diff --git a/.github/workflows/ci.yml b/.github/workflows/ci.yml
index e5b227224b4..d534abb877d 100644
--- a/.github/workflows/ci.yml
+++ b/.github/workflows/ci.yml
@@ -12,15 +12,26 @@ on:
     branches:
       - main
 
-jobs:
-  build:
-    runs-on: ${{ matrix.os }}
+# https://github.com/vitejs/vite/blob/main/.github/workflows/ci.yml
+env:
+  # 7 GiB by default on GitHub, setting to 6 GiB
+  # https://docs.github.com/en/actions/using-github-hosted-runners/about-github-hosted-runners#supported-runners-and-hardware-resources
+  NODE_OPTIONS: --max-old-space-size=6144
+  # install playwright binary manually (because pnpm only runs install script once)
+  PLAYWRIGHT_SKIP_BROWSER_DOWNLOAD: "1"
 
-    strategy:
-      matrix:
-        os: [ubuntu-latest]
-        node: [16]
 
+# Remove default permissions of GITHUB_TOKEN for security
+# https://docs.github.com/en/actions/using-jobs/assigning-permissions-to-jobs
+permissions: {}
+
+concurrency:
+  group: ${{ github.workflow }}-${{ github.event.number || github.sha }}
+  cancel-in-progress: ${{ github.event_name != 'push' }}
+
+jobs:
+  build:
+    runs-on: ubuntu-latest
     timeout-minutes: 10
 
     steps:
@@ -28,7 +39,7 @@ jobs:
       - run: corepack enable
       - uses: actions/setup-node@v3
         with:
-          node-version: ${{ matrix.node }}
+          node-version: 18
           cache: "pnpm"
 
       - name: Install dependencies
@@ -37,20 +48,18 @@ jobs:
       - name: Build
         run: pnpm build
 
+      - name: Test (types)
+        run: pnpm test:types
+
       - name: Cache dist
-        uses: actions/cache@v3
+        uses: actions/upload-artifact@v3
         with:
+          retention-days: 5
+          name: dist
           path: packages/*/dist
-          key: ${{ matrix.os }}-node-v${{ matrix.node }}-${{ github.sha }}
 
   lint:
-    runs-on: ${{ matrix.os }}
-
-    strategy:
-      matrix:
-        os: [ubuntu-latest]
-        node: [16]
-
+    runs-on: ubuntu-latest
     timeout-minutes: 10
 
     steps:
@@ -58,7 +67,7 @@ jobs:
       - run: corepack enable
       - uses: actions/setup-node@v3
         with:
-          node-version: ${{ matrix.node }}
+          node-version: 18
           cache: "pnpm"
 
       - name: Install dependencies
@@ -67,40 +76,19 @@ jobs:
       - name: Lint
         run: pnpm lint
 
-  typecheck:
-    runs-on: ${{ matrix.os }}
-
-    strategy:
-      matrix:
-        os: [ubuntu-latest]
-        node: [16]
-
-    timeout-minutes: 10
-
-    steps:
-      - uses: actions/checkout@v3
-      - run: corepack enable
-      - uses: actions/setup-node@v3
-        with:
-          node-version: ${{ matrix.node }}
-          cache: "pnpm"
-
-      - name: Install dependencies
-        run: pnpm install
-
-      - name: Build (stub)
-        run: pnpm build:stub
-
-      - name: Typecheck
-        run: pnpm typecheck
-
   test-fixtures:
     runs-on: ${{ matrix.os }}
 
     strategy:
+      fail-fast: false
       matrix:
         os: [ubuntu-latest, windows-latest]
+        env: ['dev', 'built']
+        builder: ['vite', 'webpack']
         node: [16]
+        exclude:
+          - env: 'dev'
+            builder: 'webpack'
 
     timeout-minutes: 10
 
@@ -115,22 +103,28 @@ jobs:
       - name: Install dependencies
         run: pnpm install
 
