diff --git a/packages/generator-langium/templates/.vscode/launch.json b/packages/generator-langium/templates/.vscode/launch.json
index e44e9fbc0..454b7dc95 100644
--- a/packages/generator-langium/templates/.vscode/launch.json
+++ b/packages/generator-langium/templates/.vscode/launch.json
@@ -10,11 +10,12 @@
             "type": "extensionHost",
             "request": "launch",
             "args": [
-                "--extensionDevelopmentPath=${workspaceFolder}"
+                "--extensionDevelopmentPath=${workspaceFolder}/packages/extension"
             ],
             "sourceMaps": true,
             "outFiles": [
-                "${workspaceFolder}/out/**/*.js"
+                "${workspaceFolder}/packages/language/out/**/*.js",
+                "${workspaceFolder}/packages/extension/out/**/*.js"
             ]
         },
         {
@@ -27,7 +28,8 @@
             ],
             "sourceMaps": true,
             "outFiles": [
-                "${workspaceFolder}/out/**/*.js",
+                "${workspaceFolder}/packages/language/out/**/*.js",
+                "${workspaceFolder}/packages/extension/out/**/*.js",
                 "${workspaceFolder}/node_modules/langium"
             ]
         }
diff --git a/packages/generator-langium/templates/gitignore.txt b/packages/generator-langium/templates/gitignore.txt
index 4c9df9f0b..32c0c06f5 100644
--- a/packages/generator-langium/templates/gitignore.txt
+++ b/packages/generator-langium/templates/gitignore.txt
@@ -4,5 +4,5 @@
 !.vscode/tasks.json
 node_modules/
 out/
-src/language/generated/
+src/generated/
 syntaxes/
diff --git a/packages/generator-langium/templates/package.json b/packages/generator-langium/templates/package.json
index 6048bac53..3e85776f3 100644
--- a/packages/generator-langium/templates/package.json
+++ b/packages/generator-langium/templates/package.json
@@ -1,17 +1,12 @@
 {
-    "name": "<%= extension-name %>-base",
+    "name": "<%= extension-name %>-workspace",
     "description": "Base workspace package",
     "version": "0.0.1",
     "type": "module",
     "private": true,
-    "files": [
-        "out",
-        "src"
-    ],
     "scripts": {
-        "compile": "tsc -b tsconfig.build.json",
         "watch": "tsc -b tsconfig.build.json --watch",
-        "build": "npm run compile && npm run build --workspaces",
+        "build": "tsc -b tsconfig.build.json && npm run build --workspaces",
         "lint": "eslint src --ext ts",
         "langium:generate": "npm run --workspace packages/language langium:generate",
         "langium:watch": "npm run --workspace packages/language langium:watch"
diff --git a/packages/generator-langium/templates/packages/cli/src/generator.ts b/packages/generator-langium/templates/packages/cli/src/generator.ts
index fe6c8f973..0866085ef 100644
--- a/packages/generator-langium/templates/packages/cli/src/generator.ts
+++ b/packages/generator-langium/templates/packages/cli/src/generator.ts
@@ -2,7 +2,7 @@ import type { Model } from '<%= language-id %>-language';
 import { expandToNode, joinToNode, toString } from 'langium/generate';
 import * as fs from 'node:fs';
 import * as path from 'node:path';
-import { extractDestinationAndName } from './cli-util.js';
+import { extractDestinationAndName } from './util.js';
 
