diff --git a/.gitignore b/.gitignore
index fc901fbb7a..0badfe0cf6 100644
--- a/.gitignore
+++ b/.gitignore
@@ -51,3 +51,4 @@ internal/
 !**/.vscode/tasks.json
 !tests/cases/projects/projectOption/**/node_modules
 !tests/cases/projects/NodeModulesSearch/**/*
+!tests/baselines/reference/project/nodeModules*/**/*
diff --git a/src/compiler/program.ts b/src/compiler/program.ts
index 2e4492efa7..670d30b7d3 100644
--- a/src/compiler/program.ts
+++ b/src/compiler/program.ts
@@ -1095,13 +1095,13 @@ namespace ts {
         // As all these operations happen - and are nested - within the createProgram call, they close over the below variables.
         // The current resolution depth is tracked by incrementing/decrementing as the depth first search progresses.
         const maxNodeModulesJsDepth = typeof options.maxNodeModuleJsDepth === "number" ? options.maxNodeModuleJsDepth : 2;
-        let currentNodeModulesJsDepth = 0;
+        let currentNodeModulesDepth = 0;
 
         // If a module has some of its imports skipped due to being at the depth limit under node_modules, then track
         // this, as it may be imported at a shallower depth later, and then it will need its skipped imports processed.
         const modulesWithElidedImports: Map<boolean> = {};
 
-        // Track source files that are JavaScript files found by searching under node_modules, as these shouldn't be compiled.
+        // Track source files that are source files found by searching under node_modules, as these shouldn't be compiled.
         const sourceFilesFoundSearchingNodeModules: Map<boolean> = {};
 
         const start = new Date().getTime();
@@ -1918,9 +1918,21 @@ namespace ts {
                     reportFileNamesDifferOnlyInCasingError(fileName, file.fileName, refFile, refPos, refEnd);
                 }
 
+                // If the file was previously found via a node_modules search, but is now being processed as a root file,
+                // then everything it sucks in may also be marked incorrectly, and needs to be checked again.
+                if (file && lookUp(sourceFilesFoundSearchingNodeModules, file.path) && currentNodeModulesDepth == 0) {
+                    sourceFilesFoundSearchingNodeModules[file.path] = false;
+                    if (!options.noResolve) {
+                        processReferencedFiles(file, getDirectoryPath(fileName), isDefaultLib);
+                        processTypeReferenceDirectives(file);
+                    }
+
+                    modulesWithElidedImports[file.path] = false;
+                    processImportedModules(file, getDirectoryPath(fileName));
+                }
                 // See if we need to reprocess the imports due to prior skipped imports
-                if (file && lookUp(modulesWithElidedImports, file.path)) {
-                    if (currentNodeModulesJsDepth < maxNodeModulesJsDepth) {
+                else if (file && lookUp(modulesWithElidedImports, file.path)) {
+                    if (currentNodeModulesDepth < maxNodeModulesJsDepth) {
                         modulesWithElidedImports[file.path] = false;
                         processImportedModules(file, getDirectoryPath(fileName));
                     }
@@ -1942,6 +1954,7 @@ namespace ts {
 
             filesByName.set(path, file);
             if (file) {
+                sourceFilesFoundSearchingNodeModules[path] = (currentNodeModulesDepth > 0);
                 file.path = path;
 
                 if (host.useCaseSensitiveFileNames()) {
@@ -2075,13 +2088,10 @@ namespace ts {
                     const isJsFileFromNodeModules = isFromNodeModulesSearch && hasJavaScriptFileExtension(resolution.resolvedFileName);
 
                     if (isFromNodeModulesSearch) {
-                        sourceFilesFoundSearchingNodeModules[resolvedPath] = true;
-                    }
-                    if (isJsFileFromNodeModules) {
-                        currentNodeModulesJsDepth++;
+                        currentNodeModulesDepth++;
                     }
 
-                    const elideImport = isJsFileFromNodeModules && currentNodeModulesJsDepth > maxNodeModulesJsDepth;
+                    const elideImport = isJsFileFromNodeModules && currentNodeModulesDepth > maxNodeModulesJsDepth;
                     const shouldAddFile = resolution && !options.noResolve && i < file.imports.length && !elideImport;
 
                     if (elideImport) {
@@ -2096,8 +2106,8 @@ namespace ts {
                                 file.imports[i].end);
                     }
 
