diff --git a/biome.json b/biome.json
index 094cf0e..ba1c236 100644
--- a/biome.json
+++ b/biome.json
@@ -1,11 +1,7 @@
 {
   "$schema": "https://biomejs.dev/schemas/1.0.0/schema.json",
   "files": {
-    "ignore": [
-      ".wrangler",
-      "node_modules",
-      "vendor/*"
-    ]
+    "ignore": [".wrangler", "node_modules", "vendor/*"]
   },
   "formatter": {
     "indentStyle": "space",
diff --git a/index.d.ts b/index.d.ts
index 2b183d0..678d7a0 100644
--- a/index.d.ts
+++ b/index.d.ts
@@ -173,6 +173,7 @@ declare module "replicate" {
         webhook?: string;
         webhook_events_filter?: WebhookEventType[];
         signal?: AbortSignal;
+        useFileOutput?: boolean;
       }
     ): AsyncGenerator<ServerSentEvent>;
 
diff --git a/index.js b/index.js
index b1248e7..3fc14dd 100644
--- a/index.js
+++ b/index.js
@@ -315,7 +315,12 @@ class Replicate {
    * @yields {ServerSentEvent} Each streamed event from the prediction
    */
   async *stream(ref, options) {
-    const { wait, signal, ...data } = options;
+    const {
+      wait,
+      signal,
+      useFileOutput = this.useFileOutput,
+      ...data
+    } = options;
 
     const identifier = ModelVersionIdentifier.parse(ref);
 
@@ -338,7 +343,10 @@ class Replicate {
       const stream = createReadableStream({
         url: prediction.urls.stream,
         fetch: this.fetch,
-        ...(signal ? { options: { signal } } : {}),
+        options: {
+          useFileOutput,
+          ...(signal ? { signal } : {}),
+        },
       });
 
       yield* streamAsyncIterator(stream);
diff --git a/index.test.ts b/index.test.ts
index 4905908..65eb93e 100644
--- a/index.test.ts
+++ b/index.test.ts
@@ -1906,8 +1906,12 @@ describe("Replicate client", () => {
   // Continue with tests for other methods
 
   describe("createReadableStream", () => {
-    function createStream(body: string | ReadableStream, status = 200) {
-      const streamEndpoint = "https://stream.replicate.com/fake_stream";
+    function createStream(
+      body: string | ReadableStream,
+      status = 200,
+      streamEndpoint = "https://stream.replicate.com/fake_stream",
+      options: { useFileOutput?: boolean } = {}
+    ) {
       const fetch = jest.fn((url) => {
         if (url !== streamEndpoint) {
           throw new Error(`Unmocked call to fetch() with url: ${url}`);
@@ -1917,6 +1921,7 @@ describe("Replicate client", () => {
       return createReadableStream({
         url: streamEndpoint,
         fetch: fetch as any,
+        options,
       });
     }
 
@@ -2193,5 +2198,95 @@ describe("Replicate client", () => {
       );
       expect(await iterator.next()).toEqual({ done: true });
     });
+
+    describe("file streams", () => {
+      test("emits FileOutput objects", async () => {
+        const stream = createStream(
+          `
+          event: output
+          id: EVENT_1
+          data: data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAEAAAABCAYAAAAfFcSJAAAADUlEQVR42mNk+M9QDwADhgGAWjR9awAAAABJRU5ErkJggg==
+
+          event: output
+          id: EVENT_2
+          data: https://delivery.replicate.com/my_file.png
+
+          event: done
+          id: EVENT_3
+          data: {}
+
+          `.replace(/^[ ]+/gm, ""),
+          200,
+          "https://stream.replicate.com/v1/files/abcd"
+        );
+
+        const iterator = stream[Symbol.asyncIterator]();
+        const { value: event1 } = await iterator.next();
+        expect(event1.data).toBeInstanceOf(ReadableStream);
+        expect(event1.data.url().href).toEqual(
+          "data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAEAAAABCAYAAAAfFcSJAAAADUlEQVR42mNk+M9QDwADhgGAWjR9awAAAABJRU5ErkJggg=="
+        );
+
+        const { value: event2 } = await iterator.next();
+        expect(event2.data).toBeInstanceOf(ReadableStream);
+        expect(event2.data.url().href).toEqual(
+          "https://delivery.replicate.com/my_file.png"
+        );
+
+        expect(await iterator.next()).toEqual({
+          done: false,
+          value: { event: "done", id: "EVENT_3", data: "{}" },
+        });
+
+        expect(await iterator.next()).toEqual({ done: true });
+      });
+
+      test("emits strings when useFileOutput is false", async () => {
+        const stream = createStream(
+          `
+          event: output
+          id: EVENT_1
+          data: data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAEAAAABCAYAAAAfFcSJAAAADUlEQVR42mNk+M9QDwADhgGAWjR9awAAAABJRU5ErkJggg==
+
+          event: output
+          id: EVENT_2
+          data: https://delivery.replicate.com/my_file.png
+
+          event: done
+          id: EVENT_3
+          data: {}
+
+          `.replace(/^[ ]+/gm, ""),
+          200,
+          "https://stream.replicate.com/v1/files/abcd",
+          { useFileOutput: false }
+        );
+
+        const iterator = stream[Symbol.asyncIterator]();
+
+        expect(await iterator.next()).toEqual({
+          done: false,
+          value: {
+            event: "output",
+            id: "EVENT_1",
+            data: "data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAEAAAABCAYAAAAfFcSJAAAADUlEQVR42mNk+M9QDwADhgGAWjR9awAAAABJRU5ErkJggg==",
+          },
+        });
+        expect(await iterator.next()).toEqual({
+          done: false,
+          value: {
+            event: "output",
+            id: "EVENT_2",
+            data: "https://delivery.replicate.com/my_file.png",
+          },
+        });
+        expect(await iterator.next()).toEqual({
+          done: false,
+          value: { event: "done", id: "EVENT_3", data: "{}" },
+        });
+
+        expect(await iterator.next()).toEqual({ done: true });
+      });
+    });
   });
 });
diff --git a/lib/stream.js b/lib/stream.js
index 2c899bd..802a98e 100644
--- a/lib/stream.js
+++ b/lib/stream.js
@@ -53,6 +53,7 @@ class ServerSentEvent {
  */
 function createReadableStream({ url, fetch, options = {} }) {
   const { useFileOutput = true, headers = {}, ...initOptions } = options;
+  const shouldProcessFileOutput = useFileOutput && isFileStream(url);
 
   return new ReadableStream({
     async start(controller) {
@@ -89,11 +90,11 @@ function createReadableStream({ url, fetch, options = {} }) {
 
         let data = event.data;
         if (
-          useFileOutput &&
-          typeof data === "string" &&
-          (data.startsWith("https:") || data.startsWith("data:"))
+          event.event === "output" &&
+          shouldProcessFileOutput &&
+          typeof data === "string"
         ) {
-          data = createFileOutput({ data, fetch });
+          data = createFileOutput({ url: data, fetch });
         }
         controller.enqueue(new ServerSentEvent(event.event, data, event.id));
 
@@ -169,6 +170,13 @@ function createFileOutput({ url, fetch }) {
   });
 }
 
+function isFileStream(url) {
+  try {
+    return new URL(url).pathname.startsWith("/v1/files/");
+  } catch {}
+  return false;
+}
+
 module.exports = {
   createFileOutput,
   createReadableStream,