 export function generateJavaScript(model: Model, filePath: string, destination: string | undefined): string {
     const data = extractDestinationAndName(filePath, destination);
diff --git a/packages/generator-langium/templates/packages/cli/src/main.ts b/packages/generator-langium/templates/packages/cli/src/main.ts
index 4dbd61697..41ab16def 100644
--- a/packages/generator-langium/templates/packages/cli/src/main.ts
+++ b/packages/generator-langium/templates/packages/cli/src/main.ts
@@ -2,7 +2,7 @@ import type { Model } from '<%= language-id %>-language';
 import { create<%= LanguageName %>Services, <%= LanguageName %>LanguageMetaData } from '<%= language-id %>-language';
 import chalk from 'chalk';
 import { Command } from 'commander';
-import { extractAstNode } from './cli-util.js';
+import { extractAstNode } from './util.js';
 import { generateJavaScript } from './generator.js';
 import { NodeFileSystem } from 'langium/node';
 import * as url from 'node:url';
diff --git a/packages/generator-langium/templates/packages/cli/src/cli-util.ts b/packages/generator-langium/templates/packages/cli/src/util.ts
similarity index 100%
rename from packages/generator-langium/templates/packages/cli/src/cli-util.ts
rename to packages/generator-langium/templates/packages/cli/src/util.ts
diff --git a/packages/generator-langium/templates/packages/extension/.vscodeignore b/packages/generator-langium/templates/packages/extension/.vscodeignore
index 4f97a2668..dceac54db 100644
--- a/packages/generator-langium/templates/packages/extension/.vscodeignore
+++ b/packages/generator-langium/templates/packages/extension/.vscodeignore
@@ -1,4 +1,2 @@
 .vscode/**
 .vscode-test/**
-.gitignore
-langium-quickstart.md
diff --git a/packages/generator-langium/templates/packages/language/langium-quickstart.md b/packages/generator-langium/templates/packages/language/langium-quickstart.md
index 0c3fdb472..746d3ceb8 100644
--- a/packages/generator-langium/templates/packages/language/langium-quickstart.md
+++ b/packages/generator-langium/templates/packages/language/langium-quickstart.md
@@ -3,32 +3,33 @@
 ## What's in the folder
 
 This folder contains all necessary files for your language extension.
- * `package.json` - the manifest file in which you declare your language support.
- * `language-configuration.json` - the language configuration used in the VS Code editor, defining the tokens that are used for comments and brackets.
- * `src/extension/main.ts` - the main code of the extension, which is responsible for launching a language server and client.
- * `src/language/<%= language-id %>.langium` -  the grammar definition of your language.
- * `src/language/main.ts` - the entry point of the language server process.
- * `src/language/<%= language-id %>-module.ts` - the dependency injection module of your language implementation. Use this to register overridden and added services.
- * `src/language/<%= language-id %>-validator.ts` - an example validator. You should change it to reflect the semantics of your language.
- * `src/cli/main.ts` - the entry point of the command line interface (CLI) of your language.
- * `src/cli/generator.ts` - the code generator used by the CLI to write output files from DSL documents.
- * `src/cli/cli-util.ts` - utility code for the CLI.
+
+* `package.json` - the manifest file in which you declare your language support.
+* `language-configuration.json` - the language configuration used in the VS Code editor, defining the tokens that are used for comments and brackets.
+* `src/extension/main.ts` - the main code of the extension, which is responsible for launching a language server and client.
+* `src/language/<%= language-id %>.langium` -  the grammar definition of your language.
+* `src/language/main.ts` - the entry point of the language server process.
+* `src/language/<%= language-id %>-module.ts` - the dependency injection module of your language implementation. Use this to register overridden and added services.
+* `src/language/<%= language-id %>-validator.ts` - an example validator. You should change it to reflect the semantics of your language.
+* `src/cli/main.ts` - the entry point of the command line interface (CLI) of your language.
+* `src/cli/generator.ts` - the code generator used by the CLI to write output files from DSL documents.
+* `src/cli/util.ts` - utility code for the CLI.
 
 ## Get up and running straight away
 
- * Run `npm run langium:generate` to generate TypeScript code from the grammar definition.
- * Run `npm run build` to compile all TypeScript code.
- * Press `F5` to open a new window with your extension loaded.
- * Create a new file with a file name suffix matching your language.
- * Verify that syntax highlighting, validation, completion etc. are working as expected.
- * Run `node ./bin/cli` to see options for the CLI; `node ./bin/cli generate <file>` generates code for a given DSL file.
+* Run `npm run langium:generate` to generate TypeScript code from the grammar definition.
+* Run `npm run build` to compile all TypeScript code.
+* Press `F5` to open a new window with your extension loaded.
+* Create a new file with a file name suffix matching your language.
+* Verify that syntax highlighting, validation, completion etc. are working as expected.
+* Run `node ./bin/cli` to see options for the CLI; `node ./bin/cli generate <file>` generates code for a given DSL file.
 