-                    if (isJsFileFromNodeModules) {
-                        currentNodeModulesJsDepth--;
+                    if (isFromNodeModulesSearch) {
+                        currentNodeModulesDepth--;
                     }
                 }
             }
diff --git a/src/harness/projectsRunner.ts b/src/harness/projectsRunner.ts
index fb92ff4dfa..cf3c78d885 100644
--- a/src/harness/projectsRunner.ts
+++ b/src/harness/projectsRunner.ts
@@ -479,17 +479,27 @@ class ProjectRunner extends RunnerBase {
 
                     it("Baseline of emitted result (" + moduleNameToString(moduleKind) + "): " + testCaseFileName, () => {
                         if (testCase.baselineCheck) {
+                            const errs: Error[] = [];
                             ts.forEach(compilerResult.outputFiles, outputFile => {
-
-                                Harness.Baseline.runBaseline("Baseline of emitted result (" + moduleNameToString(compilerResult.moduleKind) + "): " + testCaseFileName, getBaselineFolder(compilerResult.moduleKind) + outputFile.fileName, () => {
-                                    try {
-                                        return Harness.IO.readFile(getProjectOutputFolder(outputFile.fileName, compilerResult.moduleKind));
-                                    }
-                                    catch (e) {
-                                        return undefined;
-                                    }
-                                });
+                                // There may be multiple files with different baselines. Run all and report at the end, else
+                                // it stops copying the remaining emitted files from 'local/projectOutput' to 'local/project'.
+                                try {
+                                    Harness.Baseline.runBaseline("Baseline of emitted result (" + moduleNameToString(compilerResult.moduleKind) + "): " + testCaseFileName, getBaselineFolder(compilerResult.moduleKind) + outputFile.fileName, () => {
+                                        try {
+                                            return Harness.IO.readFile(getProjectOutputFolder(outputFile.fileName, compilerResult.moduleKind));
+                                        }
+                                        catch (e) {
+                                            return undefined;
+                                        }
+                                    });
+                                }
+                                catch (e) {
+                                    errs.push(e);
+                                }
                             });
+                            if (errs.length) {
+                                throw Error(errs.join("\n     "));
+                            }
                         }
                     });
 
diff --git a/tests/baselines/reference/moduleAugmentationInDependency2.js b/tests/baselines/reference/moduleAugmentationInDependency2.js
index 0a5d83695a..381f1e72d8 100644
--- a/tests/baselines/reference/moduleAugmentationInDependency2.js
+++ b/tests/baselines/reference/moduleAugmentationInDependency2.js
@@ -8,6 +8,8 @@ export {};
 //// [app.ts]
 import "A"
 
+//// [index.js]
+"use strict";
 //// [app.js]
 "use strict";
 require("A");
diff --git a/tests/baselines/reference/nodeResolution6.js b/tests/baselines/reference/nodeResolution6.js
index 58a9b90725..196e8ae57c 100644
--- a/tests/baselines/reference/nodeResolution6.js
+++ b/tests/baselines/reference/nodeResolution6.js
@@ -13,7 +13,5 @@ export declare var y;
 import y = require("a"); 
 
 
-//// [ref.js]
-var x = 1;
 //// [b.js]
 "use strict";
diff --git a/tests/baselines/reference/nodeResolution8.js b/tests/baselines/reference/nodeResolution8.js
index 36b53eec55..1d90399ff7 100644
--- a/tests/baselines/reference/nodeResolution8.js
+++ b/tests/baselines/reference/nodeResolution8.js
@@ -12,7 +12,5 @@ export declare var y;
 //// [b.ts]
 import y = require("a");
 
-//// [ref.js]
-var x = 1;
 //// [b.js]
 "use strict";
diff --git a/tests/baselines/reference/pathMappingBasedModuleResolution5_node.js b/tests/baselines/reference/pathMappingBasedModuleResolution5_node.js
index e4440299cc..1958800f91 100644
--- a/tests/baselines/reference/pathMappingBasedModuleResolution5_node.js
+++ b/tests/baselines/reference/pathMappingBasedModuleResolution5_node.js
@@ -31,6 +31,9 @@ exports.x = 1;
 //// [file2.js]
 "use strict";
 exports.y = 1;
+//// [file4.js]
+"use strict";
+exports.z1 = 1;
 //// [file1.js]
 "use strict";
 var file1_1 = require("folder2/file1");
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/built/node_modules/m1/index.js b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/built/node_modules/m1/index.js
new file mode 100644
index 0000000000..46d38afba6
--- /dev/null
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/built/node_modules/m1/index.js
@@ -0,0 +1,10 @@
+var m2 = require('m2');
+var rel = require('./relative');
+/**
+ * @param {string} p1 The first param
+ */
+exports.f1 = function (p1) {
+    return 42;
+};
+exports.f2 = m2;
+exports.rel = rel.relativeProp;
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/built/node_modules/m1/relative.js b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/built/node_modules/m1/relative.js
new file mode 100644
index 0000000000..1343207654
--- /dev/null
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/built/node_modules/m1/relative.js
@@ -0,0 +1 @@
+exports.relativeProp = true;
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/root.js b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/built/root.js
similarity index 82%
rename from tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/root.js
rename to tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/built/root.js
index 73cef6fc02..5a3916f07d 100644
--- a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/root.js
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/maxDepthExceeded/built/root.js
@@ -2,5 +2,6 @@ define(["require", "exports", "m1"], function (require, exports, m1) {
     "use strict";
     m1.f1("test");
     m1.f2.a = "10"; // Error: Should be number
+    m1.rel = 42; // Error: Should be boolean
     m1.f2.person.age = "10"; // OK if stopped at 2 modules: person will be "any".
 });
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/nodeModulesMaxDepthExceeded.errors.txt b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/nodeModulesMaxDepthExceeded.errors.txt
index f03b958275..7099c05d57 100644
--- a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/nodeModulesMaxDepthExceeded.errors.txt
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/nodeModulesMaxDepthExceeded.errors.txt
@@ -1,4 +1,5 @@
 maxDepthExceeded/root.ts(3,1): error TS2322: Type 'string' is not assignable to type 'number'.
+maxDepthExceeded/root.ts(4,1): error TS2322: Type 'number' is not assignable to type 'boolean'.
 