-      # https://github.com/vitejs/vite/blob/main/.github/workflows/ci.yml#L62
       # Install playwright's binary under custom directory to cache
-      - name: Set Playwright path
+      - name: (non-windows) Set Playwright path and Get playwright version
         if: runner.os != 'Windows'
-        run: echo "PLAYWRIGHT_BROWSERS_PATH=$HOME/.cache/playwright-bin" >> $GITHUB_ENV
-      - name: Set Playwright path (windows)
+        run: |
+          echo "PLAYWRIGHT_BROWSERS_PATH=$HOME/.cache/playwright-bin" >> $GITHUB_ENV
+          PLAYWRIGHT_VERSION="$(pnpm ls --depth 0 --json -w playwright | jq --raw-output '.[0].unsavedDependencies["playwright"].version')"
+          echo "PLAYWRIGHT_VERSION=$PLAYWRIGHT_VERSION" >> $GITHUB_ENV
+
+      - name: (windows) Set Playwright path and Get playwright version
         if: runner.os == 'Windows'
-        run: echo "PLAYWRIGHT_BROWSERS_PATH=$HOME\.cache\playwright-bin" >> $env:GITHUB_ENV
+        run: |
+          echo "PLAYWRIGHT_BROWSERS_PATH=$HOME\.cache\playwright-bin" >> $env:GITHUB_ENV
+          $env:PLAYWRIGHT_VERSION="$(pnpm ls --depth 0 --json -w playwright | jq --raw-output '.[0].unsavedDependencies[\"playwright\"].version')"
+          echo "PLAYWRIGHT_VERSION=$env:PLAYWRIGHT_VERSION" >> $env:GITHUB_ENV
 
       - name: Cache Playwright's binary
         uses: actions/cache@v3
         with:
-          # Playwright removes unused browsers automatically
-          # So does not need to add playwright version to key
-          key: ${{ runner.os }}-playwright-bin-v1
+          key: ${{ runner.os }}-playwright-bin-v1-${{ env.PLAYWRIGHT_VERSION }}
           path: ${{ env.PLAYWRIGHT_BROWSERS_PATH }}
+          restore-keys: |
+            ${{ runner.os }}-playwright-bin-v1-
 
       - name: Install Playwright
         # does not need to explicitly set chromium after https://github.com/microsoft/playwright/issues/14862 is solved
@@ -139,96 +133,23 @@ jobs:
       - name: Build (stub)
         run: pnpm build:stub
 
+      - name: Typecheck
+        run: pnpm typecheck
+        env:
+          TEST_ENV: ${{ matrix.env }}
+          TEST_BUILDER: ${{ matrix.builder }}
+
       - name: Test (unit)
         run: pnpm test:unit
+        env:
+          TEST_ENV: ${{ matrix.env }}
+          TEST_BUILDER: ${{ matrix.builder }}
 
       - name: Test (fixtures)
         run: pnpm test:fixtures
-
-      - name: Test (fixtures with dev)
-        run: pnpm test:fixtures:dev
         env:
-          NODE_OPTIONS: --max-old-space-size=8192
-
-  test-fixtures-webpack:
-    runs-on: ${{ matrix.os }}
-
-    strategy:
-      matrix:
-        os: [ubuntu-latest, windows-latest]
-        node: [16]
-
-    timeout-minutes: 10
-
-    steps:
-      - uses: actions/checkout@v3
-      - run: corepack enable
-      - uses: actions/setup-node@v3
-        with:
-          node-version: ${{ matrix.node }}
-          cache: "pnpm"
-
-      - name: Install dependencies
-        run: pnpm install
-
-      # https://github.com/vitejs/vite/blob/main/.github/workflows/ci.yml#L62
-      # Install playwright's binary under custom directory to cache
-      - name: Set Playwright path (non-windows)
-        if: runner.os != 'Windows'
-        run: echo "PLAYWRIGHT_BROWSERS_PATH=$HOME/.cache/playwright-bin" >> $GITHUB_ENV
-      - name: Set Playwright path (windows)
-        if: runner.os == 'Windows'
-        run: echo "PLAYWRIGHT_BROWSERS_PATH=$HOME\.cache\playwright-bin" >> $env:GITHUB_ENV
-
-      - name: Cache Playwright's binary
-        uses: actions/cache@v3
-        with:
-          # Playwright removes unused browsers automatically
-          # So does not need to add playwright version to key
-          key: ${{ runner.os }}-playwright-bin-v1
-          path: ${{ env.PLAYWRIGHT_BROWSERS_PATH }}
-
-      - name: Install Playwright
-        # does not need to explicitly set chromium after https://github.com/microsoft/playwright/issues/14862 is solved
-        run: pnpm playwright install chromium
-
-      - name: Build (stub)
-        run: pnpm build:stub
-
-      - name: Test (fixtures)
-        run: pnpm test:fixtures:webpack
-
-  test-types:
-    needs:
-      - build
-    runs-on: ${{ matrix.os }}
-
-    strategy:
-      matrix:
-        os: [ubuntu-latest]
-        node: [16]
-
-    timeout-minutes: 10
-
-    steps:
-      - uses: actions/checkout@v3
-      - run: corepack enable
-      - uses: actions/setup-node@v3
-        with:
-          node-version: ${{ matrix.node }}
-          cache: "pnpm"
-
-      - name: Install dependencies
-        run: pnpm install
-
-      - name: Restore dist cache
-        uses: actions/cache@v3
-        with:
-          path: packages/*/dist
-          key: ${{ matrix.os }}-node-v${{ matrix.node }}-${{ github.sha }}
-
-      - name: Test (types)
-        run: pnpm test:types
+          TEST_ENV: ${{ matrix.env }}
+          TEST_BUILDER: ${{ matrix.builder }}
 
