diff --git a/src/server/editorServices.ts b/src/server/editorServices.ts
index 117887d761..292c8d77fc 100644
--- a/src/server/editorServices.ts
+++ b/src/server/editorServices.ts
@@ -218,9 +218,15 @@ namespace ts.server {
         }
     }
 
+    /*@internal*/
+    export function convertUserPreferences(preferences: protocol.UserPreferences): UserPreferences {
+        const { lazyConfiguredProjectsFromExternalProject, ...userPreferences } = preferences;
+        return userPreferences;
+    }
+
     export interface HostConfiguration {
         formatCodeOptions: FormatCodeSettings;
-        preferences: UserPreferences;
+        preferences: protocol.UserPreferences;
         hostInfo: string;
         extraFileExtensions?: FileExtensionInfo[];
     }
@@ -802,7 +808,7 @@ namespace ts.server {
             return info && info.getFormatCodeSettings() || this.hostConfiguration.formatCodeOptions;
         }
 
-        getPreferences(file: NormalizedPath): UserPreferences {
+        getPreferences(file: NormalizedPath): protocol.UserPreferences {
             const info = this.getScriptInfoForNormalizedPath(file);
             return info && info.getPreferences() || this.hostConfiguration.preferences;
         }
@@ -811,7 +817,7 @@ namespace ts.server {
             return this.hostConfiguration.formatCodeOptions;
         }
 
-        getHostPreferences(): UserPreferences {
+        getHostPreferences(): protocol.UserPreferences {
             return this.hostConfiguration.preferences;
         }
 
@@ -1561,6 +1567,13 @@ namespace ts.server {
             return project;
         }
 
+        /* @internal */
+        private createLoadAndUpdateConfiguredProject(configFileName: NormalizedPath) {
+            const project = this.createAndLoadConfiguredProject(configFileName);
+            project.updateGraph();
+            return project;
+        }
+
         /**
          * Read the config file of the project, and update the project root file names.
          */
@@ -1979,7 +1992,19 @@ namespace ts.server {
                     this.logger.info("Format host information updated");
                 }
                 if (args.preferences) {
+                    const { lazyConfiguredProjectsFromExternalProject } = this.hostConfiguration.preferences;
                     this.hostConfiguration.preferences = { ...this.hostConfiguration.preferences, ...args.preferences };
+                    if (lazyConfiguredProjectsFromExternalProject && !this.hostConfiguration.preferences.lazyConfiguredProjectsFromExternalProject) {
+                        // Load configured projects for external projects that are pending reload
+                        this.configuredProjects.forEach(project => {
+                            if (project.hasExternalProjectRef() &&
+                                project.pendingReload === ConfigFileProgramReloadLevel.Full &&
+                                !this.pendingProjectUpdates.has(project.getProjectName())) {
+                                this.loadConfiguredProject(project);
+                                project.updateGraph();
+                            }
+                        });
+                    }
                 }
                 if (args.extraFileExtensions) {
                     this.hostConfiguration.extraFileExtensions = args.extraFileExtensions;
@@ -2192,8 +2217,7 @@ namespace ts.server {
                 if (configFileName) {
                     project = this.findConfiguredProjectByProjectName(configFileName);
                     if (!project) {
-                        project = this.createAndLoadConfiguredProject(configFileName);
-                        project.updateGraph();
+                        project = this.createLoadAndUpdateConfiguredProject(configFileName);
                         // Send the event only if the project got created as part of this open request and info is part of the project
                         if (info.isOrphan()) {
                             // Since the file isnt part of configured project, do not send config file info
@@ -2633,7 +2657,9 @@ namespace ts.server {
                     let project = this.findConfiguredProjectByProjectName(tsconfigFile);
                     if (!project) {
                         // errors are stored in the project, do not need to update the graph
-                        project = this.createConfiguredProjectWithDelayLoad(tsconfigFile);
+                        project = this.getHostPreferences().lazyConfiguredProjectsFromExternalProject ?
+                            this.createConfiguredProjectWithDelayLoad(tsconfigFile) :
+                            this.createLoadAndUpdateConfiguredProject(tsconfigFile);
                     }
                     if (project && !contains(exisingConfigFiles, tsconfigFile)) {
                         // keep project alive even if no documents are opened - its lifetime is bound to the lifetime of containing external project
diff --git a/src/server/project.ts b/src/server/project.ts
index ff2c504a54..9589108c93 100644
--- a/src/server/project.ts
+++ b/src/server/project.ts
@@ -1520,6 +1520,11 @@ namespace ts.server {
             ) || false;
         }
 
