diff --git a/packages/scripts/CHANGELOG.md b/packages/scripts/CHANGELOG.md
index 9c208e0d329cd8..4ebc36ac3d2015 100644
--- a/packages/scripts/CHANGELOG.md
+++ b/packages/scripts/CHANGELOG.md
@@ -2,10 +2,15 @@
 
 ## Unreleased
 
-### Bug Fix
+### New Feature
+
+-   Add `--webpack-src-dir` CLI flag to allow customizing the source code directory (`src` by default) ([#39618](https://github.com/WordPress/gutenberg/pull/39618)).
+
+### Bug Fixes
 
 -   Add `vendor/` to `.markdownlintignore`, to match `lint-md-docs` docs ([#39724](https://github.com/WordPress/gutenberg/pull/39724)).
 -   Include files with `.jsx` extension in the build process ([#39613](https://github.com/WordPress/gutenberg/pull/39613)).
+-   Ensure that the default logic for entry points in the build commands is executed only when used the default config ([#39618](https://github.com/WordPress/gutenberg/pull/39618)).
 
 ## 22.2.0 (2022-03-11)
 
diff --git a/packages/scripts/README.md b/packages/scripts/README.md
index 8fe5bfefb6fc42..0d4e12ca8a09cd 100644
--- a/packages/scripts/README.md
+++ b/packages/scripts/README.md
@@ -47,6 +47,10 @@ _Example:_
 
 It might also be a good idea to get familiar with the [JavaScript Build Setup tutorial](https://github.com/WordPress/gutenberg/tree/HEAD/docs/how-to-guides/javascript/js-build-setup.md) for setting up a development environment to use ESNext syntax. It gives a very in-depth explanation of how to use the [build](#build) and [start](#start) scripts.
 
+## Automatic block.json detection and the source code directory
+When using the `start` or `build` commands, the source code directory ( the default is `./src`) and its subdirectories are scanned for the existence of `block.json` files. If one or more are found, they are treated a entry points and will be output into corresponding folders in the `build` directory. The allows for the creation of multiple blocks that use a single build process. The source directory can be customized using the `--webpack-src-dir` flag.
+
+
 ## Updating to New Release
 
 To update an existing project to a new version of `@wordpress/scripts`, open the [changelog](https://github.com/WordPress/gutenberg/blob/HEAD/packages/scripts/CHANGELOG.md), find the version you’re currently on (check `package.json` in the top-level directory of your project), and apply the migration instructions for the newer versions.
@@ -55,6 +59,7 @@ In most cases bumping the `@wordpress/scripts` version in `package.json` and run
 
 We commit to keeping the breaking changes minimal so you can upgrade `@wordpress/scripts` as seamless as possible.
 
+
 ## Available Scripts
 
 ### `build`
@@ -80,7 +85,8 @@ _Example:_
 	"scripts": {
 		"build": "wp-scripts build",
 		"build:custom": "wp-scripts build entry-one.js entry-two.js --output-path=custom",
-		"build:copy-php": "wp-scripts build --webpack-copy-php"
+		"build:copy-php": "wp-scripts build --webpack-copy-php",
+		"build:custom-directory": "wp-scripts build --webpack-src-dir=custom-directory"
 	}
 }
 ```
@@ -90,12 +96,14 @@ This is how you execute the script with presented setup:
 -   `npm run build` - builds the code for production.
 -   `npm run build:custom` - builds the code for production with two entry points and a custom output directory. Paths for custom entry points are relative to the project root.
 -   `npm run build:copy-php` - builds the code for production and opts into copying PHP files from the `src` directory and its subfolders to the output directory.
+-   `build:custom-directory` - builds the code for production using the `custom-directory` as the source code directory.
 
 This script automatically use the optimized config but sometimes you may want to specify some custom options:
 
 -   `--webpack-bundle-analyzer` – enables visualization for the size of webpack output files with an interactive zoomable treemap.
--   `--webpack-copy-php` – enables copying PHP files from the `src` directory and its subfolders to the output directory.
+-   `--webpack-copy-php` – enables copying PHP files from the source directory ( default is `src` ) and its subfolders to the output directory.
 -   `--webpack-no-externals` – disables scripts' assets generation, and omits the list of default externals.
+-   `--webpack-src-dir` – Allows customization of the source code directory. Default is `src`.
 
 #### Advanced information
 
@@ -371,7 +379,8 @@ _Example:_
 		"start": "wp-scripts start",
 		"start:hot": "wp-scripts start --hot",
 		"start:custom": "wp-scripts start entry-one.js entry-two.js --output-path=custom",
-		"start:copy-php": "wp-scripts start"
+		"start:copy-php": "wp-scripts start --webpack-copy-php",
+		"start:custom-directory": "wp-scripts start --webpack-src-dir=custom-directory",
 	}
 }
 ```
@@ -382,14 +391,16 @@ This is how you execute the script with presented setup:
 -   `npm run start:hot` - starts the build for development with "Fast Refresh". The page will automatically reload if you make changes to the files.
 -   `npm run start:custom` - starts the build for development which contains two entry points and a custom output directory. Paths for custom entry points are relative to the project root.
 -   `npm run start:copy-php` - starts the build for development and opts into copying PHP files from the `src` directory and its subfolders to the output directory.
+-   `npm run start:custom-directory` - builds the code for production using the `custom-directory` as the source code directory.
 
