diff --git a/e2e/next/src/next.test.ts b/e2e/next/src/next.test.ts
index 4f50144b78..c58e929055 100644
--- a/e2e/next/src/next.test.ts
+++ b/e2e/next/src/next.test.ts
@@ -7,7 +7,6 @@ import {
   readJson,
   runCLI,
   runCLIAsync,
-  supportUi,
   uniq,
   updateFile,
 } from '@nrwl/e2e/utils';
@@ -87,6 +86,24 @@ forEachCli('nx', () => {
       const mainPath = `apps/${appName}/pages/index.tsx`;
       updateFile(mainPath, `import '@proj/${libName}';\n` + readFile(mainPath));
 
+      // Update lib to use css modules
+      updateFile(
+        `libs/${libName}/src/lib/${libName}.tsx`,
+        `
+        import React from 'react';
+        import styles from './style.module.css';
+        export function Test() {
+          return <div className={styles.container}>Hello</div>;
+        }
+      `
+      );
+      updateFile(
+        `libs/${libName}/src/lib/style.module.css`,
+        `
+        .container {}
+      `
+      );
+
       await checkApp(appName, {
         checkUnitTest: true,
         checkLint: true,
diff --git a/packages/next/plugins/with-nx.ts b/packages/next/plugins/with-nx.ts
new file mode 100644
index 0000000000..a0758a3d5a
--- /dev/null
+++ b/packages/next/plugins/with-nx.ts
@@ -0,0 +1,91 @@
+const { join } = require('path');
+const { appRootPath } = require('@nrwl/workspace/src/utils/app-root');
+const { workspaceLayout } = require('@nrwl/workspace/src/core/file-utils');
+
+function regexEqual(x, y) {
+  return (
+    x instanceof RegExp &&
+    y instanceof RegExp &&
+    x.source === y.source &&
+    x.global === y.global &&
+    x.ignoreCase === y.ignoreCase &&
+    x.multiline === y.multiline
+  );
+}
+
+function withNx(nextConfig = {} as any) {
+  const userWebpack = nextConfig.webpack || ((x) => x);
+  return {
+    ...nextConfig,
+    /*
+     * Modify the Next.js webpack config to allow workspace libs to use css modules.
+     *
+     * Note: This would be easier if Next.js exposes css-loader and sass-loader on `defaultLoaders`.
+     */
+    webpack: (config, { defaultLoaders }) => {
+      // Include workspace libs in css/sass loaders
+      const includes = [join(appRootPath, workspaceLayout().libsDir)];
+
+      const nextCssLoaders = config.module.rules.find(
+        (rule) => typeof rule.oneOf === 'object'
+      );
+
+      // webpack config is not as expected
+      if (!nextCssLoaders) return config;
+
+      /*
+       *  1. Modify css loader to enable module support for workspace libs
+       */
+      const nextCssLoader = nextCssLoaders.oneOf.find(
+        (rule) =>
+          rule.sideEffects === false && regexEqual(rule.test, /\.module\.css$/)
+      );
+      // Might not be found if Next.js webpack config changes in the future
+      if (nextCssLoader) {
+        nextCssLoader.issuer.or = nextCssLoader.issuer.and
+          ? nextCssLoader.issuer.and.concat(includes)
+          : includes;
+        delete nextCssLoader.issuer.and;
+      }
+
+      /*
+       *  2. Modify sass loader to enable module support for workspace libs
+       */
+      const nextSassLoader = nextCssLoaders.oneOf.find(
+        (rule) =>
+          rule.sideEffects === false &&
+          regexEqual(rule.test, /\.module\.(scss|sass)$/)
+      );
+      // Might not be found if Next.js webpack config changes in the future
+      if (nextSassLoader) {
+        nextSassLoader.issuer.or = nextSassLoader.issuer.and
+          ? nextSassLoader.issuer.and.concat(includes)
+          : includes;
+        delete nextSassLoader.issuer.and;
+      }
+
+      /*
+       *  3. Modify error loader to ignore css modules used by workspace libs
+       */
+      const nextErrorCssModuleLoader = nextCssLoaders.oneOf.find(
+        (rule) =>
+          rule.use &&
+          rule.use.loader === 'error-loader' &&
+          rule.use.options &&
+          (rule.use.options.reason ===
+            'CSS Modules \u001b[1mcannot\u001b[22m be imported from within \u001b[1mnode_modules\u001b[22m.\n' +
+              'Read more: https://err.sh/next.js/css-modules-npm' ||
+            rule.use.options.reason ===
+              'CSS Modules cannot be imported from within node_modules.\nRead more: https://err.sh/next.js/css-modules-npm')
+      );
+      // Might not be found if Next.js webpack config changes in the future
+      if (nextErrorCssModuleLoader) {
+        nextErrorCssModuleLoader.exclude = includes;
+      }
+
+      return userWebpack(config);
+    },
+  };
+}
+
+module.exports = withNx;
diff --git a/packages/next/src/schematics/application/files/next.config.js__tmpl__ b/packages/next/src/schematics/application/files/next.config.js__tmpl__
index fb13bf5b36..4fa42b1c9d 100644
--- a/packages/next/src/schematics/application/files/next.config.js__tmpl__
+++ b/packages/next/src/schematics/application/files/next.config.js__tmpl__
@@ -1,25 +1,27 @@
+const withNx = require('@nrwl/next/plugins/with-nx');
+
 <% if (style === 'less') { %>
 const withLess = require('@zeit/next-less');
-module.exports = withLess({
+module.exports = withLess(withNx({
   // Set this to true if you use CSS modules.
   // See: https://github.com/css-modules/css-modules
   cssModules: false
-});
+}));
 <% } else if (style === 'styl') { %>
 const withStylus = require('@zeit/next-stylus');
-module.exports = withStylus({
+module.exports = withStylus(withNx({
   // Set this to true if you use CSS modules.
   // See: https://github.com/css-modules/css-modules
   cssModules: false
-});
+}));
 <% } else if (
   style === 'styled-components'
   ||style === '@emotion/styled'
   || style === 'styled-jsx'
   || style === 'none'
 ) { %>
-module.exports ={};
+module.exports = withNx({});
 <% } else {
 // Defaults to CSS/SASS (which don't need plugin as of Next 9.3) %>
-module.exports ={};
+module.exports = withNx({});
 <% } %>