 
 ==== entry.js (0 errors) ====
@@ -10,8 +11,12 @@ maxDepthExceeded/root.ts(3,1): error TS2322: Type 'string' is not assignable to
     	"person": m3.person
     };
     
-==== index.js (0 errors) ====
+==== relative.js (0 errors) ====
+    exports.relativeProp = true;
+    
+==== maxDepthExceeded/node_modules/m1/index.js (0 errors) ====
     var m2 = require('m2');
+    var rel = require('./relative');
     
     /**
      * @param {string} p1 The first param
@@ -22,11 +27,17 @@ maxDepthExceeded/root.ts(3,1): error TS2322: Type 'string' is not assignable to
     
     exports.f2 = m2;
     
-==== maxDepthExceeded/root.ts (1 errors) ====
+    exports.rel = rel.relativeProp;
+    
+==== maxDepthExceeded/root.ts (2 errors) ====
     import * as m1 from "m1";
     m1.f1("test");
     m1.f2.a = "10"; // Error: Should be number
     ~~~~~~~
 !!! error TS2322: Type 'string' is not assignable to type 'number'.
+    m1.rel = 42; // Error: Should be boolean
+    ~~~~~~
+!!! error TS2322: Type 'number' is not assignable to type 'boolean'.
+    
     m1.f2.person.age = "10"; // OK if stopped at 2 modules: person will be "any".
     
\ No newline at end of file
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/nodeModulesMaxDepthExceeded.json b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/nodeModulesMaxDepthExceeded.json
index 80a0a0fb93..86e856dc7b 100644
--- a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/nodeModulesMaxDepthExceeded.json
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/amd/nodeModulesMaxDepthExceeded.json
@@ -8,10 +8,13 @@
     "resolvedInputFiles": [
         "lib.d.ts",
         "maxDepthExceeded/node_modules/m2/entry.js",
+        "maxDepthExceeded/node_modules/m1/relative.js",
         "maxDepthExceeded/node_modules/m1/index.js",
         "maxDepthExceeded/root.ts"
     ],
     "emittedFiles": [
-        "maxDepthExceeded/root.js"
+        "maxDepthExceeded/built/node_modules/m1/relative.js",
+        "maxDepthExceeded/built/node_modules/m1/index.js",
+        "maxDepthExceeded/built/root.js"
     ]
 }
\ No newline at end of file
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/built/node_modules/m1/index.js b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/built/node_modules/m1/index.js
new file mode 100644
index 0000000000..46d38afba6
--- /dev/null
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/built/node_modules/m1/index.js
@@ -0,0 +1,10 @@
+var m2 = require('m2');
+var rel = require('./relative');
+/**
+ * @param {string} p1 The first param
+ */
+exports.f1 = function (p1) {
+    return 42;
+};
+exports.f2 = m2;
+exports.rel = rel.relativeProp;
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/built/node_modules/m1/relative.js b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/built/node_modules/m1/relative.js
new file mode 100644
index 0000000000..1343207654
--- /dev/null
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/built/node_modules/m1/relative.js
@@ -0,0 +1 @@
+exports.relativeProp = true;
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/root.js b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/built/root.js
similarity index 78%
rename from tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/root.js
rename to tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/built/root.js
index 28f91fb9b9..fb4faf236b 100644
--- a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/root.js
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/maxDepthExceeded/built/root.js
@@ -2,4 +2,5 @@
 var m1 = require("m1");
 m1.f1("test");
 m1.f2.a = "10"; // Error: Should be number
+m1.rel = 42; // Error: Should be boolean
 m1.f2.person.age = "10"; // OK if stopped at 2 modules: person will be "any".
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/nodeModulesMaxDepthExceeded.errors.txt b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/nodeModulesMaxDepthExceeded.errors.txt
index f03b958275..7099c05d57 100644
--- a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/nodeModulesMaxDepthExceeded.errors.txt
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/nodeModulesMaxDepthExceeded.errors.txt
@@ -1,4 +1,5 @@
 maxDepthExceeded/root.ts(3,1): error TS2322: Type 'string' is not assignable to type 'number'.
+maxDepthExceeded/root.ts(4,1): error TS2322: Type 'number' is not assignable to type 'boolean'.
 
 
 ==== entry.js (0 errors) ====
@@ -10,8 +11,12 @@ maxDepthExceeded/root.ts(3,1): error TS2322: Type 'string' is not assignable to
     	"person": m3.person
     };
     
-==== index.js (0 errors) ====
+==== relative.js (0 errors) ====
+    exports.relativeProp = true;
+    
+==== maxDepthExceeded/node_modules/m1/index.js (0 errors) ====
     var m2 = require('m2');
+    var rel = require('./relative');
     
     /**
      * @param {string} p1 The first param
@@ -22,11 +27,17 @@ maxDepthExceeded/root.ts(3,1): error TS2322: Type 'string' is not assignable to
     
     exports.f2 = m2;
     
-==== maxDepthExceeded/root.ts (1 errors) ====
+    exports.rel = rel.relativeProp;
+    
+==== maxDepthExceeded/root.ts (2 errors) ====
     import * as m1 from "m1";
     m1.f1("test");
     m1.f2.a = "10"; // Error: Should be number
     ~~~~~~~
 !!! error TS2322: Type 'string' is not assignable to type 'number'.
+    m1.rel = 42; // Error: Should be boolean
+    ~~~~~~
+!!! error TS2322: Type 'number' is not assignable to type 'boolean'.
+    
     m1.f2.person.age = "10"; // OK if stopped at 2 modules: person will be "any".
     
