diff --git a/packages/@aws-cdk/aws-lambda-nodejs/lib/bundling.ts b/packages/@aws-cdk/aws-lambda-nodejs/lib/bundling.ts
index f68123c4d36be..5160904878e11 100644
--- a/packages/@aws-cdk/aws-lambda-nodejs/lib/bundling.ts
+++ b/packages/@aws-cdk/aws-lambda-nodejs/lib/bundling.ts
@@ -212,7 +212,7 @@ export class Bundling {
     });
 
     return lambda.Code.fromAsset(projectRoot, {
-      assetHashType: cdk.AssetHashType.BUNDLE,
+      assetHashType: cdk.AssetHashType.OUTPUT,
       bundling: {
         local: localBundler,
         ...dockerBundler.bundlingOptions,
diff --git a/packages/@aws-cdk/aws-lambda-nodejs/test/bundling.test.ts b/packages/@aws-cdk/aws-lambda-nodejs/test/bundling.test.ts
index 40fdb21ac60a8..654e3b49f9029 100644
--- a/packages/@aws-cdk/aws-lambda-nodejs/test/bundling.test.ts
+++ b/packages/@aws-cdk/aws-lambda-nodejs/test/bundling.test.ts
@@ -40,7 +40,7 @@ test('Parcel bundling', () => {
 
   // Correctly bundles with parcel
   expect(Code.fromAsset).toHaveBeenCalledWith('/project', {
-    assetHashType: AssetHashType.BUNDLE,
+    assetHashType: AssetHashType.OUTPUT,
     bundling: expect.objectContaining({
       local: {
         props: expect.objectContaining({
@@ -93,7 +93,7 @@ test('Parcel bundling with handler named index.ts', () => {
 
   // Correctly bundles with parcel
   expect(Code.fromAsset).toHaveBeenCalledWith('/project', {
-    assetHashType: AssetHashType.BUNDLE,
+    assetHashType: AssetHashType.OUTPUT,
     bundling: expect.objectContaining({
       command: [
         'bash', '-c',
@@ -112,7 +112,7 @@ test('Parcel bundling with tsx handler', () => {
 
   // Correctly bundles with parcel
   expect(Code.fromAsset).toHaveBeenCalledWith('/project', {
-    assetHashType: AssetHashType.BUNDLE,
+    assetHashType: AssetHashType.OUTPUT,
     bundling: expect.objectContaining({
       command: [
         'bash', '-c',
@@ -152,7 +152,7 @@ test('Parcel bundling with externals and dependencies', () => {
 
   // Correctly bundles with parcel
   expect(Code.fromAsset).toHaveBeenCalledWith('/project', {
-    assetHashType: AssetHashType.BUNDLE,
+    assetHashType: AssetHashType.OUTPUT,
     bundling: expect.objectContaining({
       command: [
         'bash', '-c',
@@ -199,7 +199,7 @@ test('Detects yarn.lock', () => {
 
   // Correctly bundles with parcel
   expect(Code.fromAsset).toHaveBeenCalledWith('/project', {
-    assetHashType: AssetHashType.BUNDLE,
+    assetHashType: AssetHashType.OUTPUT,
     bundling: expect.objectContaining({
       command: expect.arrayContaining([
         expect.stringMatching(/yarn\.lock.+yarn install/),
@@ -316,7 +316,7 @@ test('Custom bundling docker image', () => {
   });
 
