diff --git a/packages/ignite-element/src/tests/createLibConfig.test.ts b/packages/ignite-element/src/tests/createLibConfig.test.ts
new file mode 100644
index 00000000..19c09fb4
--- /dev/null
+++ b/packages/ignite-element/src/tests/createLibConfig.test.ts
@@ -0,0 +1,261 @@
+// @vitest-environment node
+import { describe, expect, it, vi } from "vitest";
+
+vi.mock("vite-plugin-dts", () => ({
+	default: vi.fn((options) => ({ name: "vite-plugin-dts", options })),
+}));
+
+import { createLibConfig } from "../../../../configs/vite/lib";
+
+describe("createLibConfig", () => {
+	describe("build.outDir", () => {
+		it("defaults outDir to 'dist' when not provided", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+			});
+			expect(config.build?.outDir).toBe("dist");
+		});
+
+		it("uses provided outDir", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+				outDir: "output",
+			});
+			expect(config.build?.outDir).toBe("output");
+		});
+	});
+
+	describe("build.lib", () => {
+		it("sets lib.name to the provided name", () => {
+			const config = createLibConfig({
+				name: "ignite-core",
+				entry: "src/index.ts",
+				external: [],
+			});
+			expect((config.build?.lib as { name: string }).name).toBe("ignite-core");
+		});
+
+		it("sets lib.entry to a string entry", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+			});
+			expect((config.build?.lib as { entry: unknown }).entry).toBe(
+				"src/index.ts",
+			);
+		});
+
+		it("sets lib.entry to a record entry", () => {
+			const entry = { index: "src/index.ts", xstate: "src/xstate.ts" };
+			const config = createLibConfig({
+				name: "my-lib",
+				entry,
+				external: [],
+			});
+			expect((config.build?.lib as { entry: unknown }).entry).toEqual(entry);
+		});
+	});
+
+	describe("build.lib.fileName", () => {
+		it("returns '<name>.<format>.js' when entryName is 'index'", () => {
+			const config = createLibConfig({
+				name: "ignite-element",
+				entry: { index: "src/index.ts" },
+				external: [],
+			});
+			const lib = config.build?.lib as {
+				fileName?: (format: string, entryName: string) => string;
+			};
+			expect(lib.fileName?.("esm", "index")).toBe("ignite-element.esm.js");
+		});
+
+		it("returns '<name>.<format>.js' for 'cjs' format with 'index' entry", () => {
+			const config = createLibConfig({
+				name: "ignite-element",
+				entry: "src/index.ts",
+				external: [],
+			});
+			const lib = config.build?.lib as {
+				fileName?: (format: string, entryName: string) => string;
+			};
+			expect(lib.fileName?.("cjs", "index")).toBe("ignite-element.cjs.js");
+		});
+
+		it("returns '<entryName>.<format>.js' when entryName is not 'index'", () => {
+			const config = createLibConfig({
+				name: "ignite-element",
+				entry: { xstate: "src/xstate.ts" },
+				external: [],
+			});
+			const lib = config.build?.lib as {
+				fileName?: (format: string, entryName: string) => string;
+			};
+			expect(lib.fileName?.("esm", "xstate")).toBe("xstate.esm.js");
+		});
+
+		it("returns '<entryName>.<format>.js' for multiple non-index named entries", () => {
+			const config = createLibConfig({
+				name: "ignite-element",
+				entry: { redux: "src/redux.ts", mobx: "src/mobx.ts" },
+				external: [],
+			});
+			const lib = config.build?.lib as {
+				fileName?: (format: string, entryName: string) => string;
+			};
+			expect(lib.fileName?.("cjs", "redux")).toBe("redux.cjs.js");
+			expect(lib.fileName?.("cjs", "mobx")).toBe("mobx.cjs.js");
+		});
+
+		it("uses entryName for non-index entries regardless of lib name", () => {
+			const config = createLibConfig({
+				name: "ignite-element",
+				entry: { "ignite-jsx": "src/jsx.ts" },
+				external: [],
+			});
+			const lib = config.build?.lib as {
+				fileName?: (format: string, entryName: string) => string;
+			};
+			expect(lib.fileName?.("esm", "ignite-jsx")).toBe("ignite-jsx.esm.js");
+		});
+	});
+
+	describe("build.rollupOptions", () => {
+		it("passes the external array to rollupOptions", () => {
+			const external = ["xstate", "vite", "react"];
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external,
+			});
+			expect(config.build?.rollupOptions?.external).toEqual(external);
+		});
+
+		it("sets rollupOptions.output to undefined when globals is not provided", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+			});
+			expect(config.build?.rollupOptions?.output).toBeUndefined();
+		});
+
+		it("sets rollupOptions.output.globals when globals are provided", () => {
+			const globals = { xstate: "XState", react: "React" };
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: ["xstate", "react"],
+				globals,
+			});
+			expect(config.build?.rollupOptions?.output).toEqual({ globals });
+		});
+
+		it("handles an empty external array", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+			});
+			expect(config.build?.rollupOptions?.external).toEqual([]);
+		});
+
+		it("handles multiple external dependencies", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: ["react", "react-dom", "xstate", "@xstate/react"],
+			});
+			expect(config.build?.rollupOptions?.external).toHaveLength(4);
+		});
+	});
+
+	describe("plugins", () => {
+		it("includes exactly one plugin", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+			});
+			expect(config.plugins).toHaveLength(1);
+		});
+
+		it("configures dts plugin with insertTypesEntry: true", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+			});
+			const dtsPlugin = config.plugins?.[0] as {
+				options: { insertTypesEntry: boolean };
+			};
+			expect(dtsPlugin.options.insertTypesEntry).toBe(true);
+		});
+
+		it("configures dts outDir as 'dist/types' using default outDir", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+			});
+			const dtsPlugin = config.plugins?.[0] as {
+				options: { outDir: string };
+			};
+			expect(dtsPlugin.options.outDir).toBe("dist/types");
+		});
+
+		it("configures dts outDir as '<outDir>/types' using custom outDir", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+				outDir: "build",
+			});
+			const dtsPlugin = config.plugins?.[0] as {
+				options: { outDir: string };
+			};
+			expect(dtsPlugin.options.outDir).toBe("build/types");
+		});
+
+		it("types outDir uses the same outDir value as build.outDir", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+				outDir: "custom-dist",
+			});
+			const dtsPlugin = config.plugins?.[0] as {
+				options: { outDir: string };
+			};
+			// build.outDir and dts outDir should both use the custom outDir value
+			expect(config.build?.outDir).toBe("custom-dist");
+			expect(dtsPlugin.options.outDir).toBe("custom-dist/types");
+		});
+	});
+
+	describe("complete config shape", () => {
+		it("returns an object with build and plugins keys", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: [],
+			});
+			expect(config).toHaveProperty("build");
+			expect(config).toHaveProperty("plugins");
+		});
+
+		it("does not set globals output when globals is explicitly undefined", () => {
+			const config = createLibConfig({
+				name: "my-lib",
+				entry: "src/index.ts",
+				external: ["xstate"],
+				globals: undefined,
+			});
+			expect(config.build?.rollupOptions?.output).toBeUndefined();
+		});
+	});
+});
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