diff --git a/e2e/ts_library/foobar/BUILD.bazel b/e2e/ts_library/foobar/BUILD.bazel
index 13a3cd3fba..39e4155e5e 100644
--- a/e2e/ts_library/foobar/BUILD.bazel
+++ b/e2e/ts_library/foobar/BUILD.bazel
@@ -9,7 +9,10 @@ ts_library(
 
 ts_library(
     name = "foo_ts_library",
-    srcs = ["foo.ts"],
+    srcs = [
+        "conflict.d.ts",
+        "foo.ts",
+    ],
     tsconfig = ":tsconfig-foo.json",
     deps = [
         ":types",
diff --git a/e2e/ts_library/foobar/bar.ts b/e2e/ts_library/foobar/bar.ts
index 12e6b90df7..09855a1564 100644
--- a/e2e/ts_library/foobar/bar.ts
+++ b/e2e/ts_library/foobar/bar.ts
@@ -20,6 +20,16 @@ import {a} from 'e2e_ts_library/generated_ts/foo';
 // Repro for #31, should automatically discover @types/node
 import * as fs from 'fs';
 import {cool} from 'some-lib';
+// Verify that typescript/lib/typescript.d.ts and typescript/lib/tsserverlibrary.d.ts
+// are available since we must exclude all other typescript/lib/*.d.ts which are
+// controlled by the compilerOptions.libs config.
+// See https://github.com/bazelbuild/rules_nodejs/pull/875 for more details.
 import * as ts from 'typescript';
+import * as tss from 'typescript/lib/tsserverlibrary';
 
-import('./foo').then(({greeter}) => {console.log(Greeter, fs, cool, ts, greeter, a);});
\ No newline at end of file
+import('./foo').then(({greeter}) => {console.log(Greeter, fs, cool, ts, greeter, a);});
+
+const useTssType: tss.server.Project[] = [];
+if (useTssType) {
+  console.log('foobar');
+}
diff --git a/e2e/ts_library/foobar/conflict.d.ts b/e2e/ts_library/foobar/conflict.d.ts
new file mode 100644
index 0000000000..ac24e9a4f8
--- /dev/null
+++ b/e2e/ts_library/foobar/conflict.d.ts
@@ -0,0 +1,4 @@
+// Test that we can declare an interface named Client
+// which would conflict with typescript/lib/lib.webworker.d.ts if that
+// lib was included but should work if that lib is not
+declare class Client { id: string; }
diff --git a/e2e/ts_library/package.json b/e2e/ts_library/package.json
index 44db707068..f526e095ee 100644
--- a/e2e/ts_library/package.json
+++ b/e2e/ts_library/package.json
@@ -6,7 +6,7 @@
     "@types/hammerjs": "2.0.35",
     "@types/jasmine": "3.3.9",
     "@types/node": "11.11.2",
-    "typescript": "^3.3.1",
+    "typescript": "~3.4.2",
     "tsickle": "0.33.1",
     "zone.js": "0.8.26"
   },
diff --git a/e2e/ts_library/yarn.lock b/e2e/ts_library/yarn.lock
index 6485a793e7..db9044c0c8 100644
--- a/e2e/ts_library/yarn.lock
+++ b/e2e/ts_library/yarn.lock
@@ -3,14 +3,14 @@
 
 
 "@bazel/jasmine@file:../../dist/npm_bazel_jasmine":
-  version "0.30.1-2-g5cc5c06"
+  version "0.32.0-4-gf2ff790"
   dependencies:
     jasmine "~3.3.1"
     jasmine-core "~3.3.0"
     v8-coverage "1.0.9"
 
 "@bazel/typescript@file:../../dist/npm_bazel_typescript":
-  version "0.30.1-2-g5cc5c06"
+  version "0.32.0-4-gf2ff790"
   dependencies:
     protobufjs "6.8.8"
     semver "5.6.0"
@@ -829,10 +829,10 @@ tsutils@2.27.2:
   dependencies:
     tslib "^1.8.1"
 
-typescript@^3.3.1:
-  version "3.3.3333"
-  resolved "https://registry.yarnpkg.com/typescript/-/typescript-3.3.3333.tgz#171b2c5af66c59e9431199117a3bcadc66fdcfd6"
-  integrity sha512-JjSKsAfuHBE/fB2oZ8NxtRTk5iGcg6hkYXMnZ3Wc+b2RSqejEqTaem11mHASMnFilHrax3sLK0GDzcJrekZYLw==
+typescript@~3.4.2:
+  version "3.4.5"
+  resolved "https://registry.yarnpkg.com/typescript/-/typescript-3.4.5.tgz#2d2618d10bb566572b8d7aad5180d84257d70a99"
+  integrity sha512-YycBxUb49UUhdNMU5aJ7z5Ej2XGmaIBL0x34vZ82fn3hGvD+bgrMrVDpatgz2f7YxUMJxMkbWxJZeAvDxVe7Vw==
 
 uglify-js@^3.1.4:
   version "3.5.3"
diff --git a/internal/npm_install/node_module_library.bzl b/internal/npm_install/node_module_library.bzl
index e7c7677391..913fc73f29 100644
--- a/internal/npm_install/node_module_library.bzl
+++ b/internal/npm_install/node_module_library.bzl
@@ -35,8 +35,10 @@ def _node_module_library_impl(ctx):
         for f in ctx.files.srcs
         if f.path.endswith(".d.ts") and
            # exclude eg. external/npm/node_modules/protobufjs/node_modules/@types/node/index.d.ts
-           # these would be duplicates of the typings provided directly in another dependency
-           len(f.path.split("/node_modules/")) < 3
+           # these would be duplicates of the typings provided directly in another dependency.
+           # also exclude all /node_modules/typescript/lib/lib.*.d.ts files as these are determined by
+           # the tsconfig "lib" attribute
+           len(f.path.split("/node_modules/")) < 3 and f.path.find("/node_modules/typescript/lib/lib.") == -1
     ])
 
     # transitive_declarations are all .d.ts files in srcs plus those in direct & transitive dependencies