   build-release:
     if: |
@@ -240,8 +161,6 @@ jobs:
       - lint
       - build
       - test-fixtures
-      - test-fixtures-webpack
-      - test-types
     runs-on: ${{ matrix.os }}
 
     strategy:
@@ -263,10 +182,10 @@ jobs:
         run: pnpm install
 
       - name: Restore dist cache
-        uses: actions/cache@v3
+        uses: actions/download-artifact@v3
         with:
-          path: packages/*/dist
-          key: ${{ matrix.os }}-node-v${{ matrix.node }}-${{ github.sha }}
+          name: dist
+          path: packages
 
       - name: Release Edge
         run: ./scripts/release-edge.sh
diff --git a/.nuxtrc b/.nuxtrc
new file mode 100644
index 00000000000..f54e61d4ffa
--- /dev/null
+++ b/.nuxtrc
@@ -0,0 +1 @@
+telemetry.enabled=false
diff --git a/package.json b/package.json
index b47bd6038c8..a9a5ce021e6 100644
--- a/package.json
+++ b/package.json
@@ -14,14 +14,14 @@
     "lint": "eslint --ext .vue,.ts,.js,.mjs .",
     "lint:docs": "markdownlint ./docs/content/1.docs && case-police 'docs/content/1.docs/**/*.md'",
     "lint:docs:fix": "markdownlint ./docs/content/1.docs --fix && case-police 'docs/content/1.docs/**/*.md' --fix",
-    "nuxi": "NUXT_TELEMETRY_DISABLED=1 JITI_ESM_RESOLVE=1 nuxi",
-    "nuxt": "NUXT_TELEMETRY_DISABLED=1 JITI_ESM_RESOLVE=1 nuxi",
+    "nuxi": "JITI_ESM_RESOLVE=1 nuxi",
+    "nuxt": "JITI_ESM_RESOLVE=1 nuxi",
     "play": "pnpm nuxi dev playground",
     "play:build": "pnpm nuxi build playground",
     "play:preview": "pnpm nuxi preview playground",
-    "test:fixtures": "NUXT_TELEMETRY_DISABLED=1 pnpm nuxi prepare test/fixtures/basic && JITI_ESM_RESOLVE=1 vitest run --dir test",
-    "test:fixtures:dev": "NUXT_TELEMETRY_DISABLED=1 NUXT_TEST_DEV=true pnpm test:fixtures",
-    "test:fixtures:webpack": "NUXT_TELEMETRY_DISABLED=1 TEST_WITH_WEBPACK=1 pnpm test:fixtures",
+    "test:fixtures": "pnpm nuxi prepare test/fixtures/basic && JITI_ESM_RESOLVE=1 vitest run --dir test",
+    "test:fixtures:dev": "TEST_ENV=dev pnpm test:fixtures",
+    "test:fixtures:webpack": "TEST_BUILDER=webpack pnpm test:fixtures",
     "test:types": "pnpm nuxi prepare test/fixtures/basic && cd test/fixtures/basic && npx vue-tsc --noEmit",
     "test:unit": "JITI_ESM_RESOLVE=1 vitest run --dir packages",
     "typecheck": "tsc --noEmit"
diff --git a/test/basic.test.ts b/test/basic.test.ts
index a49028e5f38..775fb61f3ae 100644
--- a/test/basic.test.ts
+++ b/test/basic.test.ts
@@ -1,21 +1,27 @@
 import { fileURLToPath } from 'node:url'
-import { promises as fsp } from 'node:fs'
 import { describe, expect, it } from 'vitest'
 import { joinURL, withQuery } from 'ufo'
 import { isWindows } from 'std-env'
-import { join, normalize } from 'pathe'
+import { normalize } from 'pathe'
 // eslint-disable-next-line import/order
 import { setup, fetch, $fetch, startServer, isDev, createPage, url } from '@nuxt/test-utils'
 
 import type { NuxtIslandResponse } from '../packages/nuxt/src/core/runtime/nitro/renderer'
-import { expectNoClientErrors, fixturesDir, expectWithPolling, renderPage, withLogs } from './utils'
+import { expectNoClientErrors, expectWithPolling, renderPage, withLogs } from './utils'
+
+const isWebpack = process.env.TEST_BUILDER === 'webpack'
 