+        /*@internal*/
+        hasExternalProjectRef() {
+            return !!this.externalProjectRefCount;
+        }
+
         getEffectiveTypeRoots() {
             return getEffectiveTypeRoots(this.getCompilationSettings(), this.directoryStructureHost) || [];
         }
diff --git a/src/server/protocol.ts b/src/server/protocol.ts
index 39a0045d97..441c1316c9 100644
--- a/src/server/protocol.ts
+++ b/src/server/protocol.ts
@@ -2823,6 +2823,7 @@ namespace ts.server.protocol {
         readonly includeCompletionsWithInsertText?: boolean;
         readonly importModuleSpecifierPreference?: "relative" | "non-relative";
         readonly allowTextChangesInNewFiles?: boolean;
+        readonly lazyConfiguredProjectsFromExternalProject?: boolean;
     }
 
     export interface CompilerOptions {
diff --git a/src/server/scriptInfo.ts b/src/server/scriptInfo.ts
index c6992e91b8..085dd6d0ee 100644
--- a/src/server/scriptInfo.ts
+++ b/src/server/scriptInfo.ts
@@ -234,7 +234,7 @@ namespace ts.server {
          */
         readonly containingProjects: Project[] = [];
         private formatSettings: FormatCodeSettings | undefined;
-        private preferences: UserPreferences | undefined;
+        private preferences: protocol.UserPreferences | undefined;
 
         /* @internal */
         fileWatcher: FileWatcher | undefined;
@@ -333,7 +333,7 @@ namespace ts.server {
         }
 
         getFormatCodeSettings(): FormatCodeSettings | undefined { return this.formatSettings; }
-        getPreferences(): UserPreferences | undefined { return this.preferences; }
+        getPreferences(): protocol.UserPreferences | undefined { return this.preferences; }
 
         attachToProject(project: Project): boolean {
             const isNew = !this.isAttached(project);
@@ -432,7 +432,7 @@ namespace ts.server {
             }
         }
 
-        setOptions(formatSettings: FormatCodeSettings, preferences: UserPreferences | undefined): void {
+        setOptions(formatSettings: FormatCodeSettings, preferences: protocol.UserPreferences | undefined): void {
             if (formatSettings) {
                 if (!this.formatSettings) {
                     this.formatSettings = getDefaultFormatCodeSettings(this.host);
diff --git a/src/server/session.ts b/src/server/session.ts
index 8d2fbe9e19..6c3413601d 100644
--- a/src/server/session.ts
+++ b/src/server/session.ts
@@ -1423,7 +1423,7 @@ namespace ts.server {
             const position = this.getPosition(args, scriptInfo);
 
             const completions = project.getLanguageService().getCompletionsAtPosition(file, position, {
-                ...this.getPreferences(file),
+                ...convertUserPreferences(this.getPreferences(file)),
                 triggerCharacter: args.triggerCharacter,
                 includeExternalModuleExports: args.includeExternalModuleExports,
                 includeInsertTextCompletions: args.includeInsertTextCompletions
@@ -2352,7 +2352,7 @@ namespace ts.server {
             return this.projectService.getFormatCodeOptions(file);
         }
 
-        private getPreferences(file: NormalizedPath): UserPreferences {
+        private getPreferences(file: NormalizedPath): protocol.UserPreferences {
             return this.projectService.getPreferences(file);
         }
 
@@ -2360,7 +2360,7 @@ namespace ts.server {
             return this.projectService.getHostFormatCodeOptions();
         }
 
-        private getHostPreferences(): UserPreferences {
+        private getHostPreferences(): protocol.UserPreferences {
             return this.projectService.getHostPreferences();
         }
     }
diff --git a/src/testRunner/unittests/tsserverProjectSystem.ts b/src/testRunner/unittests/tsserverProjectSystem.ts
index b3b2b12f2c..be144246ed 100644
--- a/src/testRunner/unittests/tsserverProjectSystem.ts
+++ b/src/testRunner/unittests/tsserverProjectSystem.ts
@@ -642,37 +642,54 @@ namespace ts.projectSystem {
             checkWatchedDirectories(host, [combinePaths(getDirectoryPath(appFile.path), nodeModulesAtTypes)], /*recursive*/ true);
         });
 
-        it("can handle tsconfig file name with difference casing", () => {
-            const f1 = {
-                path: "/a/b/app.ts",
-                content: "let x = 1"
-            };
-            const config = {
-                path: "/a/b/tsconfig.json",
-                content: JSON.stringify({
-                    include: []
-                })
-            };
+        describe("can handle tsconfig file name with difference casing", () => {
+            function verifyConfigFileCasing(lazyConfiguredProjectsFromExternalProject: boolean) {
+                const f1 = {
+                    path: "/a/b/app.ts",
+                    content: "let x = 1"
+                };
+                const config = {
+                    path: "/a/b/tsconfig.json",
+                    content: JSON.stringify({
+                        include: []
+                    })
+                };
 