 ## Make changes
 
- * Run `npm run watch` to have the TypeScript compiler run automatically after every change of the source files.
- * Run `npm run langium:watch` to have the Langium generator run automatically after every change of the grammar declaration.
- * You can relaunch the extension from the debug toolbar after making changes to the files listed above.
- * You can also reload (`Ctrl+R` or `Cmd+R` on Mac) the VS Code window with your extension to load your changes.
+* Run `npm run watch` to have the TypeScript compiler run automatically after every change of the source files.
+* Run `npm run langium:watch` to have the Langium generator run automatically after every change of the grammar declaration.
+* You can relaunch the extension from the debug toolbar after making changes to the files listed above.
+* You can also reload (`Ctrl+R` or `Cmd+R` on Mac) the VS Code window with your extension to load your changes.
 
 ## Install your extension
 
diff --git a/packages/generator-langium/templates/packages/language/test/linking/linking.test.ts b/packages/generator-langium/templates/packages/language/test/linking.test.ts
similarity index 100%
rename from packages/generator-langium/templates/packages/language/test/linking/linking.test.ts
rename to packages/generator-langium/templates/packages/language/test/linking.test.ts
diff --git a/packages/generator-langium/templates/packages/language/test/parsing/parsing.test.ts b/packages/generator-langium/templates/packages/language/test/parsing.test.ts
similarity index 91%
rename from packages/generator-langium/templates/packages/language/test/parsing/parsing.test.ts
rename to packages/generator-langium/templates/packages/language/test/parsing.test.ts
index f27815ed5..0d6e54354 100644
--- a/packages/generator-langium/templates/packages/language/test/parsing/parsing.test.ts
+++ b/packages/generator-langium/templates/packages/language/test/parsing.test.ts
@@ -2,7 +2,8 @@ import { beforeAll, describe, expect, test } from "vitest";
 import { EmptyFileSystem, type LangiumDocument } from "langium";
 import { expandToString as s } from "langium/generate";
 import { parseHelper } from "langium/test";
-import { create<%= LanguageName %>Services, isModel, Model } from "<%= language-id %>-language";
+import type { Model } from "<%= language-id %>-language";
+import { create<%= LanguageName %>Services, isModel } from "<%= language-id %>-language";
 
 let services: ReturnType<typeof create<%= LanguageName %>Services>;
 let parse:    ReturnType<typeof parseHelper<Model>>;
@@ -54,6 +55,6 @@ function checkDocumentValid(document: LangiumDocument): string | undefined {
           ${document.parseResult.parserErrors.map(e => e.message).join('\n  ')}
     `
         || document.parseResult.value === undefined && `ParseResult is 'undefined'.`
-        || !isModel(document.parseResult.value) && `Root AST object is a ${document.parseResult.value.$type}, expected a '${Model}'.`
+        || !isModel(document.parseResult.value) && `Root AST object is a ${document.parseResult.value.$type}, expected a Model'.`
         || undefined;
 }
diff --git a/packages/generator-langium/templates/packages/language/test/validating/validating.test.ts b/packages/generator-langium/templates/packages/language/test/validating.test.ts
similarity index 92%
rename from packages/generator-langium/templates/packages/language/test/validating/validating.test.ts
rename to packages/generator-langium/templates/packages/language/test/validating.test.ts
index fe8ac1c22..bd6432790 100644
--- a/packages/generator-langium/templates/packages/language/test/validating/validating.test.ts
+++ b/packages/generator-langium/templates/packages/language/test/validating.test.ts
@@ -3,7 +3,8 @@ import { EmptyFileSystem, type LangiumDocument } from "langium";
 import { expandToString as s } from "langium/generate";
 import { parseHelper } from "langium/test";
 import type { Diagnostic } from "vscode-languageserver-types";
-import { create<%= LanguageName %>Services, isModel, Model } from "<%= language-id %>-language";
+import type { Model } from "<%= language-id %>-language";
+import { create<%= LanguageName %>Services, isModel } from "<%= language-id %>-language";
 