-const fixturePath = join(fixturesDir, 'basic')
 await setup({
-  rootDir: fixturePath,
+  rootDir: fileURLToPath(new URL('./fixtures/basic', import.meta.url)),
+  dev: process.env.TEST_ENV === 'dev',
   server: true,
   browser: true,
-  setupTimeout: (isWindows ? 240 : 120) * 1000
+  setupTimeout: (isWindows ? 240 : 120) * 1000,
+  nuxtConfig: {
+    builder: isWebpack ? 'webpack' : 'vite',
+    buildDir: process.env.NITRO_BUILD_DIR,
+    nitro: { output: { dir: process.env.NITRO_OUTPUT_DIR } }
+  }
 })
 
 describe('server api', () => {
@@ -543,7 +549,7 @@ describe('deferred app suspense resolve', () => {
       await page.waitForLoadState('networkidle')
 
       // Wait for all pending micro ticks to be cleared in case hydration haven't finished yet.
-      await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 0)))
+      await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 10)))
 
       const hydrationLogs = logs.filter(log => log.includes('isHydrating'))
       expect(hydrationLogs.length).toBe(3)
@@ -571,7 +577,7 @@ describe('page key', () => {
 
         // Wait for all pending micro ticks to be cleared,
         // so we are not resolved too early when there are repeated page loading
-        await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 0)))
+        await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 10)))
 
         expect(logs.filter(l => l.includes('Child Setup')).length).toBe(1)
       })
@@ -590,7 +596,7 @@ describe('page key', () => {
 
         // Wait for all pending micro ticks to be cleared,
         // so we are not resolved too early when there are repeated page loading
-        await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 0)))
+        await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 10)))
 
         expect(logs.filter(l => l.includes('Child Setup')).length).toBe(2)
       })
@@ -611,7 +617,7 @@ describe('layout change not load page twice', () => {
 
       // Wait for all pending micro ticks to be cleared,
       // so we are not resolved too early when there are repeated page loading
-      await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 0)))
+      await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 10)))
 
       expect(logs.filter(l => l.includes('Layout2 Page Setup')).length).toBe(1)
     })
@@ -633,7 +639,7 @@ describe('automatically keyed composables', () => {
   })
 })
 
-describe.skipIf(process.env.NUXT_TEST_DEV || process.env.TEST_WITH_WEBPACK)('inlining component styles', () => {
+describe.skipIf(isDev() || isWebpack)('inlining component styles', () => {
   it('should inline styles', async () => {
     const html = await $fetch('/styles')
     for (const style of [
@@ -680,28 +686,29 @@ describe('prefetching', () => {
   })
 })
 
-describe.runIf(process.env.NUXT_TEST_DEV)('detecting invalid root nodes', () => {
-  it('should detect invalid root nodes in pages', async () => {
-    for (const path of ['1', '2', '3', '4']) {
-      const { consoleLogs } = await renderPage(joinURL('/invalid-root', path))
-      const consoleLogsWarns = consoleLogs.filter(i => i.type === 'warning').map(w => w.text).join('\n')
-      expect(consoleLogsWarns).toContain('does not have a single root node and will cause errors when navigating between routes')
-    }
+describe.runIf(isDev())('detecting invalid root nodes', () => {
+  it.each(['1', '2', '3', '4'])('should detect invalid root nodes in pages (\'/invalid-root/%s\')', async (path) => {
+    const { consoleLogs, page } = await renderPage(joinURL('/invalid-root', path))
+    await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 10)))
+    await expectWithPolling(
+      () => consoleLogs
+        .map(w => w.text).join('\n')
+        .includes('does not have a single root node and will cause errors when navigating between routes'),
+      true
+    )
   })
 
-  it('should not complain if there is no transition', async () => {
-    for (const path of ['fine']) {
-      const { consoleLogs } = await renderPage(joinURL('/invalid-root', path))
-
-      const consoleLogsWarns = consoleLogs.filter(i => i.type === 'warning')
+  it.each(['fine'])('should not complain if there is no transition (%s)', async (path) => {
+    const { consoleLogs, page } = await renderPage(joinURL('/invalid-root', path))
+    await page.evaluate(() => new Promise(resolve => setTimeout(resolve, 10)))
 