-            const host = createServerHost([f1, config], { useCaseSensitiveFileNames: false });
-            const service = createProjectService(host);
-            const upperCaseConfigFilePath = combinePaths(getDirectoryPath(config.path).toUpperCase(), getBaseFileName(config.path));
-            service.openExternalProject(<protocol.ExternalProject>{
-                projectFileName: "/a/b/project.csproj",
-                rootFiles: toExternalFiles([f1.path, upperCaseConfigFilePath]),
-                options: {}
+                const host = createServerHost([f1, config], { useCaseSensitiveFileNames: false });
+                const service = createProjectService(host);
+                service.setHostConfiguration({ preferences: { lazyConfiguredProjectsFromExternalProject } });
+                const upperCaseConfigFilePath = combinePaths(getDirectoryPath(config.path).toUpperCase(), getBaseFileName(config.path));
+                service.openExternalProject(<protocol.ExternalProject>{
+                    projectFileName: "/a/b/project.csproj",
+                    rootFiles: toExternalFiles([f1.path, upperCaseConfigFilePath]),
+                    options: {}
+                });
+                service.checkNumberOfProjects({ configuredProjects: 1 });
+                const project = service.configuredProjects.get(config.path)!;
+                if (lazyConfiguredProjectsFromExternalProject) {
+                    assert.equal(project.pendingReload, ConfigFileProgramReloadLevel.Full); // External project referenced configured project pending to be reloaded
+                    checkProjectActualFiles(project, emptyArray);
+                }
+                else {
+                    assert.equal(project.pendingReload, ConfigFileProgramReloadLevel.None); // External project referenced configured project loaded
+                    checkProjectActualFiles(project, [upperCaseConfigFilePath]);
+                }
+
+                service.openClientFile(f1.path);
+                service.checkNumberOfProjects({ configuredProjects: 1, inferredProjects: 1 });
+
+                assert.equal(project.pendingReload, ConfigFileProgramReloadLevel.None); // External project referenced configured project is updated
+                checkProjectActualFiles(project, [upperCaseConfigFilePath]);
+                checkProjectActualFiles(service.inferredProjects[0], [f1.path]);
+            }
+
+            it("when lazyConfiguredProjectsFromExternalProject not set", () => {
+                verifyConfigFileCasing(/*lazyConfiguredProjectsFromExternalProject*/ false);
             });
-            service.checkNumberOfProjects({ configuredProjects: 1 });
-            const project = service.configuredProjects.get(config.path)!;
-            assert.equal(project.pendingReload, ConfigFileProgramReloadLevel.Full); // External project referenced configured project pending to be reloaded
-            checkProjectActualFiles(project, emptyArray);
 
-            service.openClientFile(f1.path);
-            service.checkNumberOfProjects({ configuredProjects: 1, inferredProjects: 1 });
-
-            assert.equal(project.pendingReload, ConfigFileProgramReloadLevel.None); // External project referenced configured project is updated
-            checkProjectActualFiles(project, [upperCaseConfigFilePath]);
-            checkProjectActualFiles(service.inferredProjects[0], [f1.path]);
+            it("when lazyConfiguredProjectsFromExternalProject is set", () => {
+                verifyConfigFileCasing(/*lazyConfiguredProjectsFromExternalProject*/ true);
+            });
         });
 
         it("create configured project without file list", () => {
@@ -2950,45 +2967,56 @@ namespace ts.projectSystem {
             assert.equal(navbar[0].spans[0].length, f1.content.length);
         });
 
-        it("deleting config file opened from the external project works", () => {
-            const site = {
-                path: "/user/someuser/project/js/site.js",
-                content: ""
-            };
-            const configFile = {
-                path: "/user/someuser/project/tsconfig.json",
-                content: "{}"
-            };
-            const projectFileName = "/user/someuser/project/WebApplication6.csproj";
-            const host = createServerHost([libFile, site, configFile]);
-            const projectService = createProjectService(host);
+        describe("deleting config file opened from the external project works", () => {
+            function verifyDeletingConfigFile(lazyConfiguredProjectsFromExternalProject: boolean) {
+                const site = {
+                    path: "/user/someuser/project/js/site.js",
+                    content: ""
+                };
+                const configFile = {
+                    path: "/user/someuser/project/tsconfig.json",
+                    content: "{}"
+                };
+                const projectFileName = "/user/someuser/project/WebApplication6.csproj";
+                const host = createServerHost([libFile, site, configFile]);
+                const projectService = createProjectService(host);
+                projectService.setHostConfiguration({ preferences: { lazyConfiguredProjectsFromExternalProject } });
 
-            const externalProject: protocol.ExternalProject = {
-                projectFileName,
-                rootFiles: [toExternalFile(site.path), toExternalFile(configFile.path)],
-                options: { allowJs: false },
-                typeAcquisition: { include: [] }
-            };
+                const externalProject: protocol.ExternalProject = {
+                    projectFileName,
+                    rootFiles: [toExternalFile(site.path), toExternalFile(configFile.path)],
+                    options: { allowJs: false },
+                    typeAcquisition: { include: [] }
+                };
 
-            projectService.openExternalProjects([externalProject]);
+                projectService.openExternalProjects([externalProject]);
 
-            let knownProjects = projectService.synchronizeProjectList([]);
-            checkNumberOfProjects(projectService, { configuredProjects: 1, externalProjects: 0, inferredProjects: 0 });
+                let knownProjects = projectService.synchronizeProjectList([]);
+                checkNumberOfProjects(projectService, { configuredProjects: 1, externalProjects: 0, inferredProjects: 0 });
 
