diff --git a/packages/next/build/webpack/loaders/next-image-loader.js b/packages/next/build/webpack/loaders/next-image-loader.js
index e4aff1b76e32f..4a4198b39154e 100644
--- a/packages/next/build/webpack/loaders/next-image-loader.js
+++ b/packages/next/build/webpack/loaders/next-image-loader.js
@@ -17,7 +17,7 @@ function nextImageLoader(content) {
       '/static/image/[path][name].[hash].[ext]',
       opts
     )
-    const outputPath = '/_next' + interpolatedName
+    const outputPath = assetPrefix + '/_next' + interpolatedName
 
     let extension = loaderUtils.interpolateName(this, '[ext]', opts)
     if (extension === 'jpg') {
@@ -32,7 +32,7 @@ function nextImageLoader(content) {
       if (isDev) {
         const prefix = 'http://localhost'
         const url = new URL('/_next/image', prefix)
-        url.searchParams.set('url', assetPrefix + outputPath)
+        url.searchParams.set('url', outputPath)
         url.searchParams.set('w', BLUR_IMG_SIZE)
         url.searchParams.set('q', BLUR_QUALITY)
         blurDataURL = url.href.slice(prefix.length)
diff --git a/packages/next/server/config.ts b/packages/next/server/config.ts
index 5690e59b984d7..24fa19b07bdab 100644
--- a/packages/next/server/config.ts
+++ b/packages/next/server/config.ts
@@ -196,6 +196,13 @@ function assignDefaults(userConfig: { [key: string]: any }) {
         )
       }
 
+      // static images are automatically prefixed with assetPrefix
+      // so we need to ensure _next/image allows downloading from
+      // this resource
+      if (config.assetPrefix?.startsWith('http')) {
+        images.domains.push(new URL(config.assetPrefix).hostname)
+      }
+
       if (images.domains.length > 50) {
         throw new Error(
           `Specified images.domains exceeds length of 50, received length (${images.domains.length}), please reduce the length of the array to continue.\nSee more info here: https://nextjs.org/docs/messages/invalid-images-config`
diff --git a/packages/next/server/image-optimizer.ts b/packages/next/server/image-optimizer.ts
index a2d7c6a664d0c..4a4227aeeb1f5 100644
--- a/packages/next/server/image-optimizer.ts
+++ b/packages/next/server/image-optimizer.ts
@@ -135,7 +135,9 @@ export async function imageOptimizer(
   }
 
   // Should match output from next-image-loader
-  const isStatic = url.startsWith('/_next/static/image')
+  const isStatic = url.startsWith(
+    `${nextConfig.basePath || ''}/_next/static/image`
+  )
 
   const width = parseInt(w, 10)
 
