-app.mjs
@@ -25,7 +25,6 @@ export default (env) => {
   /** @type {import('@rspack/core').Configuration} */
   const config = {
     mode,
-    devtool: false,
     context,
     entry: './src/host/index.js',
     resolve: {
diff --git a/apps/tester-federation/configs/rspack.mini-app.mjs b/apps/tester-federation/configs/rspack.mini-app.mjs
index 58297fda4..a8d2b9180 100644
--- a/apps/tester-federation/configs/rspack.mini-app.mjs
+++ b/apps/tester-federation/configs/rspack.mini-app.mjs
@@ -22,7 +22,6 @@ export default (env) => {
   /** @type {import('@rspack/core').Configuration} */
   const config = {
     mode,
-    devtool: false,
     context,
     entry: './src/mini/index.js',
     resolve: {
diff --git a/apps/tester-federation/configs/webpack.host-app.mjs b/apps/tester-federation/configs/webpack.host-app.mjs
index 72ff6259f..4fd4994f4 100644
--- a/apps/tester-federation/configs/webpack.host-app.mjs
+++ b/apps/tester-federation/configs/webpack.host-app.mjs
@@ -25,7 +25,6 @@ export default (env) => {
 
   return {
     mode,
-    devtool: false,
     context,
     entry: './src/host/index.js',
     resolve: {
diff --git a/apps/tester-federation/configs/webpack.mini-app.mjs b/apps/tester-federation/configs/webpack.mini-app.mjs
index 6c4a64bed..975503728 100644
--- a/apps/tester-federation/configs/webpack.mini-app.mjs
+++ b/apps/tester-federation/configs/webpack.mini-app.mjs
@@ -22,7 +22,6 @@ export default (env) => {
 
   return {
     mode,
-    devtool: false,
     context,
     entry: './src/mini/index.js',
     resolve: {
diff --git a/packages/repack/src/commands/common/config/getRepackConfig.ts b/packages/repack/src/commands/common/config/getRepackConfig.ts
index 340e68117..641e19438 100644
--- a/packages/repack/src/commands/common/config/getRepackConfig.ts
+++ b/packages/repack/src/commands/common/config/getRepackConfig.ts
@@ -1,5 +1,6 @@
 export function getRepackConfig() {
   return {
+    devtool: 'source-map',
     output: {
       publicPath: 'noop:///',
     },
diff --git a/packages/repack/src/plugins/DevelopmentPlugin.ts b/packages/repack/src/plugins/DevelopmentPlugin.ts
index 94eda8987..bd8555d01 100644
--- a/packages/repack/src/plugins/DevelopmentPlugin.ts
+++ b/packages/repack/src/plugins/DevelopmentPlugin.ts
@@ -127,19 +127,6 @@ export class DevelopmentPlugin implements RspackPluginInstance {
       // setup HMR
       new compiler.webpack.HotModuleReplacementPlugin().apply(compiler);
 
-      // setup HMR source maps
-      new compiler.webpack.SourceMapDevToolPlugin({
-        test: /\.hot-update\.js$/,
-        filename: '[file].map',
-        append: `//# sourceMappingURL=[url]?platform=${this.config.platform}`,
-        module: true,
-        columns: true,
-        noSources: false,
-        namespace:
-          compiler.options.output.devtoolNamespace ??
-          compiler.options.output.uniqueName,
-      }).apply(compiler);
-
       // setup React Refresh manually instead of using the official plugin
       // to avoid issues with placement of reactRefreshEntry
       new compiler.webpack.ProvidePlugin({
diff --git a/packages/repack/src/plugins/RepackPlugin.ts b/packages/repack/src/plugins/RepackPlugin.ts
index 2e224e82e..2f6304a1a 100644
--- a/packages/repack/src/plugins/RepackPlugin.ts
+++ b/packages/repack/src/plugins/RepackPlugin.ts
@@ -6,6 +6,7 @@ import { LoggerPlugin, type LoggerPluginConfig } from './LoggerPlugin.js';
 import { NativeEntryPlugin } from './NativeEntryPlugin.js';
 import { OutputPlugin, type OutputPluginConfig } from './OutputPlugin/index.js';
 import { RepackTargetPlugin } from './RepackTargetPlugin/index.js';
+import { SourceMapPlugin } from './SourceMapPlugin.js';
 
 /**
  * {@link RepackPlugin} configuration options.
@@ -145,20 +146,8 @@ export class RepackPlugin implements RspackPluginInstance {
     }).apply(compiler);
 
     if (this.config.sourceMaps) {
-      // TODO Fix sourcemap directory structure
-      // Right now its very messy and not every node module is inside of the node module
-      // like React Devtools backend etc or some symilinked module appear with relative path
-      // We should normalize this through a custom handler and provide an output similar to Metro
-      new compiler.webpack.SourceMapDevToolPlugin({
-        test: /\.(js)?bundle$/,
-        filename: '[file].map',
-        append: `//# sourceMappingURL=[url]?platform=${this.config.platform}`,
-        module: true,
-        columns: true,
-        noSources: false,
-        namespace:
-          compiler.options.output.devtoolNamespace ??
-          compiler.options.output.uniqueName,
+      new SourceMapPlugin({
+        platform: this.config.platform,
       }).apply(compiler);
     }
 
