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
index 2ded0e509c253..09ed81b62a09d 100644
--- 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
@@ -6,23 +6,30 @@
  * Side Public License, v 1.
  */
 
+const Fs = require('fs');
 const Path = require('path');
 
-const { REPO_ROOT } = require('@kbn/dev-utils');
+const { REPO_ROOT: REPO_ROOT_FOLLOWING_SYMLINKS } = require('@kbn/dev-utils');
+const BASE_REPO_ROOT = Path.resolve(
+  Fs.realpathSync(Path.resolve(REPO_ROOT_FOLLOWING_SYMLINKS, 'package.json')),
+  '..'
+);
+
+const transpileKbnPaths = [
+  'test',
+  'x-pack/test',
+  'examples',
+  'x-pack/examples',
+  // TODO: should should probably remove this link back to the source
+  'x-pack/plugins/task_manager/server/config.ts',
+  'src/core/utils/default_app_categories.ts',
+].map((path) => Path.resolve(BASE_REPO_ROOT, path));
 
 // 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'),
-    Path.resolve(REPO_ROOT, 'src/core/utils/default_app_categories.ts'),
-  ],
+  only: transpileKbnPaths,
   babelrc: false,
   presets: [require.resolve('@kbn/babel-preset/node_preset')],
   extensions: ['.js', '.ts', '.tsx'],
diff --git a/src/setup_node_env/dist.js b/src/setup_node_env/dist.js
index 1d901b9ef5f06..3628a27a7793f 100644
--- a/src/setup_node_env/dist.js
+++ b/src/setup_node_env/dist.js
@@ -6,5 +6,5 @@
  * Side Public License, v 1.
  */
 
-require('./no_transpilation');
+require('./no_transpilation_dist');
 require('./polyfill');
diff --git a/src/setup_node_env/no_transpilation.js b/src/setup_node_env/no_transpilation.js
index 1826f5bb0297d..b9497734b40bc 100644
--- a/src/setup_node_env/no_transpilation.js
+++ b/src/setup_node_env/no_transpilation.js
@@ -7,12 +7,4 @@
  */
 
 require('./ensure_node_preserve_symlinks');
-
-// The following require statements MUST be executed before any others - BEGIN
-require('./exit_on_warning');
-require('./harden');
-// The following require statements MUST be executed before any others - END
-
-require('symbol-observable');
-require('source-map-support/register');
-require('./node_version_validator');
+require('./no_transpilation_dist');
diff --git a/src/setup_node_env/no_transpilation_dist.js b/src/setup_node_env/no_transpilation_dist.js
new file mode 100644
index 0000000000000..c52eba70f4ad3
--- /dev/null
+++ b/src/setup_node_env/no_transpilation_dist.js
@@ -0,0 +1,16 @@
+/*
+ * Copyright Elasticsearch B.V. and/or licensed to Elasticsearch B.V. under one
+ * or more contributor license agreements. Licensed under the Elastic License
+ * 2.0 and the Server Side Public License, v 1; you may not use this file except
+ * in compliance with, at your election, the Elastic License 2.0 or the Server
+ * Side Public License, v 1.
+ */
+
+// The following require statements MUST be executed before any others - BEGIN
+require('./exit_on_warning');
+require('./harden');
+// The following require statements MUST be executed before any others - END
+
+require('symbol-observable');
+require('source-map-support/register');
+require('./node_version_validator');