-            const configProject = configuredProjectAt(projectService, 0);
-            checkProjectActualFiles(configProject, []); // Since no files opened from this project, its not loaded
+                const configProject = configuredProjectAt(projectService, 0);
+                checkProjectActualFiles(configProject, lazyConfiguredProjectsFromExternalProject ?
+                    emptyArray : // Since no files opened from this project, its not loaded
+                    [libFile.path, configFile.path]);
 
-            host.reloadFS([libFile, site]);
-            host.checkTimeoutQueueLengthAndRun(1);
+                host.reloadFS([libFile, site]);
+                host.checkTimeoutQueueLengthAndRun(1);
 
-            knownProjects = projectService.synchronizeProjectList(map(knownProjects, proj => proj.info!)); // TODO: GH#18217 GH#20039
-            checkNumberOfProjects(projectService, { configuredProjects: 0, externalProjects: 0, inferredProjects: 0 });
+                knownProjects = projectService.synchronizeProjectList(map(knownProjects, proj => proj.info!)); // TODO: GH#18217 GH#20039
+                checkNumberOfProjects(projectService, { configuredProjects: 0, externalProjects: 0, inferredProjects: 0 });
 
-            externalProject.rootFiles.length = 1;
-            projectService.openExternalProjects([externalProject]);
+                externalProject.rootFiles.length = 1;
+                projectService.openExternalProjects([externalProject]);
 
-            checkNumberOfProjects(projectService, { configuredProjects: 0, externalProjects: 1, inferredProjects: 0 });
-            checkProjectActualFiles(projectService.externalProjects[0], [site.path, libFile.path]);
+                checkNumberOfProjects(projectService, { configuredProjects: 0, externalProjects: 1, inferredProjects: 0 });
+                checkProjectActualFiles(projectService.externalProjects[0], [site.path, libFile.path]);
+            }
+            it("when lazyConfiguredProjectsFromExternalProject not set", () => {
+                verifyDeletingConfigFile(/*lazyConfiguredProjectsFromExternalProject*/ false);
+            });
+            it("when lazyConfiguredProjectsFromExternalProject is set", () => {
+                verifyDeletingConfigFile(/*lazyConfiguredProjectsFromExternalProject*/ true);
+            });
         });
 
         it("Getting errors from closed script info does not throw exception (because of getting project from orphan script info)", () => {
@@ -3298,49 +3326,64 @@ namespace ts.projectSystem {
 
         });
 
-        it("includes deferred files in the project context", () => {
-            const file1 = {
-                path: "/a.deferred",
-                content: "const a = 1;"
-            };
-            // Deferred extensions should not affect JS files.
-            const file2 = {
-                path: "/b.js",
-                content: "const b = 1;"
-            };
-            const tsconfig = {
-                path: "/tsconfig.json",
-                content: ""
-            };
+        describe("includes deferred files in the project context", () => {
+            function verifyDeferredContext(lazyConfiguredProjectsFromExternalProject: boolean) {
+                const file1 = {
+                    path: "/a.deferred",
+                    content: "const a = 1;"
+                };
+                // Deferred extensions should not affect JS files.
+                const file2 = {
+                    path: "/b.js",
+                    content: "const b = 1;"
+                };
+                const tsconfig = {
+                    path: "/tsconfig.json",
+                    content: ""
+                };
 
-            const host = createServerHost([file1, file2, tsconfig]);
-            const session = createSession(host);
-            const projectService = session.getProjectService();
+                const host = createServerHost([file1, file2, tsconfig]);
+                const session = createSession(host);
+                const projectService = session.getProjectService();
+                session.executeCommandSeq<protocol.ConfigureRequest>({
+                    command: protocol.CommandTypes.Configure,
+                    arguments: { preferences: { lazyConfiguredProjectsFromExternalProject } }
+                });
 
-            // Configure the deferred extension.
-            const extraFileExtensions = [{ extension: ".deferred", scriptKind: ScriptKind.Deferred, isMixedContent: true }];
-            const configureHostRequest = makeSessionRequest<protocol.ConfigureRequestArguments>(CommandNames.Configure, { extraFileExtensions });
-            session.executeCommand(configureHostRequest);
+                // Configure the deferred extension.
+                const extraFileExtensions = [{ extension: ".deferred", scriptKind: ScriptKind.Deferred, isMixedContent: true }];
+                const configureHostRequest = makeSessionRequest<protocol.ConfigureRequestArguments>(CommandNames.Configure, { extraFileExtensions });
+                session.executeCommand(configureHostRequest);
 