-      expect(consoleLogsWarns.length).toEqual(0)
-    }
+    const consoleLogsWarns = consoleLogs.filter(i => i.type === 'warning')
+    expect(consoleLogsWarns.length).toEqual(0)
   })
 })
 
 // TODO: dynamic paths in dev
-describe.skipIf(process.env.NUXT_TEST_DEV)('dynamic paths', () => {
+describe.skipIf(isDev())('dynamic paths', () => {
   it('should work with no overrides', async () => {
     const html: string = await $fetch('/assets')
     for (const match of html.matchAll(/(href|src)="(.*?)"|url\(([^)]*?)\)/g)) {
@@ -711,7 +718,7 @@ describe.skipIf(process.env.NUXT_TEST_DEV)('dynamic paths', () => {
   })
 
   // webpack injects CSS differently
-  it.skipIf(process.env.TEST_WITH_WEBPACK)('adds relative paths to CSS', async () => {
+  it.skipIf(isWebpack)('adds relative paths to CSS', async () => {
     const html: string = await $fetch('/assets')
     const urls = Array.from(html.matchAll(/(href|src)="(.*?)"|url\(([^)]*?)\)/g)).map(m => m[2] || m[3])
     const cssURL = urls.find(u => /_nuxt\/assets.*\.css$/.test(u))
@@ -740,7 +747,7 @@ describe.skipIf(process.env.NUXT_TEST_DEV)('dynamic paths', () => {
         url.startsWith('/foo/_other/') ||
         url === '/foo/public.svg' ||
         // TODO: webpack does not yet support dynamic static paths
-        (process.env.TEST_WITH_WEBPACK && url === '/public.svg')
+        (isWebpack && url === '/public.svg')
       ).toBeTruthy()
     }
   })
@@ -757,7 +764,7 @@ describe.skipIf(process.env.NUXT_TEST_DEV)('dynamic paths', () => {
         url.startsWith('./_nuxt/') ||
         url === './public.svg' ||
         // TODO: webpack does not yet support dynamic static paths
-        (process.env.TEST_WITH_WEBPACK && url === '/public.svg')
+        (isWebpack && url === '/public.svg')
       ).toBeTruthy()
       expect(url.startsWith('./_nuxt/_nuxt')).toBeFalsy()
     }
@@ -785,7 +792,7 @@ describe.skipIf(process.env.NUXT_TEST_DEV)('dynamic paths', () => {
         url.startsWith('https://example.com/_cdn/') ||
         url === 'https://example.com/public.svg' ||
         // TODO: webpack does not yet support dynamic static paths
-        (process.env.TEST_WITH_WEBPACK && url === '/public.svg')
+        (isWebpack && url === '/public.svg')
       ).toBeTruthy()
     }
   })
@@ -819,7 +826,7 @@ describe('component islands', () => {
   it('renders components with route', async () => {
     const result: NuxtIslandResponse = await $fetch('/__nuxt_island/RouteComponent?url=/foo')
 
-    if (process.env.NUXT_TEST_DEV) {
+    if (isDev()) {
       result.head.link = result.head.link.filter(l => !l.href.includes('@nuxt+ui-templates'))
     }
 
@@ -846,7 +853,7 @@ describe('component islands', () => {
       })
     }))
 
-    if (process.env.NUXT_TEST_DEV) {
+    if (isDev()) {
       result.head.link = result.head.link.filter(l => !l.href.includes('@nuxt+ui-templates'))
       const fixtureDir = normalize(fileURLToPath(new URL('./fixtures/basic', import.meta.url)))
       for (const link of result.head.link) {
@@ -860,7 +867,8 @@ describe('component islands', () => {
       key: s.key.replace(/-[a-zA-Z0-9]+$/, '')
     }))
 
-    if (!(process.env.NUXT_TEST_DEV || process.env.TEST_WITH_WEBPACK)) {
+    // TODO: fix rendering of styles in webpack
+    if (!isDev() && !isWebpack) {
       expect(result.head).toMatchInlineSnapshot(`
         {
           "link": [],
@@ -872,7 +880,7 @@ describe('component islands', () => {
           ],
         }
       `)
-    } else if (process.env.NUXT_TEST_DEV) {
+    } else if (isDev() && !isWebpack) {
       expect(result.head).toMatchInlineSnapshot(`
         {
           "link": [
@@ -908,7 +916,7 @@ describe('component islands', () => {
   })
 })
 
