diff --git a/.gitignore b/.gitignore
index c0459c8604323..123b3567059df 100644
--- a/.gitignore
+++ b/.gitignore
@@ -4,6 +4,7 @@ npm-debug.log
 Thumbs.db
 node_modules/
 .build/
+.vscode/extensions/**/out/
 extensions/**/dist/
 /out*/
 /extensions/**/out/
diff --git a/build/gulpfile.extensions.js b/build/gulpfile.extensions.js
index 579a62dbbbbe6..32a66abfbc2a0 100644
--- a/build/gulpfile.extensions.js
+++ b/build/gulpfile.extensions.js
@@ -22,74 +22,70 @@ const commit = getVersion(root);
 const plumber = require('gulp-plumber');
 const ext = require('./lib/extensions');
 
-const extensionsPath = path.join(path.dirname(__dirname), 'extensions');
-
 // To save 250ms for each gulp startup, we are caching the result here
 // const compilations = glob.sync('**/tsconfig.json', {
 // 	cwd: extensionsPath,
 // 	ignore: ['**/out/**', '**/node_modules/**']
 // });
 const compilations = [
-	'authentication-proxy/tsconfig.json',
-	'configuration-editing/build/tsconfig.json',
-	'configuration-editing/tsconfig.json',
-	'css-language-features/client/tsconfig.json',
-	'css-language-features/server/tsconfig.json',
-	'debug-auto-launch/tsconfig.json',
-	'debug-server-ready/tsconfig.json',
-	'emmet/tsconfig.json',
-	'extension-editing/tsconfig.json',
-	'git/tsconfig.json',
-	'git-base/tsconfig.json',
-	'github-authentication/tsconfig.json',
-	'github/tsconfig.json',
-	'grunt/tsconfig.json',
-	'gulp/tsconfig.json',
-	'html-language-features/client/tsconfig.json',
-	'html-language-features/server/tsconfig.json',
-	'ipynb/tsconfig.json',
-	'jake/tsconfig.json',
-	'json-language-features/client/tsconfig.json',
-	'json-language-features/server/tsconfig.json',
-	'markdown-language-features/preview-src/tsconfig.json',
-	'markdown-language-features/server/tsconfig.json',
-	'markdown-language-features/tsconfig.json',
-	'markdown-math/tsconfig.json',
-	'media-preview/tsconfig.json',
-	'merge-conflict/tsconfig.json',
-	'microsoft-authentication/tsconfig.json',
-	'notebook-renderers/tsconfig.json',
-	'npm/tsconfig.json',
-	'php-language-features/tsconfig.json',
-	'search-result/tsconfig.json',
-	'references-view/tsconfig.json',
-	'simple-browser/tsconfig.json',
-	'tunnel-forwarding/tsconfig.json',
-	'typescript-language-features/test-workspace/tsconfig.json',
-	'typescript-language-features/web/tsconfig.json',
-	'typescript-language-features/tsconfig.json',
-	'vscode-api-tests/tsconfig.json',
-	'vscode-colorize-tests/tsconfig.json',
-	'vscode-test-resolver/tsconfig.json'
+	'extensions/configuration-editing/tsconfig.json',
+	'extensions/css-language-features/client/tsconfig.json',
+	'extensions/css-language-features/server/tsconfig.json',
+	'extensions/debug-auto-launch/tsconfig.json',
+	'extensions/debug-server-ready/tsconfig.json',
+	'extensions/emmet/tsconfig.json',
+	'extensions/extension-editing/tsconfig.json',
+	'extensions/git/tsconfig.json',
+	'extensions/git-base/tsconfig.json',
+	'extensions/github/tsconfig.json',
+	'extensions/github-authentication/tsconfig.json',
+	'extensions/grunt/tsconfig.json',
+	'extensions/gulp/tsconfig.json',
+	'extensions/html-language-features/client/tsconfig.json',
+	'extensions/html-language-features/server/tsconfig.json',
+	'extensions/ipynb/tsconfig.json',
+	'extensions/jake/tsconfig.json',
+	'extensions/json-language-features/client/tsconfig.json',
+	'extensions/json-language-features/server/tsconfig.json',
+	'extensions/markdown-language-features/preview-src/tsconfig.json',
+	'extensions/markdown-language-features/server/tsconfig.json',
+	'extensions/markdown-language-features/tsconfig.json',
+	'extensions/markdown-math/tsconfig.json',
+	'extensions/media-preview/tsconfig.json',
+	'extensions/merge-conflict/tsconfig.json',
+	'extensions/microsoft-authentication/tsconfig.json',
+	'extensions/notebook-renderers/tsconfig.json',
+	'extensions/npm/tsconfig.json',
+	'extensions/php-language-features/tsconfig.json',
+	'extensions/references-view/tsconfig.json',
+	'extensions/search-result/tsconfig.json',
+	'extensions/simple-browser/tsconfig.json',
+	'extensions/tunnel-forwarding/tsconfig.json',
+	'extensions/typescript-language-features/test-workspace/tsconfig.json',
+	'extensions/typescript-language-features/web/tsconfig.json',
+	'extensions/typescript-language-features/tsconfig.json',
+	'extensions/vscode-api-tests/tsconfig.json',
+	'extensions/vscode-colorize-tests/tsconfig.json',
+	'extensions/vscode-test-resolver/tsconfig.json'
 ];
 