 This script automatically use the optimized config but sometimes you may want to specify some custom options:
 
 -   `--hot` – enables "Fast Refresh". The page will automatically reload if you make changes to the code. _For now, it requires that WordPress has the [`SCRIPT_DEBUG`](https://wordpress.org/support/article/debugging-in-wordpress/#script_debug) flag enabled and the [Gutenberg](https://wordpress.org/plugins/gutenberg/) plugin installed._
 -   `--webpack-bundle-analyzer` – enables visualization for the size of webpack output files with an interactive zoomable treemap.
--   `--webpack-copy-php` – enables copying PHP files from the `src` directory and its subfolders to the output directory.
+-   `--webpack-copy-php` – enables copying PHP files from the source directory ( default is `src` ) and its subfolders to the output directory.
 -   `--webpack-devtool` – controls how source maps are generated. See options at https://webpack.js.org/configuration/devtool/#devtool.
 -   `--webpack-no-externals` – disables scripts' assets generation, and omits the list of default externals.
+-   `--webpack-src-dir` – Allows customization of the source code directory. Default is `src`.
 
 #### Advanced information
 
diff --git a/packages/scripts/config/webpack.config.js b/packages/scripts/config/webpack.config.js
index b3eddc562f6232..d03e6fe18646f2 100644
--- a/packages/scripts/config/webpack.config.js
+++ b/packages/scripts/config/webpack.config.js
@@ -36,7 +36,7 @@ if ( ! browserslist.findConfig( '.' ) ) {
 }
 const hasReactFastRefresh = hasArgInCLI( '--hot' ) && ! isProduction;
 
-const copyWebPackPatterns = process.env.WP_COPY_PHP_FILES_TO_DIST
+const copyWebpackPatterns = process.env.WP_COPY_PHP_FILES_TO_DIST
 	? '**/{block.json,*.php}'
 	: '**/block.json';
 
@@ -90,7 +90,7 @@ const cssLoaders = [
 const config = {
 	mode,
 	target,
-	entry: getWebpackEntryPoints(),
+	entry: getWebpackEntryPoints,
 	output: {
 		filename: '[name].js',
 		path: resolve( process.cwd(), 'build' ),
@@ -232,8 +232,8 @@ const config = {
 		new CopyWebpackPlugin( {
 			patterns: [
 				{
-					from: copyWebPackPatterns,
-					context: 'src',
+					from: copyWebpackPatterns,
+					context: process.env.WP_SRC_DIRECTORY,
 					noErrorOnMissing: true,
 				},
 			],
diff --git a/packages/scripts/scripts/build.js b/packages/scripts/scripts/build.js
index 19a244da48e15d..f1d101954e7cb0 100644
--- a/packages/scripts/scripts/build.js
+++ b/packages/scripts/scripts/build.js
@@ -7,7 +7,7 @@ const { sync: resolveBin } = require( 'resolve-bin' );
 /**
  * Internal dependencies
  */
-const { getWebpackArgs, hasArgInCLI } = require( '../utils' );
+const { getWebpackArgs, hasArgInCLI, getArgFromCLI } = require( '../utils' );
 
 process.env.NODE_ENV = process.env.NODE_ENV || 'production';
 
@@ -23,6 +23,10 @@ if ( hasArgInCLI( '--webpack-copy-php' ) ) {
 	process.env.WP_COPY_PHP_FILES_TO_DIST = true;
 }
 
+process.env.WP_SRC_DIRECTORY = hasArgInCLI( '--webpack-src-dir' )
+	? getArgFromCLI( '--webpack-src-dir' )
+	: 'src';
+
 const { status } = spawn( resolveBin( 'webpack' ), getWebpackArgs(), {
 	stdio: 'inherit',
 } );
diff --git a/packages/scripts/scripts/start.js b/packages/scripts/scripts/start.js
index 383634ee8b46bb..7c9aae9c143e6b 100644
--- a/packages/scripts/scripts/start.js
+++ b/packages/scripts/scripts/start.js
@@ -25,6 +25,10 @@ if ( hasArgInCLI( '--webpack-copy-php' ) ) {
 	process.env.WP_COPY_PHP_FILES_TO_DIST = true;
 }
 