-describe.runIf(process.env.NUXT_TEST_DEV && !process.env.TEST_WITH_WEBPACK)('vite plugins', () => {
+describe.runIf(isDev() && !isWebpack)('vite plugins', () => {
   it('does not override vite plugins', async () => {
     expect(await $fetch('/vite-plugin-without-path')).toBe('vite-plugin without path')
     expect(await $fetch('/__nuxt-test')).toBe('vite-plugin with __nuxt prefix')
@@ -918,7 +926,7 @@ describe.runIf(process.env.NUXT_TEST_DEV && !process.env.TEST_WITH_WEBPACK)('vit
   })
 })
 
-describe.skipIf(process.env.NUXT_TEST_DEV || isWindows)('payload rendering', () => {
+describe.skipIf(isDev() || isWindows)('payload rendering', () => {
   it('renders a payload', async () => {
     const payload = await $fetch('/random/a/_payload.js', { responseType: 'text' })
     expect(payload).toMatch(
@@ -937,7 +945,7 @@ describe.skipIf(process.env.NUXT_TEST_DEV || isWindows)('payload rendering', ()
     await page.goto(url('/random/a'))
     await page.waitForLoadState('networkidle')
 
-    const importSuffix = process.env.NUXT_TEST_DEV && !process.env.TEST_WITH_WEBPACK ? '?import' : ''
+    const importSuffix = isDev() && !isWebpack ? '?import' : ''
 
     // We are manually prefetching other payloads
     expect(requests).toContain('/random/c/_payload.js')
@@ -970,7 +978,7 @@ describe.skipIf(process.env.NUXT_TEST_DEV || isWindows)('payload rendering', ()
 
     // We are not refetching payloads we've already prefetched
     // Note: we refetch on dev as urls differ between '' and '?import'
-    // expect(requests.filter(p => p.includes('_payload')).length).toBe(process.env.NUXT_TEST_DEV ? 1 : 0)
+    // expect(requests.filter(p => p.includes('_payload')).length).toBe(isDev() ? 1 : 0)
   })
 })
 
@@ -995,64 +1003,3 @@ describe.skipIf(isWindows)('useAsyncData', () => {
     await expectNoClientErrors('/useAsyncData/promise-all')
   })
 })
-
-// HMR should be at the last
-// TODO: fix HMR on Windows
-if (isDev() && !isWindows) {
-  describe('hmr', () => {
-    it('should work', async () => {
-      const { page, pageErrors, consoleLogs } = await renderPage('/')
-
-      expect(await page.title()).toBe('Basic fixture')
-      expect((await page.$('.sugar-counter').then(r => r!.textContent()))!.trim())
-        .toEqual('Sugar Counter 12 x 2 = 24  Inc')
-
-      // reactive
-      await page.$('.sugar-counter button').then(r => r!.click())
-      expect((await page.$('.sugar-counter').then(r => r!.textContent()))!.trim())
-        .toEqual('Sugar Counter 13 x 2 = 26  Inc')
-
-      // modify file
-      let indexVue = await fsp.readFile(join(fixturePath, 'pages/index.vue'), 'utf8')
-      indexVue = indexVue
-        .replace('<Title>Basic fixture</Title>', '<Title>Basic fixture HMR</Title>')
-        .replace('<h1>Hello Nuxt 3!</h1>', '<h1>Hello Nuxt 3! HMR</h1>')
-      indexVue += '<style scoped>\nh1 { color: red }\n</style>'
-      await fsp.writeFile(join(fixturePath, 'pages/index.vue'), indexVue)
-
-      await expectWithPolling(
-        () => page.title(),
-        'Basic fixture HMR'
-      )
-
-      // content HMR
-      const h1 = await page.$('h1')
-      expect(await h1!.textContent()).toBe('Hello Nuxt 3! HMR')
-
-      // style HMR
-      const h1Color = await h1!.evaluate(el => window.getComputedStyle(el).getPropertyValue('color'))
-      expect(h1Color).toMatchInlineSnapshot('"rgb(255, 0, 0)"')
-
-      // ensure no errors
-      const consoleLogErrors = consoleLogs.filter(i => i.type === 'error')
-      const consoleLogWarnings = consoleLogs.filter(i => i.type === 'warn')
-      expect(pageErrors).toEqual([])
-      expect(consoleLogErrors).toEqual([])
-      expect(consoleLogWarnings).toEqual([])
-    }, 60_000)
-
-    it('should detect new routes', async () => {
-      const html = await $fetch('/some-404')
-      expect(html).toContain('404 at some-404')
-
-      // write new page route
-      const indexVue = await fsp.readFile(join(fixturePath, 'pages/index.vue'), 'utf8')
-      await fsp.writeFile(join(fixturePath, 'pages/some-404.vue'), indexVue)
-
-      await expectWithPolling(
-        () => $fetch('/some-404').then(r => r.includes('Hello Nuxt 3') ? 'ok' : 'fail'),
-        'ok'
-      )
-    })
-  })
-}
diff --git a/test/fixtures/basic/nuxt.config.ts b/test/fixtures/basic/nuxt.config.ts
index d6e6fb85908..39a8ea02829 100644
--- a/test/fixtures/basic/nuxt.config.ts
+++ b/test/fixtures/basic/nuxt.config.ts
@@ -21,7 +21,7 @@ export default defineNuxtConfig({
     }
   },
   buildDir: process.env.NITRO_BUILD_DIR,
-  builder: process.env.TEST_WITH_WEBPACK ? 'webpack' : 'vite',
+  builder: process.env.TEST_BUILDER as 'webpack' | 'vite' ?? 'vite',
   build: {
     transpile: [
       (ctx) => {
@@ -70,7 +70,7 @@ export default defineNuxtConfig({
       }
     ],
     function (_, nuxt) {
-      if (process.env.TEST_WITH_WEBPACK) { return }
+      if (typeof nuxt.options.builder === 'string' && nuxt.options.builder.includes('webpack')) { return }
 