diff --git a/packages/repack/src/plugins/SourceMapPlugin.ts b/packages/repack/src/plugins/SourceMapPlugin.ts
new file mode 100644
index 000000000..1421f7191
--- /dev/null
+++ b/packages/repack/src/plugins/SourceMapPlugin.ts
@@ -0,0 +1,69 @@
+import type { Compiler, RspackPluginInstance } from '@rspack/core';
+import { ConfigurationError } from './utils/ConfigurationError.js';
+
+interface SourceMapPluginConfig {
+  platform?: string;
+}
+
+export class SourceMapPlugin implements RspackPluginInstance {
+  constructor(private config: SourceMapPluginConfig = {}) {}
+
+  apply(compiler: Compiler) {
+    // if devtool is explicitly set to false, skip generating source maps
+    if (!compiler.options.devtool) {
+      return;
+    }
+
+    const format = compiler.options.devtool;
+    // disable builtin sourcemap generation
+    compiler.options.devtool = false;
+
+    const platform = this.config.platform ?? (compiler.name as string);
+
+    // explicitly fallback to uniqueName if devtoolNamespace is not set
+    const devtoolNamespace =
+      compiler.options.output.devtoolNamespace ??
+      compiler.options.output.uniqueName;
+    const devtoolModuleFilenameTemplate =
+      compiler.options.output.devtoolModuleFilenameTemplate;
+    const devtoolFallbackModuleFilenameTemplate =
+      compiler.options.output.devtoolFallbackModuleFilenameTemplate;
+
+    if (format.startsWith('eval')) {
+      throw new ConfigurationError(
+        '[RepackSourceMapPlugin] Eval source maps are not supported. ' +
+          'Please use a different setting for `config.devtool`.'
+      );
+    }
+
+    if (format.startsWith('inline')) {
+      throw new ConfigurationError(
+        '[RepackSourceMapPlugin] Inline source maps are not supported. ' +
+          'Please use a different setting for `config.devtool`.'
+      );
+    }
+
+    const hidden = format.includes('hidden');
+    const cheap = format.includes('cheap');
+    const moduleMaps = format.includes('module');
+    const noSources = format.includes('nosources');
+
+    // TODO Fix sourcemap directory structure
+    // Right now its very messy and not every node module is inside of the node module
+    // like React Devtools backend etc or some symilinked module appear with relative path
+    // We should normalize this through a custom handler and provide an output similar to Metro
+    new compiler.webpack.SourceMapDevToolPlugin({
+      test: /\.([cm]?jsx?|bundle)$/,
+      filename: '[file].map',
+      moduleFilenameTemplate: devtoolModuleFilenameTemplate,
+      fallbackModuleFilenameTemplate: devtoolFallbackModuleFilenameTemplate,
+      append: hidden
+        ? false
+        : `//# sourceMappingURL=[url]?platform=${platform}`,
+      module: moduleMaps ? true : !cheap,
+      columns: !cheap,
+      noSources,
+      namespace: devtoolNamespace,
+    }).apply(compiler);
+  }
+}
diff --git a/packages/repack/src/plugins/utils/ConfigurationError.ts b/packages/repack/src/plugins/utils/ConfigurationError.ts
new file mode 100644
index 000000000..0dde41fc2
--- /dev/null
+++ b/packages/repack/src/plugins/utils/ConfigurationError.ts
@@ -0,0 +1,13 @@
+import { VERBOSE_ENV_KEY } from '../../env.js';
+
+export class ConfigurationError extends Error {
+  constructor(message: string) {
+    super(message);
+    this.name = 'ConfigurationError';
+
+    // hide stack trace in non-verbose mode
+    if (!process.env[VERBOSE_ENV_KEY]) {
+      this.stack = undefined;
+    }
+  }
+}
diff --git a/templates_v5/rspack.config.cjs b/templates_v5/rspack.config.cjs
index 2dc199463..63cb1cdef 100644
--- a/templates_v5/rspack.config.cjs
+++ b/templates_v5/rspack.config.cjs
@@ -35,11 +35,6 @@ module.exports = (env) => {
 
   return {
     mode,
-    /**
-     * This should be always `false`, since the Source Map configuration is done
-     * by `SourceMapDevToolPlugin`.
-     */
-    devtool: false,
     context,
     entry,
     resolve: {
diff --git a/templates_v5/rspack.config.mjs b/templates_v5/rspack.config.mjs
index 9d139d560..2c93eda6e 100644
--- a/templates_v5/rspack.config.mjs
+++ b/templates_v5/rspack.config.mjs
@@ -39,11 +39,6 @@ export default (env) => {
 
   return {
     mode,
-    /**
-     * This should be always `false`, since the Source Map configuration is done
-     * by `SourceMapDevToolPlugin`.
-     */
-    devtool: false,
     context,
     entry,
     resolve: {
diff --git a/templates_v5/webpack.config.cjs b/templates_v5/webpack.config.cjs
index 3c459cd51..c9c0388a5 100644
--- a/templates_v5/webpack.config.cjs
+++ b/templates_v5/webpack.config.cjs
@@ -46,11 +46,6 @@ module.exports = (env) => {
 
   return {
     mode,
-    /**
-     * This should be always `false`, since the Source Map configuration is done
-     * by `SourceMapDevToolPlugin`.
-     */
-    devtool: false,
     context,
     /**
      * `getInitializationEntries` will return necessary entries with setup and initialization code.
diff --git a/templates_v5/webpack.config.mjs b/templates_v5/webpack.config.mjs
index 48a6784c2..77b335279 100644
--- a/templates_v5/webpack.config.mjs
+++ b/templates_v5/webpack.config.mjs
@@ -50,11 +50,6 @@ export default (env) => {
 
   return {
     mode,
-    /**
-     * This should be always `false`, since the Source Map configuration is done
-     * by `SourceMapDevToolPlugin`.
-     */
-    devtool: false,
     context,
     entry,
     resolve: {