diff --git a/lib/babel.js b/lib/babel.js
index 24efb4df0..7828c7596 100644
--- a/lib/babel.js
+++ b/lib/babel.js
@@ -25,7 +25,8 @@ sourceMapSupport.install({
 });
 
 var createEspowerPlugin = require('babel-plugin-espower/create');
-var requireFromString = require('require-from-string');
+var libHook = require('istanbul-lib-hook');
+var path = require('path');
 var loudRejection = require('loud-rejection/api')(process);
 var resolveFrom = require('resolve-from');
 var hasGenerator = require('has-generator');
@@ -49,15 +50,6 @@ var powerAssert = createEspowerPlugin(babel, {
 	patterns: require('./enhance-assert').PATTERNS
 });
 
-// if generators are not supported, use regenerator
-var options = {
-	blacklist: hasGenerator ? ['regenerator'] : [],
-	optional: hasGenerator ? ['asyncToGenerator', 'runtime'] : ['runtime'],
-	plugins: [powerAssert],
-	sourceMaps: true,
-	inputSourceMap: null
-};
-
 // check if test files required ava and show error, when they didn't
 exports.avaRequired = false;
 
@@ -65,21 +57,49 @@ process.on('uncaughtException', function (exception) {
 	send('uncaughtException', {exception: serializeError(exception)});
 });
 
-// try to load an input source map for the test file, in case the file was
-// already compiled once by the user
-var inputSourceMap = sourceMapSupport.retrieveSourceMap(testPath);
-if (inputSourceMap) {
-	// source-map-support returns the source map as a json-encoded string, but
-	// babel requires an actual object
-	options.inputSourceMap = JSON.parse(inputSourceMap.map);
+// Append AVA's node_modules paths, this is so users don't need to install Babel as a dependency.
+var Module = module.constructor;
+var originalNodeModulePaths = Module._nodeModulePaths;
+var pathToAppend = path.join(__dirname, '../node_modules');
+Module._nodeModulePaths = function () {
+	var paths = originalNodeModulePaths.apply(this, arguments);
+	return paths.concat([pathToAppend]);
+};
+
+// Install a require hook.
+
+// Currently only matches the test file. Easy to extend.
+function matcher(file) {
+	return file === testPath;
 }
 
-// include test file
-var transpiled = babel.transformFileSync(testPath, options);
-sourceMapCache[testPath] = transpiled.map;
-requireFromString(transpiled.code, testPath, {
-	appendPaths: module.paths
-});
+function transform(code, file) {
+	// if generators are not supported, use regenerator
+	var options = {
+		blacklist: hasGenerator ? ['regenerator'] : [],
+		optional: hasGenerator ? ['asyncToGenerator', 'runtime'] : ['runtime'],
+		plugins: [powerAssert],
+		sourceMaps: true,
+		filename: file
+	};
+
+	// try to load an input source map for the test file, in case the file was
+	// already compiled once by the user
+	var inputSourceMap = sourceMapSupport.retrieveSourceMap(file);
+	if (inputSourceMap) {
+		// source-map-support returns the source map as a json-encoded string, but
+		// babel requires an actual object
+		options.inputSourceMap = JSON.parse(inputSourceMap.map);
+	}
+
+	var transpiled = babel.transform(code, options);
+	sourceMapCache[testPath] = transpiled.map;
+	return transpiled.code;
+}
+
+libHook.hookRequire(matcher, transform);
+
+require(testPath);
 
 // if ava was not required, show an error
 if (!exports.avaRequired) {
diff --git a/package.json b/package.json
index d7171dce8..2d7f778db 100644
--- a/package.json
+++ b/package.json
@@ -96,6 +96,7 @@
     "is-generator-fn": "^1.0.0",
     "is-observable": "^0.1.0",
     "is-promise": "^2.1.0",
+    "istanbul-lib-hook": "^1.0.0-alpha.3",
     "loud-rejection": "^1.2.0",
     "max-timeout": "^1.0.0",
     "meow": "^3.6.0",
diff --git a/test/fork.js b/test/fork.js
index 3cca1df6c..b3fdad8ba 100644
--- a/test/fork.js
+++ b/test/fork.js
@@ -39,7 +39,7 @@ test('rejects on error and streams output', function (t) {
 	fork(fixture('broken.js'))
 		.run()
 		.on('uncaughtException', function (data) {
-			t.true(/no such file or directory/.test(data.exception.message));
+			t.match(data.exception.message, /Cannot find module /);
 		})
 		.catch(function () {
 			t.pass();