       nuxt.options.css.push('virtual.css')
       nuxt.options.build.transpile.push('virtual.css')
diff --git a/test/hmr.test.ts b/test/hmr.test.ts
new file mode 100644
index 00000000000..498e531180f
--- /dev/null
+++ b/test/hmr.test.ts
@@ -0,0 +1,87 @@
+import { promises as fsp } from 'node:fs'
+import { fileURLToPath } from 'node:url'
+import { describe, expect, it } from 'vitest'
+import { isWindows } from 'std-env'
+import { join } from 'pathe'
+// eslint-disable-next-line import/order
+import { setup, $fetch } from '@nuxt/test-utils'
+
+import { expectWithPolling, renderPage } from './utils'
+
+const isWebpack = process.env.TEST_BUILDER === 'webpack'
+
+// TODO: fix HMR on Windows
+if (process.env.TEST_ENV !== 'built' && !isWindows) {
+  const fixturePath = fileURLToPath(new URL('./fixtures-temp/basic', import.meta.url))
+  await setup({
+    rootDir: fixturePath,
+    dev: true,
+    server: true,
+    browser: true,
+    setupTimeout: (isWindows ? 240 : 120) * 1000,
+    nuxtConfig: {
+      builder: isWebpack ? 'webpack' : 'vite',
+      buildDir: process.env.NITRO_BUILD_DIR,
+      nitro: { output: { dir: process.env.NITRO_OUTPUT_DIR } }
+    }
+  })
+
+  describe('hmr', () => {
+    it('should work', async () => {
+      const { page, pageErrors, consoleLogs } = await renderPage('/')
+
+      expect(await page.title()).toBe('Basic fixture')
+      expect((await page.$('.sugar-counter').then(r => r!.textContent()))!.trim())
+        .toEqual('Sugar Counter 12 x 2 = 24  Inc')
+
+      // reactive
+      await page.$('.sugar-counter button').then(r => r!.click())
+      expect((await page.$('.sugar-counter').then(r => r!.textContent()))!.trim())
+        .toEqual('Sugar Counter 13 x 2 = 26  Inc')
+
+      // modify file
+      let indexVue = await fsp.readFile(join(fixturePath, 'pages/index.vue'), 'utf8')
+      indexVue = indexVue
+        .replace('<Title>Basic fixture</Title>', '<Title>Basic fixture HMR</Title>')
+        .replace('<h1>Hello Nuxt 3!</h1>', '<h1>Hello Nuxt 3! HMR</h1>')
+      indexVue += '<style scoped>\nh1 { color: red }\n</style>'
+      await fsp.writeFile(join(fixturePath, 'pages/index.vue'), indexVue)
+
+      await expectWithPolling(
+        () => page.title(),
+        'Basic fixture HMR'
+      )
+
+      // content HMR
+      const h1 = await page.$('h1')
+      expect(await h1!.textContent()).toBe('Hello Nuxt 3! HMR')
+
+      // style HMR
+      const h1Color = await h1!.evaluate(el => window.getComputedStyle(el).getPropertyValue('color'))
+      expect(h1Color).toMatchInlineSnapshot('"rgb(255, 0, 0)"')
+
+      // ensure no errors
+      const consoleLogErrors = consoleLogs.filter(i => i.type === 'error')
+      const consoleLogWarnings = consoleLogs.filter(i => i.type === 'warn')
+      expect(pageErrors).toEqual([])
+      expect(consoleLogErrors).toEqual([])
+      expect(consoleLogWarnings).toEqual([])
+    }, 60_000)
+
+    it('should detect new routes', async () => {
+      const html = await $fetch('/some-404')
+      expect(html).toContain('404 at some-404')
+
+      // write new page route
+      const indexVue = await fsp.readFile(join(fixturePath, 'pages/index.vue'), 'utf8')
+      await fsp.writeFile(join(fixturePath, 'pages/some-404.vue'), indexVue)
+
+      await expectWithPolling(
+        () => $fetch('/some-404').then(r => r.includes('Hello Nuxt 3')),
+        true
+      )
+    })
+  })
+} else {
+  describe.skip('hmr', () => {})
+}
diff --git a/test/utils.ts b/test/utils.ts
index 5c566996c42..dfd19d29bc6 100644
--- a/test/utils.ts
+++ b/test/utils.ts
@@ -1,10 +1,7 @@
-import { fileURLToPath } from 'node:url'
 import { expect } from 'vitest'
 import type { Page } from 'playwright'
 import { createPage, getBrowser, url, useTestContext } from '@nuxt/test-utils'
 