-            // Open external project
-            const projectName = "/proj1";
-            projectService.openExternalProject({
-                projectFileName: projectName,
-                rootFiles: toExternalFiles([file1.path, file2.path, tsconfig.path]),
-                options: {}
+                // Open external project
+                const projectName = "/proj1";
+                projectService.openExternalProject({
+                    projectFileName: projectName,
+                    rootFiles: toExternalFiles([file1.path, file2.path, tsconfig.path]),
+                    options: {}
+                });
+
+                // Assert
+                checkNumberOfProjects(projectService, { configuredProjects: 1 });
+
+                const configuredProject = configuredProjectAt(projectService, 0);
+                if (lazyConfiguredProjectsFromExternalProject) {
+                    // configured project is just created and not yet loaded
+                    checkProjectActualFiles(configuredProject, emptyArray);
+                    projectService.ensureInferredProjectsUpToDate_TestOnly();
+                }
+                checkProjectActualFiles(configuredProject, [file1.path, tsconfig.path]);
+
+                // Allow allowNonTsExtensions will be set to true for deferred extensions.
+                assert.isTrue(configuredProject.getCompilerOptions().allowNonTsExtensions);
+            }
+
+            it("when lazyConfiguredProjectsFromExternalProject not set", () => {
+                verifyDeferredContext(/*lazyConfiguredProjectsFromExternalProject*/ false);
+            });
+            it("when lazyConfiguredProjectsFromExternalProject is set", () => {
+                verifyDeferredContext(/*lazyConfiguredProjectsFromExternalProject*/ true);
             });
-
-            // Assert
-            checkNumberOfProjects(projectService, { configuredProjects: 1 });
-
-            const configuredProject = configuredProjectAt(projectService, 0);
-            // configured project is just created and not yet loaded
-            checkProjectActualFiles(configuredProject, emptyArray);
-            projectService.ensureInferredProjectsUpToDate_TestOnly();
-            checkProjectActualFiles(configuredProject, [file1.path, tsconfig.path]);
-
-            // Allow allowNonTsExtensions will be set to true for deferred extensions.
-            assert.isTrue(configuredProject.getCompilerOptions().allowNonTsExtensions);
         });
 
         it("Orphan source files are handled correctly on watch trigger", () => {
@@ -3943,143 +3986,167 @@ namespace ts.projectSystem {
     });
 
     describe("tsserverProjectSystem external projects", () => {
-        it("correctly handling add/remove tsconfig - 1", () => {
-            const f1 = {
-                path: "/a/b/app.ts",
-                content: "let x = 1;"
-            };
-            const f2 = {
-                path: "/a/b/lib.ts",
-                content: ""
-            };
-            const tsconfig = {
-                path: "/a/b/tsconfig.json",
-                content: ""
-            };
-            const host = createServerHost([f1, f2]);
-            const projectService = createProjectService(host);
+        describe("correctly handling add/remove tsconfig - 1", () => {
+            function verifyAddRemoveConfig(lazyConfiguredProjectsFromExternalProject: boolean) {
+                const f1 = {
+                    path: "/a/b/app.ts",
+                    content: "let x = 1;"
+                };
+                const f2 = {
+                    path: "/a/b/lib.ts",
+                    content: ""
+                };
+                const tsconfig = {
+                    path: "/a/b/tsconfig.json",
+                    content: ""
+                };
+                const host = createServerHost([f1, f2]);
+                const projectService = createProjectService(host);
+                projectService.setHostConfiguration({ preferences: { lazyConfiguredProjectsFromExternalProject } });
 
-            // open external project
-            const projectName = "/a/b/proj1";
-            projectService.openExternalProject({
-                projectFileName: projectName,
-                rootFiles: toExternalFiles([f1.path, f2.path]),
-                options: {}
+                // open external project
+                const projectName = "/a/b/proj1";
+                projectService.openExternalProject({
+                    projectFileName: projectName,
+                    rootFiles: toExternalFiles([f1.path, f2.path]),
+                    options: {}
+                });
+                projectService.openClientFile(f1.path);
+                projectService.checkNumberOfProjects({ externalProjects: 1 });
+                checkProjectActualFiles(projectService.externalProjects[0], [f1.path, f2.path]);
+
+                // rename lib.ts to tsconfig.json
+                host.reloadFS([f1, tsconfig]);
+                projectService.openExternalProject({
+                    projectFileName: projectName,
+                    rootFiles: toExternalFiles([f1.path, tsconfig.path]),
+                    options: {}
+                });
+                projectService.checkNumberOfProjects({ configuredProjects: 1 });
+                if (lazyConfiguredProjectsFromExternalProject) {
+                    checkProjectActualFiles(configuredProjectAt(projectService, 0), emptyArray); // Configured project created but not loaded till actually needed
+                    projectService.ensureInferredProjectsUpToDate_TestOnly();
+                }
+                checkProjectActualFiles(configuredProjectAt(projectService, 0), [f1.path, tsconfig.path]);
+
+                // rename tsconfig.json back to lib.ts
+                host.reloadFS([f1, f2]);
+                projectService.openExternalProject({
+                    projectFileName: projectName,
+                    rootFiles: toExternalFiles([f1.path, f2.path]),
+                    options: {}
+                });
+
+                projectService.checkNumberOfProjects({ externalProjects: 1 });
+                checkProjectActualFiles(projectService.externalProjects[0], [f1.path, f2.path]);
+            }
+            it("when lazyConfiguredProjectsFromExternalProject not set", () => {
+                verifyAddRemoveConfig(/*lazyConfiguredProjectsFromExternalProject*/ false);
             });
-            projectService.openClientFile(f1.path);
-            projectService.checkNumberOfProjects({ externalProjects: 1 });
-            checkProjectActualFiles(projectService.externalProjects[0], [f1.path, f2.path]);
-
-            // rename lib.ts to tsconfig.json
-            host.reloadFS([f1, tsconfig]);
-            projectService.openExternalProject({
-                projectFileName: projectName,
-                rootFiles: toExternalFiles([f1.path, tsconfig.path]),
-                options: {}
+            it("when lazyConfiguredProjectsFromExternalProject is set", () => {
+                verifyAddRemoveConfig(/*lazyConfiguredProjectsFromExternalProject*/ true);
             });
-            projectService.checkNumberOfProjects({ configuredProjects: 1 });
-            checkProjectActualFiles(configuredProjectAt(projectService, 0), emptyArray); // Configured project created but not loaded till actually needed
-            projectService.ensureInferredProjectsUpToDate_TestOnly();
-            checkProjectActualFiles(configuredProjectAt(projectService, 0), [f1.path, tsconfig.path]);
-
-            // rename tsconfig.json back to lib.ts
-            host.reloadFS([f1, f2]);
-            projectService.openExternalProject({
-                projectFileName: projectName,
-                rootFiles: toExternalFiles([f1.path, f2.path]),
-                options: {}
-            });
-
-            projectService.checkNumberOfProjects({ externalProjects: 1 });
-            checkProjectActualFiles(projectService.externalProjects[0], [f1.path, f2.path]);
         });
 