diff --git a/test/integration/image-component/base-path/components/TallImage.js b/test/integration/image-component/base-path/components/TallImage.js
new file mode 100644
index 0000000000000..c0fbbcfe6d63c
--- /dev/null
+++ b/test/integration/image-component/base-path/components/TallImage.js
@@ -0,0 +1,20 @@
+import React from 'react'
+import Image from 'next/image'
+
+import testTall from './tall.png'
+
+const Page = () => {
+  return (
+    <div>
+      <h1 id="page-header">Static Image</h1>
+      <Image
+        id="basic-static"
+        src={testTall}
+        layout="fixed"
+        placeholder="blur"
+      />
+    </div>
+  )
+}
+
+export default Page
diff --git a/test/integration/image-component/base-path/components/tall.png b/test/integration/image-component/base-path/components/tall.png
new file mode 100644
index 0000000000000..a792dda6c172f
Binary files /dev/null and b/test/integration/image-component/base-path/components/tall.png differ
diff --git a/test/integration/image-component/base-path/pages/static-img.js b/test/integration/image-component/base-path/pages/static-img.js
new file mode 100644
index 0000000000000..29912c6defc24
--- /dev/null
+++ b/test/integration/image-component/base-path/pages/static-img.js
@@ -0,0 +1,54 @@
+import React from 'react'
+import testImg from '../public/foo/test-rect.jpg'
+import Image from 'next/image'
+
+import testJPG from '../public/test.jpg'
+import testPNG from '../public/test.png'
+import testWEBP from '../public/test.webp'
+import testSVG from '../public/test.svg'
+import testGIF from '../public/test.gif'
+import testBMP from '../public/test.bmp'
+import testICO from '../public/test.ico'
+
+import TallImage from '../components/TallImage'
+
+const Page = () => {
+  return (
+    <div>
+      <h1 id="page-header">Static Image</h1>
+      <Image
+        id="basic-static"
+        src={testImg}
+        layout="fixed"
+        placeholder="blur"
+      />
+      <TallImage />
+      <Image
+        id="defined-size-static"
+        src={testPNG}
+        layout="fixed"
+        height="200"
+        width="200"
+      />
+      <Image id="require-static" src={require('../public/foo/test-rect.jpg')} />
+      <Image
+        id="basic-non-static"
+        src="/test-rect.jpg"
+        width="400"
+        height="300"
+      />
+      <br />
+      <Image id="blur-png" src={testPNG} placeholder="blur" />
+      <Image id="blur-jpg" src={testJPG} placeholder="blur" />
+      <Image id="blur-webp" src={testWEBP} placeholder="blur" />
+      <Image id="static-svg" src={testSVG} />
+      <Image id="static-gif" src={testGIF} />
+      <Image id="static-bmp" src={testBMP} />
+      <Image id="static-ico" src={testICO} />
+      <br />
+      <Image id="static-unoptimized" src={testJPG} unoptimized />
+    </div>
+  )
+}
+
+export default Page
diff --git a/test/integration/image-component/base-path/public/foo/test-rect.jpg b/test/integration/image-component/base-path/public/foo/test-rect.jpg
new file mode 100644
index 0000000000000..68d3a8415f5e6
Binary files /dev/null and b/test/integration/image-component/base-path/public/foo/test-rect.jpg differ
diff --git a/test/integration/image-component/base-path/public/test.ico b/test/integration/image-component/base-path/public/test.ico
new file mode 100644
index 0000000000000..55cce0b4a8547
Binary files /dev/null and b/test/integration/image-component/base-path/public/test.ico differ
diff --git a/test/integration/image-component/base-path/public/test.webp b/test/integration/image-component/base-path/public/test.webp
new file mode 100644
index 0000000000000..4b306cb0898cc
Binary files /dev/null and b/test/integration/image-component/base-path/public/test.webp differ
diff --git a/test/integration/image-component/base-path/test/static.test.js b/test/integration/image-component/base-path/test/static.test.js
new file mode 100644
index 0000000000000..c3b050cb54387
--- /dev/null
+++ b/test/integration/image-component/base-path/test/static.test.js
@@ -0,0 +1,105 @@
+import {
+  findPort,
+  killApp,
+  nextBuild,
+  nextStart,
+  renderViaHTTP,
+  File,
+  waitFor,
+} from 'next-test-utils'
+import webdriver from 'next-webdriver'
+import { join } from 'path'
+
+const appDir = join(__dirname, '../')
+let appPort
+let app
+let browser
+let html
+
+const indexPage = new File(join(appDir, 'pages/static-img.js'))
+
+const runTests = () => {
