diff --git a/.changeset/purple-plums-travel.md b/.changeset/purple-plums-travel.md
new file mode 100644
index 0000000000..0077b15808
--- /dev/null
+++ b/.changeset/purple-plums-travel.md
@@ -0,0 +1,5 @@
+---
+'@backstage/cli': patch
+---
+
+Fixed a misconfiguration where all modules where treated as ESM by the React Refresh plugin for Webpack.
diff --git a/packages/cli/src/lib/bundler/transforms.ts b/packages/cli/src/lib/bundler/transforms.ts
index 5fe20a0043..ba8da5bad8 100644
--- a/packages/cli/src/lib/bundler/transforms.ts
+++ b/packages/cli/src/lib/bundler/transforms.ts
@@ -190,7 +190,6 @@ export const transforms = (options: TransformOptions): Transforms => {
   if (isDev) {
     plugins.push(
       new ReactRefreshPlugin({
-        esModule: true,
         overlay: { sockProtocol: 'ws' },
       }),
     );