-export const fixturesDir = fileURLToPath(new URL(process.env.NUXT_TEST_DEV ? './fixtures-temp' : './fixtures', import.meta.url))
-
 export async function renderPage (path = '/') {
   const ctx = useTestContext()
   if (!ctx.options.browser) {
@@ -53,21 +50,22 @@ export async function expectNoClientErrors (path: string) {
   expect(consoleLogWarnings).toEqual([])
 }
 
+type EqualityVal = string | number | boolean | null | undefined | RegExp
 export async function expectWithPolling (
-  get: () => Promise<string> | string,
-  expected: string,
+  get: () => Promise<EqualityVal> | EqualityVal,
+  expected: EqualityVal,
   retries = process.env.CI ? 100 : 30,
   delay = process.env.CI ? 500 : 100
 ) {
-  let result: string | undefined
+  let result: EqualityVal
   for (let i = retries; i >= 0; i--) {
     result = await get()
-    if (result === expected) {
+    if (result?.toString() === expected?.toString()) {
       break
     }
     await new Promise(resolve => setTimeout(resolve, delay))
   }
-  expect(result).toEqual(expected)
+  expect(result?.toString(), `"${result?.toString()}" did not equal "${expected?.toString()}" in ${retries * delay}ms`).toEqual(expected?.toString())
 }
 
 export async function withLogs (callback: (page: Page, logs: string[]) => Promise<void>) {
@@ -76,8 +74,8 @@ export async function withLogs (callback: (page: Page, logs: string[]) => Promis
   const logs: string[] = []
   page.on('console', (msg) => {
     const text = msg.text()
-    if (done) {
-      throw new Error('Test finished prematurely')
+    if (done && !text.includes('[vite] server connection lost')) {
+      throw new Error(`Test finished prematurely before log: [${msg.type()}] ${text}`)
     }
     logs.push(text)
   })
diff --git a/vitest.config.ts b/vitest.config.ts
index a1a6b95f44b..ac9e6998bfc 100644
--- a/vitest.config.ts
+++ b/vitest.config.ts
@@ -19,7 +19,7 @@ export default defineConfig({
     deps: { inline: ['@vitejs/plugin-vue'] },
     // Excluded plugin because it should throw an error when accidentally loaded via Nuxt
     exclude: [...configDefaults.exclude, '**/this-should-not-load.spec.js'],
-    maxThreads: process.env.NUXT_TEST_DEV ? 1 : undefined,
-    minThreads: process.env.NUXT_TEST_DEV ? 1 : undefined
+    maxThreads: process.env.TEST_ENV === 'dev' ? 1 : undefined,
+    minThreads: process.env.TEST_ENV === 'dev' ? 1 : undefined
   }
 })