diff --git a/.editorconfig b/.editorconfig
index aa7f61e97..42639a347 100644
--- a/.editorconfig
+++ b/.editorconfig
@@ -23,4 +23,7 @@ insert_final_newline = true
 insert_final_newline = true
 
 [*.lua]
+indent_style = tab
+
+[*.luau]
 indent_style = tab
\ No newline at end of file
diff --git a/CHANGELOG.md b/CHANGELOG.md
index 8021fac9d..ba305c506 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -2,10 +2,12 @@
 
 ## Unreleased Changes
 * Improved the visualization for array properties like Tags ([#829])
-* Significantly improved performance of `rojo serve`, `rojo build --watch`, and `rojo sourcemap --watch` on macOS. [#830]
+* Significantly improved performance of `rojo serve`, `rojo build --watch`, and `rojo sourcemap --watch` on macOS. ([#830])
+* Changed *.lua files that init command generates to *.luau ([#831])
 
 [#829]: https://github.com/rojo-rbx/rojo/pull/829
 [#830]: https://github.com/rojo-rbx/rojo/pull/830
+[#831]: https://github.com/rojo-rbx/rojo/pull/831
 
 ## [7.4.0-rc3] - October 25, 2023
 * Changed `sourcemap --watch` to only generate the sourcemap when it's necessary ([#800])
diff --git a/assets/default-model-project/src-init.lua b/assets/default-model-project/src-init.luau
similarity index 100%
rename from assets/default-model-project/src-init.lua
rename to assets/default-model-project/src-init.luau
diff --git a/rojo-test/build-test-snapshots/end_to_end__tests__build__server_init.snap b/rojo-test/build-test-snapshots/end_to_end__tests__build__server_init.snap
index 5858d5e01..2bbda0731 100644
--- a/rojo-test/build-test-snapshots/end_to_end__tests__build__server_init.snap
+++ b/rojo-test/build-test-snapshots/end_to_end__tests__build__server_init.snap
@@ -7,7 +7,7 @@ expression: contents
     <Properties>
       <string name="Name">server_init</string>
       <token name="RunContext">0</token>
-      <string name="Source">return "From folder/init.server.lua"</string>
+      <string name="Source">return "From folder/init.server.luau"</string>
     </Properties>
   </Item>
 </roblox>
diff --git a/rojo-test/build-tests/client_in_folder/folder/localScript.client.lua b/rojo-test/build-tests/client_in_folder/folder/localScript.client.luau
similarity index 100%
rename from rojo-test/build-tests/client_in_folder/folder/localScript.client.lua
rename to rojo-test/build-tests/client_in_folder/folder/localScript.client.luau
diff --git a/rojo-test/build-tests/nested_runcontext/folder1/test.server.lua b/rojo-test/build-tests/nested_runcontext/folder1/test.server.luau
similarity index 100%
rename from rojo-test/build-tests/nested_runcontext/folder1/test.server.lua
rename to rojo-test/build-tests/nested_runcontext/folder1/test.server.luau
diff --git a/rojo-test/build-tests/nested_runcontext/folder2/folder3/test.server.lua b/rojo-test/build-tests/nested_runcontext/folder2/folder3/test.server.luau
similarity index 100%
rename from rojo-test/build-tests/nested_runcontext/folder2/folder3/test.server.lua
rename to rojo-test/build-tests/nested_runcontext/folder2/folder3/test.server.luau
diff --git a/rojo-test/build-tests/script_meta_disabled/folder/hello.server.lua b/rojo-test/build-tests/script_meta_disabled/folder/hello.server.luau
similarity index 100%
rename from rojo-test/build-tests/script_meta_disabled/folder/hello.server.lua
rename to rojo-test/build-tests/script_meta_disabled/folder/hello.server.luau
diff --git a/rojo-test/build-tests/server_in_folder/folder/serverScript.server.lua b/rojo-test/build-tests/server_in_folder/folder/serverScript.server.luau
similarity index 100%
rename from rojo-test/build-tests/server_in_folder/folder/serverScript.server.lua
rename to rojo-test/build-tests/server_in_folder/folder/serverScript.server.luau
diff --git a/rojo-test/build-tests/server_init/folder/init.server.lua b/rojo-test/build-tests/server_init/folder/init.server.lua
deleted file mode 100644
index 30d3d49a1..000000000
--- a/rojo-test/build-tests/server_init/folder/init.server.lua
+++ /dev/null
@@ -1 +0,0 @@
-return "From folder/init.server.lua"
\ No newline at end of file
diff --git a/rojo-test/build-tests/server_init/folder/init.server.luau b/rojo-test/build-tests/server_init/folder/init.server.luau
new file mode 100644
index 000000000..196105d7a
--- /dev/null
+++ b/rojo-test/build-tests/server_init/folder/init.server.luau
@@ -0,0 +1 @@
+return "From folder/init.server.luau"
\ No newline at end of file
diff --git a/src/cli/init.rs b/src/cli/init.rs
index 48d513b1e..5f861470b 100644
--- a/src/cli/init.rs
+++ b/src/cli/init.rs
@@ -13,7 +13,7 @@ use super::resolve_path;
 static MODEL_PROJECT: &str =
     include_str!("../../assets/default-model-project/default.project.json");
 static MODEL_README: &str = include_str!("../../assets/default-model-project/README.md");
-static MODEL_INIT: &str = include_str!("../../assets/default-model-project/src-init.lua");
+static MODEL_INIT: &str = include_str!("../../assets/default-model-project/src-init.luau");
 static MODEL_GIT_IGNORE: &str = include_str!("../../assets/default-model-project/gitignore.txt");
 