+        describe("correctly handling add/remove tsconfig - 2", () => {
+            function verifyAddRemoveConfig(lazyConfiguredProjectsFromExternalProject: boolean) {
+                const f1 = {
+                    path: "/a/b/app.ts",
+                    content: "let x = 1;"
+                };
+                const cLib = {
+                    path: "/a/b/c/lib.ts",
+                    content: ""
+                };
+                const cTsconfig = {
+                    path: "/a/b/c/tsconfig.json",
+                    content: "{}"
+                };
+                const dLib = {
+                    path: "/a/b/d/lib.ts",
+                    content: ""
+                };
+                const dTsconfig = {
+                    path: "/a/b/d/tsconfig.json",
+                    content: "{}"
+                };
+                const host = createServerHost([f1, cLib, cTsconfig, dLib, dTsconfig]);
+                const projectService = createProjectService(host);
+                projectService.setHostConfiguration({ preferences: { lazyConfiguredProjectsFromExternalProject } });
 
-        it("correctly handling add/remove tsconfig - 2", () => {
-            const f1 = {
-                path: "/a/b/app.ts",
-                content: "let x = 1;"
-            };
-            const cLib = {
-                path: "/a/b/c/lib.ts",
-                content: ""
-            };
-            const cTsconfig = {
-                path: "/a/b/c/tsconfig.json",
-                content: "{}"
-            };
-            const dLib = {
-                path: "/a/b/d/lib.ts",
-                content: ""
-            };
-            const dTsconfig = {
-                path: "/a/b/d/tsconfig.json",
-                content: "{}"
-            };
-            const host = createServerHost([f1, cLib, cTsconfig, dLib, dTsconfig]);
-            const projectService = createProjectService(host);
+                // open external project
+                const projectName = "/a/b/proj1";
+                projectService.openExternalProject({
+                    projectFileName: projectName,
+                    rootFiles: toExternalFiles([f1.path]),
+                    options: {}
+                });
 
