Path created for background image is wrong in the template using webpack 5

I am trying to build my template files using webpack 5. The issue is the path of the background image that is being generated is "basic-project/dist/stylesheet/img/webpack-bg.png", instead it should be "basic-project/dist/img/webpack-bg.png". Attached is the webpack.config.js file screenshot.

Looks like you have set up everything right. As you mentioned, the actual issue is from the output.publicPath value. Basically, the right one should be set as / in most cases:

// webpack.config.js
module.exports = {
  // ...
  output: {
    // ...
    publicPath: '/',
  },
}