 static PLACE_PROJECT: &str =
@@ -116,17 +116,17 @@ fn init_place(base_path: &Path, project_params: ProjectParams) -> anyhow::Result
     fs::create_dir_all(src.join(&src_client))?;
 
     write_if_not_exists(
-        &src_shared.join("Hello.lua"),
+        &src_shared.join("Hello.luau"),
         "return function()\n\tprint(\"Hello, world!\")\nend",
     )?;
 
     write_if_not_exists(
-        &src_server.join("init.server.lua"),
+        &src_server.join("init.server.luau"),
         "print(\"Hello world, from server!\")",
     )?;
 
     write_if_not_exists(
-        &src_client.join("init.client.lua"),
+        &src_client.join("init.client.luau"),
         "print(\"Hello world, from client!\")",
     )?;
 
@@ -149,7 +149,7 @@ fn init_model(base_path: &Path, project_params: ProjectParams) -> anyhow::Result
     fs::create_dir_all(&src)?;
 
     let init = project_params.render_template(MODEL_INIT);
-    write_if_not_exists(&src.join("init.lua"), &init)?;
+    write_if_not_exists(&src.join("init.luau"), &init)?;
 
     let git_ignore = project_params.render_template(MODEL_GIT_IGNORE);
     try_git_init(base_path, &git_ignore)?;
@@ -170,7 +170,7 @@ fn init_plugin(base_path: &Path, project_params: ProjectParams) -> anyhow::Resul
     fs::create_dir_all(&src)?;
 
     write_if_not_exists(
-        &src.join("init.server.lua"),
+        &src.join("init.server.luau"),
         "print(\"Hello world, from plugin!\")\n",
     )?;
 
diff --git a/test-projects/plugins/default.project.json b/test-projects/plugins/default.project.json
index 02387e7e3..4ca44a88f 100644
--- a/test-projects/plugins/default.project.json
+++ b/test-projects/plugins/default.project.json
@@ -4,6 +4,6 @@
     "$path": "src"
   },
   "plugins": [
-    "test-plugin.lua"
+    "test-plugin.luau"
   ]
 }
\ No newline at end of file
diff --git a/test-projects/plugins/test-plugin.lua b/test-projects/plugins/test-plugin.luau
similarity index 100%
rename from test-projects/plugins/test-plugin.lua
rename to test-projects/plugins/test-plugin.luau