 const getBaseUrl = out => `https://ticino.blob.core.windows.net/sourcemaps/${commit}/${out}`;
 
 const tasks = compilations.map(function (tsconfigFile) {
-	const absolutePath = path.join(extensionsPath, tsconfigFile);
-	const relativeDirname = path.dirname(tsconfigFile);
+	const absolutePath = path.join(root, tsconfigFile);
+	const relativeDirname = path.dirname(tsconfigFile.replace(/^(.*\/)?extensions\//i, ''));
 
 	const overrideOptions = {};
 	overrideOptions.sourceMap = true;
 
 	const name = relativeDirname.replace(/\//g, '-');
 
-	const root = path.join('extensions', relativeDirname);
-	const srcBase = path.join(root, 'src');
+	const srcRoot = path.dirname(tsconfigFile);
+	const srcBase = path.join(srcRoot, 'src');
 	const src = path.join(srcBase, '**');
-	const srcOpts = { cwd: path.dirname(__dirname), base: srcBase };
+	const srcOpts = { cwd: root, base: srcBase, dot: true };
 
-	const out = path.join(root, 'out');
+	const out = path.join(srcRoot, 'out');
 	const baseUrl = getBaseUrl(out);
 
 	let headerId, headerOut;
@@ -116,7 +112,7 @@ const tasks = compilations.map(function (tsconfigFile) {
 
 		const pipeline = function () {
 			const input = es.through();
-			const tsFilter = filter(['**/*.ts', '!**/lib/lib*.d.ts', '!**/node_modules/**'], { restore: true });
+			const tsFilter = filter(['**/*.ts', '!**/lib/lib*.d.ts', '!**/node_modules/**'], { restore: true, dot: true });
 			const output = input
 				.pipe(plumber({
 					errorHandler: function (err) {
@@ -140,7 +136,7 @@ const tasks = compilations.map(function (tsconfigFile) {
 				.pipe(tsFilter.restore)
 				.pipe(build ? nlsDev.bundleMetaDataFiles(headerId, headerOut) : es.through())
 				// Filter out *.nls.json file. We needed them only to bundle meta data file.
-				.pipe(filter(['**', '!**/*.nls.json']))
+				.pipe(filter(['**', '!**/*.nls.json'], { dot: true }))
 				.pipe(reporter.end(emitError));
 
 			return es.duplex(input, output);
@@ -272,6 +268,7 @@ exports.watchWebExtensionsTask = watchWebExtensionsTask;
  * @param {boolean} isWatch
  */
 async function buildWebExtensions(isWatch) {
+	const extensionsPath = path.join(root, 'extensions');
 	const webpackConfigLocations = await nodeUtil.promisify(glob)(
 		path.join(extensionsPath, '**', 'extension-browser.webpack.config.js'),
 		{ ignore: ['**/node_modules'] }