diff --git a/src/install.js b/src/install.js
index ee8506aa8..565b3e7f9 100644
--- a/src/install.js
+++ b/src/install.js
@@ -22,7 +22,7 @@ export function install (Vue) {
     beforeCreate () {
       if (isDef(this.$options.router)) {
         this._routerRoot = this
-        this._router = this.$options.router
+        this._router = typeof this.$options.router === 'function' ? this.$options.router() : this.$options.router
         this._router.init(this)
         Vue.util.defineReactive(this, '_route', this._router.history.current)
       } else {
diff --git a/test/unit/specs/factory.spec.js b/test/unit/specs/factory.spec.js
new file mode 100644
index 000000000..a8c6f85c1
--- /dev/null
+++ b/test/unit/specs/factory.spec.js
@@ -0,0 +1,50 @@
+import Router from '../../../src/index'
+import Vue from 'vue'
+
+describe('router factory', () => {
+  let InstancedBasedApp, FactoryBasedApp
+
+  beforeEach(() => {
+    const routerFactory = () => new Router({
+      mode: 'abstract',
+      routes: [
+        {
+          path: '/a',
+          component: {
+            name: 'A'
+          }
+        }
+      ]
+    })
+
+    const router = routerFactory()
+
+    InstancedBasedApp = Vue.extend({
+      router,
+      render (h) { return h('div') }
+    })
+
+    FactoryBasedApp = Vue.extend({
+      router: routerFactory,
+      render (h) { return h('div') }
+    })
+  })
+
+  it('should initialize router from factory', () => {
+    const vm = new FactoryBasedApp()
+    expect(vm.$router instanceof Router).toBeTruthy()
+  })
+
+  it('should use different router instances on different app instances', () => {
+    const app = new FactoryBasedApp()
+    const app2 = new FactoryBasedApp()
+    expect(app.$router).not.toBe(app2.$router)
+  })
+
+  it('should allow to work as normal', () => {
+    const app = new InstancedBasedApp()
+    const app2 = new InstancedBasedApp()
+    expect(app.$router).toBe(app2.$router)
+  })
+})
+
diff --git a/types/vue.d.ts b/types/vue.d.ts
index 307515cf9..2b35be25f 100644
--- a/types/vue.d.ts
+++ b/types/vue.d.ts
@@ -12,11 +12,12 @@ declare module 'vue/types/vue' {
   }
 }
 
-declare module 'vue/types/options' {
+declare module "vue/types/options" {
+  type VueRouterFactory = () => VueRouter;
   interface ComponentOptions<V extends Vue> {
-    router?: VueRouter
-    beforeRouteEnter?: NavigationGuard<V>
-    beforeRouteLeave?: NavigationGuard<V>
-    beforeRouteUpdate?: NavigationGuard<V>
+    router?: VueRouter | VueRouterFactory;
+    beforeRouteEnter?: NavigationGuard<V>;
+    beforeRouteLeave?: NavigationGuard<V>;
+    beforeRouteUpdate?: NavigationGuard<V>;
   }
 }