diff --git a/packages/@vue/cli/__tests__/mock-preset-with-template/generator/index.js b/packages/@vue/cli/__tests__/mock-preset-with-template/generator/index.js
new file mode 100644
index 0000000000..43ae7a2fc3
--- /dev/null
+++ b/packages/@vue/cli/__tests__/mock-preset-with-template/generator/index.js
@@ -0,0 +1,3 @@
+module.exports = (api, options) => {
+  api.render('./template', options)
+}
diff --git a/packages/@vue/cli/__tests__/mock-preset-with-template/generator/template/test.js b/packages/@vue/cli/__tests__/mock-preset-with-template/generator/template/test.js
new file mode 100644
index 0000000000..12db7fb421
--- /dev/null
+++ b/packages/@vue/cli/__tests__/mock-preset-with-template/generator/template/test.js
@@ -0,0 +1 @@
+<%= ok %>
diff --git a/packages/@vue/cli/__tests__/mock-preset-with-template/preset.json b/packages/@vue/cli/__tests__/mock-preset-with-template/preset.json
new file mode 100644
index 0000000000..63ec289edc
--- /dev/null
+++ b/packages/@vue/cli/__tests__/mock-preset-with-template/preset.json
@@ -0,0 +1,5 @@
+{
+  "plugins": {
+    "@vue/cli-plugin-babel": {}
+  }
+}
diff --git a/packages/@vue/cli/__tests__/mock-preset-with-template/prompts.js b/packages/@vue/cli/__tests__/mock-preset-with-template/prompts.js
new file mode 100644
index 0000000000..26971b45f2
--- /dev/null
+++ b/packages/@vue/cli/__tests__/mock-preset-with-template/prompts.js
@@ -0,0 +1,5 @@
+module.exports = [{
+  type: 'confirm',
+  name: 'ok',
+  message: 'Are you ok?'
+}]
diff --git a/packages/@vue/cli/__tests__/preset.spec.js b/packages/@vue/cli/__tests__/preset.spec.js
index 15f0707e0c..7afab7b1f9 100644
--- a/packages/@vue/cli/__tests__/preset.spec.js
+++ b/packages/@vue/cli/__tests__/preset.spec.js
@@ -30,3 +30,29 @@ test('fetching local preset with prompts and generator', async () => {
   const pkg = require(path.resolve(cwd, name, 'package.json'))
   expect(pkg.devDependencies).toHaveProperty('@vue/cli-plugin-babel')
 })
+
+test('should recognize generator/index.js in a local preset directory', async () => {
+  const cwd = path.resolve(__dirname, '../../../test')
+  const name = 'test-preset-template'
+
+  expectPrompts([{
+    message: 'Are you ok',
+    confirm: true
+  }])
+
+  await create(
+    name,
+    {
+      force: true,
+      git: false,
+      cwd,
+      preset: path.resolve(__dirname, './mock-preset-with-template')
+    }
+  )
+
+  const testFile = await fs.readFile(path.resolve(cwd, name, 'test.js'), 'utf-8')
+  expect(testFile).toBe('true\n')
+
+  const pkg = require(path.resolve(cwd, name, 'package.json'))
+  expect(pkg.devDependencies).toHaveProperty('@vue/cli-plugin-babel')
+})
diff --git a/packages/@vue/cli/lib/util/loadPresetFromDir.js b/packages/@vue/cli/lib/util/loadPresetFromDir.js
index f5d32aaec2..096368b2ce 100644
--- a/packages/@vue/cli/lib/util/loadPresetFromDir.js
+++ b/packages/@vue/cli/lib/util/loadPresetFromDir.js
@@ -8,10 +8,10 @@ module.exports = async function loadPresetFromDir (dir) {
   }
   const preset = await fs.readJson(presetPath)
 
-  // if the preset dir contains generator.js, we will inject it as a hidden
+  // if the preset dir contains generator.js or generator/index.js, we will inject it as a hidden
   // plugin so it will be invoked by the generator.
-  const generatorPath = path.join(dir, 'generator.js')
-  if (fs.existsSync(generatorPath)) {
+  const hasGenerator = fs.existsSync(path.join(dir, 'generator.js')) || fs.existsSync(path.join(dir, 'generator/index.js'))
+  if (hasGenerator) {
     (preset.plugins || (preset.plugins = {}))[dir.replace(/[\/]$/, '')] = {
       _isPreset: true,
       prompts: true