 let services: ReturnType<typeof create<%= LanguageName %>Services>;
 let parse:    ReturnType<typeof parseHelper<Model>>;
@@ -19,7 +20,7 @@ beforeAll(async () => {
 });
 
 describe('Validating', () => {
-  
+
     test('check no errors', async () => {
         document = await parse(`
             person Langium
@@ -56,7 +57,7 @@ function checkDocumentValid(document: LangiumDocument): string | undefined {
           ${document.parseResult.parserErrors.map(e => e.message).join('\n  ')}
     `
         || document.parseResult.value === undefined && `ParseResult is 'undefined'.`
-        || !isModel(document.parseResult.value) && `Root AST object is a ${document.parseResult.value.$type}, expected a '${Model}'.`
+        || !isModel(document.parseResult.value) && `Root AST object is a ${document.parseResult.value.$type}, expected a 'Model'.`
         || undefined;
 }
 
diff --git a/packages/generator-langium/templates/packages/language/tsconfig.src.json b/packages/generator-langium/templates/packages/language/tsconfig.src.json
index 87e2fcdc6..b95fbed91 100644
--- a/packages/generator-langium/templates/packages/language/tsconfig.src.json
+++ b/packages/generator-langium/templates/packages/language/tsconfig.src.json
@@ -2,11 +2,9 @@
     "extends": "../../tsconfig.json",
     "compilerOptions": {
       "rootDir": "src",
-      "outDir": "out",
-      "declarationDir": "out",
+      "outDir": "out"
     },
     "include": [
       "src/**/*.ts",
     ]
   }
-  
\ No newline at end of file
diff --git a/packages/generator-langium/test/yeoman-generator.test.ts b/packages/generator-langium/test/yeoman-generator.test.ts
index 147408df9..f651ccaa2 100644
--- a/packages/generator-langium/test/yeoman-generator.test.ts
+++ b/packages/generator-langium/test/yeoman-generator.test.ts
@@ -47,14 +47,14 @@ describe('Check yeoman generator works', () => {
 
     const filesTest = (targetRoot: string) => [
         targetRoot + '/packages/language/tsconfig.test.json',
-        targetRoot + '/packages/language/test/linking/linking.test.ts',
-        targetRoot + '/packages/language/test/parsing/parsing.test.ts',
-        targetRoot + '/packages/language/test/validating/validating.test.ts',
+        targetRoot + '/packages/language/test/linking.test.ts',
+        targetRoot + '/packages/language/test/parsing.test.ts',
+        targetRoot + '/packages/language/test/validating.test.ts',
     ];
 
     const filesCli = (targetRoot: string) => [
         targetRoot + '/packages/cli/bin/cli.js',
-        targetRoot + '/packages/cli/src/cli-util.ts',
+        targetRoot + '/packages/cli/src/util.ts',
         targetRoot + '/packages/cli/src/generator.ts',
         targetRoot + '/packages/cli/src/main.ts',
         targetRoot + '/packages/cli/package.json',
@@ -232,16 +232,15 @@ describe('Check yeoman generator works', () => {
 
 // eslint-disable-next-line @typescript-eslint/no-explicit-any
 const PACKAGE_JSON_EXPECTATION: Record<string, any> = {
-    name: 'hello-world-base',
+    name: 'hello-world-workspace',
     description: 'Base workspace package',
     version: '0.0.1',
     type: 'module',
     private: true,
     files: ['out', 'src'],
     scripts: {
-        'compile': 'tsc -b tsconfig.build.json',
         'watch': 'tsc -b tsconfig.build.json --watch',
-        'build': 'npm run compile && npm run build --workspaces',
+        'build': 'tsc -b tsconfig.build.json && npm run build --workspaces',
         'lint': 'eslint src --ext ts',
         'langium:generate': 'npm run --workspace packages/language langium:generate',
         'langium:watch': 'npm run --workspace packages/language langium:watch'