-            // open external project
-            const projectName = "/a/b/proj1";
-            projectService.openExternalProject({
-                projectFileName: projectName,
-                rootFiles: toExternalFiles([f1.path]),
-                options: {}
+                projectService.checkNumberOfProjects({ externalProjects: 1 });
+                checkProjectActualFiles(projectService.externalProjects[0], [f1.path]);
+
+                // add two config file as root files
+                projectService.openExternalProject({
+                    projectFileName: projectName,
+                    rootFiles: toExternalFiles([f1.path, cTsconfig.path, dTsconfig.path]),
+                    options: {}
+                });
+                projectService.checkNumberOfProjects({ configuredProjects: 2 });
+                if (lazyConfiguredProjectsFromExternalProject) {
+                    checkProjectActualFiles(configuredProjectAt(projectService, 0), emptyArray); // Configured project created but not loaded till actually needed
+                    checkProjectActualFiles(configuredProjectAt(projectService, 1), emptyArray); // Configured project created but not loaded till actually needed
+                    projectService.ensureInferredProjectsUpToDate_TestOnly();
+                }
+                checkProjectActualFiles(configuredProjectAt(projectService, 0), [cLib.path, cTsconfig.path]);
+                checkProjectActualFiles(configuredProjectAt(projectService, 1), [dLib.path, dTsconfig.path]);
+
+                // remove one config file
+                projectService.openExternalProject({
+                    projectFileName: projectName,
+                    rootFiles: toExternalFiles([f1.path, dTsconfig.path]),
+                    options: {}
+                });
+
+                projectService.checkNumberOfProjects({ configuredProjects: 1 });
+                checkProjectActualFiles(configuredProjectAt(projectService, 0), [dLib.path, dTsconfig.path]);
+
+                // remove second config file
+                projectService.openExternalProject({
+                    projectFileName: projectName,
+                    rootFiles: toExternalFiles([f1.path]),
+                    options: {}
+                });
+
+                projectService.checkNumberOfProjects({ externalProjects: 1 });
+                checkProjectActualFiles(projectService.externalProjects[0], [f1.path]);
+
+                // open two config files
+                // add two config file as root files
+                projectService.openExternalProject({
+                    projectFileName: projectName,
+                    rootFiles: toExternalFiles([f1.path, cTsconfig.path, dTsconfig.path]),
+                    options: {}
+                });
+                projectService.checkNumberOfProjects({ configuredProjects: 2 });
+                if (lazyConfiguredProjectsFromExternalProject) {
+                    checkProjectActualFiles(configuredProjectAt(projectService, 0), emptyArray); // Configured project created but not loaded till actually needed
+                    checkProjectActualFiles(configuredProjectAt(projectService, 1), emptyArray); // Configured project created but not loaded till actually needed
+                    projectService.ensureInferredProjectsUpToDate_TestOnly();
+                }
+                checkProjectActualFiles(configuredProjectAt(projectService, 0), [cLib.path, cTsconfig.path]);
+                checkProjectActualFiles(configuredProjectAt(projectService, 1), [dLib.path, dTsconfig.path]);
+
+                // close all projects - no projects should be opened
+                projectService.closeExternalProject(projectName);
+                projectService.checkNumberOfProjects({});
+            }
+
+            it("when lazyConfiguredProjectsFromExternalProject not set", () => {
+                verifyAddRemoveConfig(/*lazyConfiguredProjectsFromExternalProject*/ false);
             });
-
-            projectService.checkNumberOfProjects({ externalProjects: 1 });
-            checkProjectActualFiles(projectService.externalProjects[0], [f1.path]);
-
-            // add two config file as root files
-            projectService.openExternalProject({
-                projectFileName: projectName,
-                rootFiles: toExternalFiles([f1.path, cTsconfig.path, dTsconfig.path]),
-                options: {}
+            it("when lazyConfiguredProjectsFromExternalProject is set", () => {
+                verifyAddRemoveConfig(/*lazyConfiguredProjectsFromExternalProject*/ true);
             });
-            projectService.checkNumberOfProjects({ configuredProjects: 2 });
-            checkProjectActualFiles(configuredProjectAt(projectService, 0), emptyArray); // Configured project created but not loaded till actually needed
-            checkProjectActualFiles(configuredProjectAt(projectService, 1), emptyArray); // Configured project created but not loaded till actually needed
-            projectService.ensureInferredProjectsUpToDate_TestOnly();
-            checkProjectActualFiles(configuredProjectAt(projectService, 0), [cLib.path, cTsconfig.path]);
-            checkProjectActualFiles(configuredProjectAt(projectService, 1), [dLib.path, dTsconfig.path]);
-
-            // remove one config file
-            projectService.openExternalProject({
-                projectFileName: projectName,
-                rootFiles: toExternalFiles([f1.path, dTsconfig.path]),
-                options: {}
-            });
-
-            projectService.checkNumberOfProjects({ configuredProjects: 1 });
-            checkProjectActualFiles(configuredProjectAt(projectService, 0), [dLib.path, dTsconfig.path]);
-
-            // remove second config file
-            projectService.openExternalProject({
-                projectFileName: projectName,
-                rootFiles: toExternalFiles([f1.path]),
-                options: {}
-            });
-
-            projectService.checkNumberOfProjects({ externalProjects: 1 });
-            checkProjectActualFiles(projectService.externalProjects[0], [f1.path]);
-
-            // open two config files
-            // add two config file as root files
-            projectService.openExternalProject({
-                projectFileName: projectName,
-                rootFiles: toExternalFiles([f1.path, cTsconfig.path, dTsconfig.path]),
-                options: {}
-            });
-            projectService.checkNumberOfProjects({ configuredProjects: 2 });
-            checkProjectActualFiles(configuredProjectAt(projectService, 0), emptyArray); // Configured project created but not loaded till actually needed
-            checkProjectActualFiles(configuredProjectAt(projectService, 1), emptyArray); // Configured project created but not loaded till actually needed
-            projectService.ensureInferredProjectsUpToDate_TestOnly();
-            checkProjectActualFiles(configuredProjectAt(projectService, 0), [cLib.path, cTsconfig.path]);
-            checkProjectActualFiles(configuredProjectAt(projectService, 1), [dLib.path, dTsconfig.path]);
-
-            // close all projects - no projects should be opened
-            projectService.closeExternalProject(projectName);
-            projectService.checkNumberOfProjects({});
         });
 