+process.env.WP_SRC_DIRECTORY = hasArgInCLI( '--webpack-src-dir' )
+	? getArgFromCLI( '--webpack-src-dir' )
+	: 'src';
+
 const { status } = spawn(
 	resolveBin( 'webpack' ),
 	[ hasArgInCLI( '--hot' ) ? 'serve' : 'watch', ...getWebpackArgs() ],
diff --git a/packages/scripts/utils/config.js b/packages/scripts/utils/config.js
index b8bc4861c1f8de..1d7650a6a89594 100644
--- a/packages/scripts/utils/config.js
+++ b/packages/scripts/utils/config.js
@@ -2,6 +2,7 @@
  * External dependencies
  */
 const chalk = require( 'chalk' );
+const { readFileSync } = require( 'fs' );
 const { basename, dirname, extname, join, sep } = require( 'path' );
 const { sync: glob } = require( 'fast-glob' );
 
@@ -183,26 +184,34 @@ function getWebpackEntryPoints() {
 		return JSON.parse( process.env.WP_ENTRY );
 	}
 
-	// Continue only if the `src` directory exists.
-	if ( ! hasProjectFile( 'src' ) ) {
+	// Continue only if the source directory exists.
+	if ( ! hasProjectFile( process.env.WP_SRC_DIRECTORY ) ) {
+		log(
+			chalk.yellow(
+				`Source directory "${ process.env.WP_SRC_DIRECTORY }" was not found. Please confirm there is a "src" directory in the root or the value passed to --webpack-src-dir is correct.`
+			)
+		);
 		return {};
 	}
 
-	// 2. Checks whether any block metadata files can be detected in the `src` directory.
+	// 2. Checks whether any block metadata files can be detected in the defined source directory.
 	//    It scans all discovered files looking for JavaScript assets and converts them to entry points.
-	const blockMetadataFiles = glob( 'src/**/block.json', {
-		absolute: true,
-	} );
+	const blockMetadataFiles = glob(
+		`${ process.env.WP_SRC_DIRECTORY }/**/block.json`,
+		{
+			absolute: true,
+		}
+	);
 
 	if ( blockMetadataFiles.length > 0 ) {
-		const srcDirectory = fromProjectRoot( 'src' + sep );
+		const srcDirectory = fromProjectRoot(
+			process.env.WP_SRC_DIRECTORY + sep
+		);
 		const entryPoints = blockMetadataFiles.reduce(
 			( accumulator, blockMetadataFile ) => {
-				const {
-					editorScript,
-					script,
-					viewScript,
-				} = require( blockMetadataFile );
+				const { editorScript, script, viewScript } = JSON.parse(
+					readFileSync( blockMetadataFile )
+				);
 				[ editorScript, script, viewScript ]
 					.flat()
 					.filter( ( value ) => value && value.startsWith( 'file:' ) )
@@ -213,7 +222,7 @@ function getWebpackEntryPoints() {
 							value.replace( 'file:', '' )
 						);
 
-						// Takes the path without the file extension, and relative to the `src` directory.
+						// Takes the path without the file extension, and relative to the defined source directory.
 						if ( ! filepath.startsWith( srcDirectory ) ) {
 							log(
 								chalk.yellow(
@@ -223,7 +232,9 @@ function getWebpackEntryPoints() {
 									) }" listed in "${ blockMetadataFile.replace(
 										fromProjectRoot( sep ),
 										''
-									) }". File is located outside of the "src" directory.`
+									) }". File is located outside of the "${
+										process.env.WP_SRC_DIRECTORY
+									}" directory.`
 								)
 							);
 							return;
@@ -233,9 +244,9 @@ function getWebpackEntryPoints() {
 							.replace( srcDirectory, '' )
 							.replace( /\\/g, '/' );
 
-						// Detects the proper file extension used in the `src` directory.
+						// Detects the proper file extension used in the defined source directory.
 						const [ entryFilepath ] = glob(
-							`src/${ entryName }.[jt]s?(x)`,
+							`${ process.env.WP_SRC_DIRECTORY }/${ entryName }.[jt]s?(x)`,
 							{
 								absolute: true,
 							}
@@ -250,7 +261,9 @@ function getWebpackEntryPoints() {
 									) }" listed in "${ blockMetadataFile.replace(
 										fromProjectRoot( sep ),
 										''
-									) }". File does not exist in the "src" directory.`
+									) }". File does not exist in the "${
+										process.env.WP_SRC_DIRECTORY
+									}" directory.`
 								)
 							);
 							return;
@@ -267,14 +280,19 @@ function getWebpackEntryPoints() {
 		}
 	}
 
-	// 3. Checks whether a standard file name can be detected in the `src` directory,
+	// 3. Checks whether a standard file name can be detected in the defined source directory,
 	//    and converts the discovered file to entry point.
-	const [ entryFile ] = glob( 'src/index.[jt]s?(x)', {
-		absolute: true,
-	} );
+	const [ entryFile ] = glob(
+		`${ process.env.WP_SRC_DIRECTORY }/index.[jt]s?(x)`,
+		{
+			absolute: true,
+		}
+	);
 	if ( ! entryFile ) {
 		log(
-			chalk.yellow( 'No entry file discovered in the "src" directory.' )
+			chalk.yellow(
+				`No entry file discovered in the "${ process.env.WP_SRC_DIRECTORY }" directory.`
+			)
 		);
 		return {};
 	}