   expect(Code.fromAsset).toHaveBeenCalledWith('/project', {
-    assetHashType: AssetHashType.BUNDLE,
+    assetHashType: AssetHashType.OUTPUT,
     bundling: expect.objectContaining({
       image: { image: 'my-custom-image' },
     }),
diff --git a/packages/@aws-cdk/core/lib/asset-staging.ts b/packages/@aws-cdk/core/lib/asset-staging.ts
index dc49750a46f2f..e5878c2a31365 100644
--- a/packages/@aws-cdk/core/lib/asset-staging.ts
+++ b/packages/@aws-cdk/core/lib/asset-staging.ts
@@ -113,7 +113,7 @@ export class AssetStaging extends Construct {
         this.relativePath = renderAssetFilename(this.assetHash);
         this.stagedPath = this.relativePath;
       } else { // Bundling is skipped
-        this.assetHash = props.assetHashType === AssetHashType.BUNDLE
+        this.assetHash = props.assetHashType === AssetHashType.BUNDLE || props.assetHashType === AssetHashType.OUTPUT
           ? this.calculateHash(AssetHashType.CUSTOM, this.node.path) // Use node path as dummy hash because we're not bundling
           : this.calculateHash(hashType, props.assetHash);
         this.stagedPath = this.sourcePath;
@@ -295,8 +295,9 @@ export class AssetStaging extends Construct {
       case AssetHashType.SOURCE:
         return FileSystem.fingerprint(this.sourcePath, this.fingerprintOptions);
       case AssetHashType.BUNDLE:
+      case AssetHashType.OUTPUT:
         if (!this.bundleDir) {
-          throw new Error('Cannot use `AssetHashType.BUNDLE` when `bundling` is not specified.');
+          throw new Error(`Cannot use \`${hashType}\` hash type when \`bundling\` is not specified.`);
         }
         return FileSystem.fingerprint(this.bundleDir, this.fingerprintOptions);
       default:
diff --git a/packages/@aws-cdk/core/lib/assets.ts b/packages/@aws-cdk/core/lib/assets.ts
index 012b7da4d489c..17d3b9d93e53f 100644
--- a/packages/@aws-cdk/core/lib/assets.ts
+++ b/packages/@aws-cdk/core/lib/assets.ts
@@ -60,18 +60,35 @@ export interface AssetOptions {
 
 /**
  * The type of asset hash
+ *
+ * NOTE: the hash is used in order to identify a specific revision of the asset, and
+ * used for optimizing and caching deployment activities related to this asset such as
+ * packaging, uploading to Amazon S3, etc.
  */
 export enum AssetHashType {
   /**
    * Based on the content of the source path
+   *
+   * When bundling, use `SOURCE` when the content of the bundling output is not
+   * stable across repeated bundling operations.
    */
   SOURCE = 'source',
 
   /**
    * Based on the content of the bundled path
+   *
+   * @deprecated use `OUTPUT` instead
    */
   BUNDLE = 'bundle',
 
+  /**
+   * Based on the content of the bundling output
+   *
+   * Use `OUTPUT` when the source of the asset is a top level folder containing
+   * code and/or dependencies that are not directly linked to the asset.
+   */
+  OUTPUT = 'output',
+
   /**
    * Use a custom hash
    */
diff --git a/packages/@aws-cdk/core/test/test.staging.ts b/packages/@aws-cdk/core/test/test.staging.ts
index ff7279172bb00..e652c884935f4 100644
--- a/packages/@aws-cdk/core/test/test.staging.ts
+++ b/packages/@aws-cdk/core/test/test.staging.ts
@@ -425,6 +425,28 @@ export = {
     test.done();
   },
 
+  'bundling with OUTPUT asset hash type'(test: Test) {
+    // GIVEN
+    const app = new App();
+    const stack = new Stack(app, 'stack');
+    const directory = path.join(__dirname, 'fs', 'fixtures', 'test1');
+
+    // WHEN
+    const asset = new AssetStaging(stack, 'Asset', {
+      sourcePath: directory,
+      bundling: {
+        image: BundlingDockerImage.fromRegistry('alpine'),
+        command: [DockerStubCommand.SUCCESS],
+      },
+      assetHashType: AssetHashType.OUTPUT,
+    });
+
+    // THEN
+    test.equal(asset.assetHash, '33cbf2cae5432438e0f046bc45ba8c3cef7b6afcf47b59d1c183775c1918fb1f');
+
+    test.done();
+  },
+
   'custom hash'(test: Test) {
     // GIVEN
     const app = new App();
@@ -474,7 +496,23 @@ export = {
     test.throws(() => new AssetStaging(stack, 'Asset', {
       sourcePath: directory,
       assetHashType: AssetHashType.BUNDLE,
-    }), /Cannot use `AssetHashType.BUNDLE` when `bundling` is not specified/);
+    }), /Cannot use `bundle` hash type when `bundling` is not specified/);
+    test.equal(fs.existsSync(STUB_INPUT_FILE), false);
+
+    test.done();
+  },
+
+  'throws with OUTPUT hash type and no bundling'(test: Test) {
+    // GIVEN
+    const app = new App();
+    const stack = new Stack(app, 'stack');
+    const directory = path.join(__dirname, 'fs', 'fixtures', 'test1');
+
+    // THEN
+    test.throws(() => new AssetStaging(stack, 'Asset', {
+      sourcePath: directory,
+      assetHashType: AssetHashType.OUTPUT,
+    }), /Cannot use `output` hash type when `bundling` is not specified/);
     test.equal(fs.existsSync(STUB_INPUT_FILE), false);
 
     test.done();