diff --git a/docs/external-lua-code.md b/docs/external-lua-code.md
new file mode 100644
index 00000000..3d60cb21
--- /dev/null
+++ b/docs/external-lua-code.md
@@ -0,0 +1,87 @@
+---
+title: External Lua Code
+---
+
+As of `0.40.0`, tstl supports module resolution for libraries, which means you can _use_ and _create_ npm packages containing `.lua` files. You can also include Lua source files directly into your source code.
+
+## Adding Lua files to your project sources
+
+You can simply add a Lua file as part of your project sources if you add [a declaration file](./advanced/writing-declarations.md) with the same name. You can then simply import the Lua code in your TypeScript. Your project should look like:
+
+```
+main.ts
+somelua.lua
+somelua.d.ts
+tsconfig.json
+```
+
+## Using NPM packages
+
+To use a Lua package, install it via npm and use it as you would for any regular npm package in TypeScript. If the package does not include its own `.d.ts` declaration files, you can create your own by adding a `<package name>.d.ts` [declaration file](./advanced/writing-declarations.md) to your source files.
+
+:::note
+Including TS or JS files from npm packages is currently NOT supported.
+:::
+
+## Creating Lua NPM packages
+
+If you want to distribute your tstl created Lua as a library, you will need to enable the library build mode in `tsconfig.json`, and enable the output of declaration files:
+
+```json title=json.config
+{
+    "compilerOptions": {
+        ...
+        "outDir": "dist", // Output package contents to dist directory
+        "declaration": true
+    },
+    "tstl": {
+        ...
+        "buildMode": "library"
+    }
+}
+```
+
+Then add or update your `package.json` so it contains the following information:
+
+```json title=package.json
+{
+  "name": "example-tstl-lua-package",
+  "version": "1.0.0",
+  "description": "A package created with TypeScriptToLua",
+  "scripts": {
+    "prepublish": "tstl" // Make sure latest lua is built before publishing
+  },
+  // Only include dist files
+  "files": ["dist/**/*.lua", "dist/**/*.d.ts"]
+}
+```
+
+With these two files you are now ready to publish your npm package with `npm publish`!
+
+:::warning
+Currently, projects using `"buildMode": "library"` cannot be bundled.
+:::
+
+## Example projects
+
+For example projects using external Lua, you can look at the projects used in the TypeScriptToLua tests:
+
+### [A project using Lua from node_modules packages](https://github.com/TypeScriptToLua/TypeScriptToLua/tree/master/test/transpile/module-resolution/project-with-node-modules)
+
+A project using dependencies from its [node_modules directory](https://github.com/TypeScriptToLua/TypeScriptToLua/tree/master/test/transpile/module-resolution/project-with-node-modules/node_modules) with Lua code. These example dependencies include:
+
+- `lua-global-with-decls`: Lua code + TypeScript declarations defining global functions.
+- `lua-global-without-decls`: Lua code defining global functions.
+  - Declaration file is added manually in [lua-global-without-decls.d.ts in the project sources](https://github.com/TypeScriptToLua/TypeScriptToLua/tree/master/test/transpile/module-resolution/project-with-node-modules).
+- `lua-module-with-decls`: Lua code + TypeScript declarations for 'module' files, i.e Lua files that return a table of exported functions.
+- `lua-module-with-decls`: Lua code for 'module' files, i.e Lua files that return a table of exported functions.
+  - Declaration files are added manually in [lua-module-without-decls.d.ts in the project sources](https://github.com/TypeScriptToLua/TypeScriptToLua/tree/master/test/transpile/module-resolution/project-with-node-modules).
+
+### [A project with Lua sources](https://github.com/TypeScriptToLua/TypeScriptToLua/tree/master/test/transpile/module-resolution/project-with-lua-sources)
+
+This project includes Lua files as part of the project's source files. To use the Lua from the files you have to provide declaration files with a matching name and location for each file. For examples `some_dir/library.lua` & `some_dir/library.d.ts`. The declaration files contain the TypeScript declarations of the corresponding Lua file. Both Lua and .d.ts files should be checked into your repository!
+
+This project contains two Lua source files:
+
+- `luafile.lua`: Some Lua right next to the .ts files using it.
+- `lua_sources/otherluaFile.lua`: Lua in a separate `lua_sources` directory, in case you want to group all your Lua files into one directory.
diff --git a/package-lock.json b/package-lock.json
index 320722b9..e99b6e6f 100644
--- a/package-lock.json
+++ b/package-lock.json
@@ -32,7 +32,7 @@
                 "file-loader": "^6.1.1",
                 "fork-ts-checker-webpack-plugin": "^5.2.0",
                 "null-loader": "^4.0.1",
-                "prettier": "^2.3.1",
+                "prettier": "2.3.1",
                 "raw-loader": "^4.0.2",
                 "sass": "^1.27.0",
                 "sass-loader": "^10.0.4",
diff --git a/package.json b/package.json
index 27eb17d1..68f90bbf 100644
--- a/package.json
+++ b/package.json
@@ -39,7 +39,7 @@
         "file-loader": "^6.1.1",
         "fork-ts-checker-webpack-plugin": "^5.2.0",
         "null-loader": "^4.0.1",
-        "prettier": "^2.3.1",
+        "prettier": "2.3.1",
         "raw-loader": "^4.0.2",
         "sass": "^1.27.0",
         "sass-loader": "^10.0.4",
diff --git a/sidebars.json b/sidebars.json
index 6e0b48cd..dee34c75 100644
--- a/sidebars.json
+++ b/sidebars.json
@@ -4,6 +4,7 @@
         "configuration",
         "caveats",
         "the-self-parameter",
+        "external-lua-code",
         "editor-support",
         {
             "type": "category",