         it("correctly handles changes in lib section of config file", () => {
@@ -4174,6 +4241,47 @@ namespace ts.projectSystem {
             assert.isTrue(project.hasOpenRef()); // f
             assert.isFalse(project.isClosed());
         });
+
+        it("handles loads existing configured projects of external projects when lazyConfiguredProjectsFromExternalProject is disabled", () => {
+            const f1 = {
+                path: "/a/b/app.ts",
+                content: "let x = 1"
+            };
+            const config = {
+                path: "/a/b/tsconfig.json",
+                content: JSON.stringify({})
+            };
+            const projectFileName = "/a/b/project.csproj";
+            const host = createServerHost([f1, config]);
+            const service = createProjectService(host);
+            service.setHostConfiguration({ preferences: { lazyConfiguredProjectsFromExternalProject: true } });
+            service.openExternalProject(<protocol.ExternalProject>{
+                projectFileName,
+                rootFiles: toExternalFiles([f1.path, config.path]),
+                options: {}
+            });
+            service.checkNumberOfProjects({ configuredProjects: 1 });
+            const project = service.configuredProjects.get(config.path)!;
+            assert.equal(project.pendingReload, ConfigFileProgramReloadLevel.Full); // External project referenced configured project pending to be reloaded
+            checkProjectActualFiles(project, emptyArray);
+
+            service.setHostConfiguration({ preferences: { lazyConfiguredProjectsFromExternalProject: false } });
+            assert.equal(project.pendingReload, ConfigFileProgramReloadLevel.None); // External project referenced configured project loaded
+            checkProjectActualFiles(project, [config.path, f1.path]);
+
+            service.closeExternalProject(projectFileName);
+            service.checkNumberOfProjects({});
+
+            service.openExternalProject(<protocol.ExternalProject>{
+                projectFileName,
+                rootFiles: toExternalFiles([f1.path, config.path]),
+                options: {}
+            });
+            service.checkNumberOfProjects({ configuredProjects: 1 });
+            const project2 = service.configuredProjects.get(config.path)!;
+            assert.equal(project2.pendingReload, ConfigFileProgramReloadLevel.None); // External project referenced configured project loaded
+            checkProjectActualFiles(project2, [config.path, f1.path]);
+        });
     });
 
     describe("tsserverProjectSystem prefer typings to js", () => {
diff --git a/tests/baselines/reference/api/tsserverlibrary.d.ts b/tests/baselines/reference/api/tsserverlibrary.d.ts
index e8cda88590..186f3eeff1 100644
--- a/tests/baselines/reference/api/tsserverlibrary.d.ts
+++ b/tests/baselines/reference/api/tsserverlibrary.d.ts
@@ -7797,6 +7797,7 @@ declare namespace ts.server.protocol {
         readonly includeCompletionsWithInsertText?: boolean;
         readonly importModuleSpecifierPreference?: "relative" | "non-relative";
         readonly allowTextChangesInNewFiles?: boolean;
+        readonly lazyConfiguredProjectsFromExternalProject?: boolean;
     }
     interface CompilerOptions {
         allowJs?: boolean;
@@ -7928,14 +7929,14 @@ declare namespace ts.server {
         getSnapshot(): IScriptSnapshot;
         private ensureRealPath;
         getFormatCodeSettings(): FormatCodeSettings | undefined;
-        getPreferences(): UserPreferences | undefined;
+        getPreferences(): protocol.UserPreferences | undefined;
         attachToProject(project: Project): boolean;
         isAttached(project: Project): boolean;
         detachFromProject(project: Project): void;
         detachAllProjects(): void;
         getDefaultProject(): Project;
         registerFileUpdate(): void;
-        setOptions(formatSettings: FormatCodeSettings, preferences: UserPreferences | undefined): void;
+        setOptions(formatSettings: FormatCodeSettings, preferences: protocol.UserPreferences | undefined): void;
         getLatestVersion(): string;
         saveTo(fileName: string): void;
         reloadFromFile(tempFileName?: NormalizedPath): boolean;
@@ -8313,7 +8314,7 @@ declare namespace ts.server {
     function convertScriptKindName(scriptKindName: protocol.ScriptKindName): ScriptKind.Unknown | ScriptKind.JS | ScriptKind.JSX | ScriptKind.TS | ScriptKind.TSX;
     interface HostConfiguration {
         formatCodeOptions: FormatCodeSettings;
-        preferences: UserPreferences;
+        preferences: protocol.UserPreferences;
         hostInfo: string;
         extraFileExtensions?: FileExtensionInfo[];
     }
@@ -8432,9 +8433,9 @@ declare namespace ts.server {
          */
         private ensureProjectStructuresUptoDate;
         getFormatCodeOptions(file: NormalizedPath): FormatCodeSettings;
-        getPreferences(file: NormalizedPath): UserPreferences;
+        getPreferences(file: NormalizedPath): protocol.UserPreferences;
         getHostFormatCodeOptions(): FormatCodeSettings;
-        getHostPreferences(): UserPreferences;
+        getHostPreferences(): protocol.UserPreferences;
         private onSourceFileChanged;
         private handleDeletedFile;
         private onConfigChangedForConfiguredProject;