diff --git a/src/compiler/commandLineParser.ts b/src/compiler/commandLineParser.ts
index 86d073f7d49..d29a287b950 100644
--- a/src/compiler/commandLineParser.ts
+++ b/src/compiler/commandLineParser.ts
@@ -17,6 +17,12 @@ namespace ts {
             type: "boolean",
             description: Diagnostics.Generates_corresponding_d_ts_file,
         },
+        {
+            name: "declarationDir",
+            type: "string",
+            isFilePath: true,
+            paramType: Diagnostics.DIRECTORY,
+        },
         {
             name: "diagnostics",
             type: "boolean",
diff --git a/src/compiler/types.ts b/src/compiler/types.ts
index ca662d6ac46..c065478a20a 100644
--- a/src/compiler/types.ts
+++ b/src/compiler/types.ts
@@ -2371,6 +2371,7 @@ namespace ts {
         allowNonTsExtensions?: boolean;
         charset?: string;
         declaration?: boolean;
+        declarationDir?: string;
         diagnostics?: boolean;
         emitBOM?: boolean;
         help?: boolean;
diff --git a/src/compiler/utilities.ts b/src/compiler/utilities.ts
index d8474f85f6b..40b5462888e 100644
--- a/src/compiler/utilities.ts
+++ b/src/compiler/utilities.ts
@@ -2012,6 +2012,16 @@ namespace ts {
         return emitOutputFilePathWithoutExtension + extension;
     }
 
+    export function getDeclarationEmitOutputFilePath(sourceFile: SourceFile, host: EmitHost) {
+        const options = host.getCompilerOptions();
+        const outputDir = options.declarationDir || options.outDir; // Prefer declaration folder if specified
+        return options.declaration ? removeFileExtension(
+            outputDir
+                ? getSourceFilePathInNewDir(sourceFile, host, outputDir)
+                : sourceFile.fileName
+        ) + ".d.ts" : undefined;
+    }
+
     export function getEmitScriptTarget(compilerOptions: CompilerOptions) {
         return compilerOptions.target || ScriptTarget.ES3;
     }
@@ -2065,23 +2075,23 @@ namespace ts {
             const emitFileNames: EmitFileNames = {
                 jsFilePath,
                 sourceMapFilePath: getSourceMapFilePath(jsFilePath, options),
-                declarationFilePath: !isSourceFileJavaScript(sourceFile) ? getDeclarationEmitFilePath(jsFilePath, options) : undefined
+                declarationFilePath: !isSourceFileJavaScript(sourceFile) ? getDeclarationEmitOutputFilePath(sourceFile, host) : undefined
             };
             action(emitFileNames, [sourceFile], /*isBundledEmit*/false);
         }
 
         function onBundledEmit(host: EmitHost) {
             // Can emit only sources that are not declaration file and are either non module code or module with --module or --target es6 specified
-            const bundledSources = filter(host.getSourceFiles(),
-                sourceFile => !isDeclarationFile(sourceFile) && // Not a declaration file
-                    (!isExternalModule(sourceFile) || // non module file
-                        (getEmitModuleKind(options) && isExternalModule(sourceFile)))); // module that can emit - note falsy value from getEmitModuleKind means the module kind that shouldn't be emitted
+            const bundledSources = filter(host.getSourceFiles(), sourceFile =>
+                !isDeclarationFile(sourceFile)                                       // Not a declaration file
+                && (!isExternalModule(sourceFile) || !!getEmitModuleKind(options))); // and not a module, unless module emit enabled
+
             if (bundledSources.length) {
                 const jsFilePath = options.outFile || options.out;
                 const emitFileNames: EmitFileNames = {
                     jsFilePath,
                     sourceMapFilePath: getSourceMapFilePath(jsFilePath, options),
-                    declarationFilePath: getDeclarationEmitFilePath(jsFilePath, options)
+                    declarationFilePath: options.declaration ? removeFileExtension(jsFilePath) + ".d.ts" : undefined
                 };
                 action(emitFileNames, bundledSources, /*isBundledEmit*/true);
             }
@@ -2090,10 +2100,6 @@ namespace ts {
         function getSourceMapFilePath(jsFilePath: string, options: CompilerOptions) {
             return options.sourceMap ? jsFilePath + ".map" : undefined;
         }
-
-        function getDeclarationEmitFilePath(jsFilePath: string, options: CompilerOptions) {
-            return options.declaration ? removeFileExtension(jsFilePath) + ".d.ts" : undefined;
-        }
     }
 
     export function getSourceFilePathInNewDir(sourceFile: SourceFile, host: EmitHost, newDirPath: string) {