+  it('Should allow an image with a static src to omit height and width', async () => {
+    expect(await browser.elementById('basic-static')).toBeTruthy()
+    expect(await browser.elementById('blur-png')).toBeTruthy()
+    expect(await browser.elementById('blur-webp')).toBeTruthy()
+    expect(await browser.elementById('blur-jpg')).toBeTruthy()
+    expect(await browser.elementById('static-svg')).toBeTruthy()
+    expect(await browser.elementById('static-gif')).toBeTruthy()
+    expect(await browser.elementById('static-bmp')).toBeTruthy()
+    expect(await browser.elementById('static-ico')).toBeTruthy()
+    expect(await browser.elementById('static-unoptimized')).toBeTruthy()
+  })
+  it('Should use immutable cache-control header for static import', async () => {
+    await browser.eval(
+      `document.getElementById("basic-static").scrollIntoView()`
+    )
+    await waitFor(1000)
+    const url = await browser.eval(
+      `document.getElementById("basic-static").src`
+    )
+    const res = await fetch(url)
+    expect(res.headers.get('cache-control')).toBe(
+      'public, max-age=315360000, immutable'
+    )
+  })
+  it('Should use immutable cache-control header even when unoptimized', async () => {
+    await browser.eval(
+      `document.getElementById("static-unoptimized").scrollIntoView()`
+    )
+    await waitFor(1000)
+    const url = await browser.eval(
+      `document.getElementById("static-unoptimized").src`
+    )
+    const res = await fetch(url)
+    expect(res.headers.get('cache-control')).toBe(
+      'public, max-age=31536000, immutable'
+    )
+  })
+  it('Should automatically provide an image height and width', async () => {
+    expect(html).toContain('width:400px;height:300px')
+  })
+  it('Should allow provided width and height to override intrinsic', async () => {
+    expect(html).toContain('width:200px;height:200px')
+    expect(html).not.toContain('width:400px;height:400px')
+  })
+  it('Should add a blurry placeholder to statically imported jpg', async () => {
+    expect(html).toContain(
+      `style="position:absolute;top:0;left:0;bottom:0;right:0;box-sizing:border-box;padding:0;border:none;margin:auto;display:block;width:0;height:0;min-width:100%;max-width:100%;min-height:100%;max-height:100%;filter:blur(20px);background-size:cover;background-image:url(&quot;data:image/jpeg;base64,/9j/4AAQSkZJRgABAQAAAQABAAD/2wCEAAoKCgoKCgsMDAsPEA4QDxYUExMUFiIYGhgaGCIzICUgICUgMy03LCksNy1RQDg4QFFeT0pPXnFlZXGPiI+7u/sBCgoKCgoKCwwMCw8QDhAPFhQTExQWIhgaGBoYIjMgJSAgJSAzLTcsKSw3LVFAODhAUV5PSk9ecWVlcY+Ij7u7+//CABEIAAgACAMBIgACEQEDEQH/xAAUAAEAAAAAAAAAAAAAAAAAAAAH/9oACAEBAAAAADX/xAAUAQEAAAAAAAAAAAAAAAAAAAAA/9oACAECEAAAAH//xAAUAQEAAAAAAAAAAAAAAAAAAAAA/9oACAEDEAAAAH//xAAdEAABAgcAAAAAAAAAAAAAAAATEhUAAwUUIzLS/9oACAEBAAE/AB0ZlUac43GqMYuo/8QAFBEBAAAAAAAAAAAAAAAAAAAAAP/aAAgBAgEBPwB//8QAFBEBAAAAAAAAAAAAAAAAAAAAAP/aAAgBAwEBPwB//9k=&quot;);background-position:0% 0%"`
+    )
+  })
+  it('Should add a blurry placeholder to statically imported png', async () => {
+    expect(html).toContain(
+      `style="position:absolute;top:0;left:0;bottom:0;right:0;box-sizing:border-box;padding:0;border:none;margin:auto;display:block;width:0;height:0;min-width:100%;max-width:100%;min-height:100%;max-height:100%;filter:blur(20px);background-size:cover;background-image:url(&quot;data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAgAAAAICAQAAABuBnYAAAAATklEQVR42i2I0QmAMBQD869Q9K+IsxU6RkfoiA6T55VXDpJLJC9uUJIzcx+XFd2dXMbx8n+QpoeYDpgY66RaDA83jCUfVpK2pER1dcEUP+KfSBtXK+BpAAAAAElFTkSuQmCC&quot;);background-position:0% 0%"`
+    )
+  })
+}
+
+describe('Build Error Tests for basePath', () => {
+  it('should throw build error when import statement is used with missing file', async () => {
+    await indexPage.replace(
+      '../public/foo/test-rect.jpg',
+      '../public/foo/test-rect-broken.jpg'
+    )
+
+    const { stderr } = await nextBuild(appDir, undefined, { stderr: true })
+    await indexPage.restore()
+
+    expect(stderr).toContain(
+      "Error: Can't resolve '../public/foo/test-rect-broken.jpg"
+    )
+  })
+})
+describe('Static Image Component Tests for basePath', () => {
+  beforeAll(async () => {
+    await nextBuild(appDir)
+    appPort = await findPort()
+    app = await nextStart(appDir, appPort)
+    html = await renderViaHTTP(appPort, '/docs/static-img')
+    browser = await webdriver(appPort, '/docs/static-img')
+  })
+  afterAll(() => {
+    killApp(app)
+  })
+  runTests()
+})