diff --git a/babel-preset/configs/hmr.js b/babel-preset/configs/hmr.js
index 2a4bb9a9370..e88e2c67d5b 100644
--- a/babel-preset/configs/hmr.js
+++ b/babel-preset/configs/hmr.js
@@ -8,16 +8,23 @@
  */
 'use strict';
 
+var path = require('path');
 var resolvePlugins = require('../lib/resolvePlugins');
 
-module.exports = function(options) {
+var hmrTransform = 'react-transform-hmr/lib/index.js';
+var transformPath = require.resolve(hmrTransform);
+
+module.exports = function(options, filename) {
+  var transform = filename
+      ? path.relative(path.dirname(filename), transformPath) // packager can't handle absolute paths
+      : hmrTransform;
   return {
     plugins: resolvePlugins([
       [
         'react-transform',
         {
           transforms: [{
-            transform: 'react-transform-hmr/lib/index.js',
+            transform: transform,
             imports: ['React'],
             locals: ['module'],
           }]
diff --git a/babel-preset/package.json b/babel-preset/package.json
index 0ab0579b153..00d24728afd 100644
--- a/babel-preset/package.json
+++ b/babel-preset/package.json
@@ -1,6 +1,6 @@
 {
   "name": "babel-preset-react-native",
-  "version": "1.4.0",
+  "version": "1.5.0",
   "description": "Babel preset for React Native applications",
   "main": "index.js",
   "repository": "https://github.com/facebook/react-native/tree/master/babel-preset",