\ No newline at end of file
diff --git a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/nodeModulesMaxDepthExceeded.json b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/nodeModulesMaxDepthExceeded.json
index 80a0a0fb93..86e856dc7b 100644
--- a/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/nodeModulesMaxDepthExceeded.json
+++ b/tests/baselines/reference/project/nodeModulesMaxDepthExceeded/node/nodeModulesMaxDepthExceeded.json
@@ -8,10 +8,13 @@
     "resolvedInputFiles": [
         "lib.d.ts",
         "maxDepthExceeded/node_modules/m2/entry.js",
+        "maxDepthExceeded/node_modules/m1/relative.js",
         "maxDepthExceeded/node_modules/m1/index.js",
         "maxDepthExceeded/root.ts"
     ],
     "emittedFiles": [
-        "maxDepthExceeded/root.js"
+        "maxDepthExceeded/built/node_modules/m1/relative.js",
+        "maxDepthExceeded/built/node_modules/m1/index.js",
+        "maxDepthExceeded/built/root.js"
     ]
 }
\ No newline at end of file
diff --git a/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/node_modules/m1/index.js b/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/node_modules/m1/index.js
index 7ff454a240..0433199ffd 100644
--- a/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/node_modules/m1/index.js
+++ b/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/node_modules/m1/index.js
@@ -1,4 +1,5 @@
 var m2 = require('m2');
+var rel = require('./relative');
 
 /**
  * @param {string} p1 The first param
@@ -8,3 +9,5 @@ exports.f1 = function(p1) {
 };
 
 exports.f2 = m2;
+
+exports.rel = rel.relativeProp;
diff --git a/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/node_modules/m1/relative.js b/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/node_modules/m1/relative.js
new file mode 100644
index 0000000000..8b051584b8
--- /dev/null
+++ b/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/node_modules/m1/relative.js
@@ -0,0 +1 @@
+exports.relativeProp = true;
diff --git a/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/root.ts b/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/root.ts
index 6260440864..f847ea6048 100644
--- a/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/root.ts
+++ b/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/root.ts
@@ -1,4 +1,6 @@
 import * as m1 from "m1";
 m1.f1("test");
 m1.f2.a = "10"; // Error: Should be number
+m1.rel = 42; // Error: Should be boolean
+
 m1.f2.person.age = "10"; // OK if stopped at 2 modules: person will be "any".
diff --git a/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/tsconfig.json b/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/tsconfig.json
index 0aafe67d68..52633bb5a9 100644
--- a/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/tsconfig.json
+++ b/tests/cases/projects/NodeModulesSearch/maxDepthExceeded/tsconfig.json
@@ -1,5 +1,9 @@
 {
   "compilerOptions": { 
-    "allowJs": true
-  }
+    "allowJs": true,
+    "maxNodeModuleJsDepth": 1, // Note: Module m1 is already included as a root file
+    "outDir": "built"
+  },
+  "include": ["**/*"],
+  "exclude": ["node_modules/m2/**/*"]
 }