diff --git a/examples/fork-ts-checker-webpack-plugin/yarn.lock b/examples/fork-ts-checker-webpack-plugin/yarn.lock
index cb11ecfcc..b898b148f 100644
--- a/examples/fork-ts-checker-webpack-plugin/yarn.lock
+++ b/examples/fork-ts-checker-webpack-plugin/yarn.lock
@@ -2293,9 +2293,9 @@ js-tokens@^3.0.2:
   integrity sha1-mGbfOVECEw449/mWvOtlRDIJwls=
 
 js-yaml@^3.7.0:
-  version "3.12.1"
-  resolved "https://registry.yarnpkg.com/js-yaml/-/js-yaml-3.12.1.tgz#295c8632a18a23e054cf5c9d3cecafe678167600"
-  integrity sha512-um46hB9wNOKlwkHgiuyEVAybXBjwFUV0Z/RaHJblRd9DXltue9FTYvzCr9ErQrK9Adz5MU4gHWVaNUfdmrC8qA==
+  version "3.13.1"
+  resolved "https://registry.yarnpkg.com/js-yaml/-/js-yaml-3.13.1.tgz#aff151b30bfdfa8e49e05da22e7415e9dfa37847"
+  integrity sha512-YfbcO7jXDdyj0DGxYVSlSeQNHbD7XPWvrVWeVUujrQEoZzWJIRrCPoyk6kL6IAjAG2IolMK4T0hNUe0HOUs5Jw==
   dependencies:
     argparse "^1.0.7"
     esprima "^4.0.0"
diff --git a/src/config.ts b/src/config.ts
index 7cb78e806..e30e97460 100644
--- a/src/config.ts
+++ b/src/config.ts
@@ -6,7 +6,7 @@ import * as webpack from 'webpack';
 
 import { ConfigFile, LoaderOptions, WebpackError } from './interfaces';
 import * as logger from './logger';
-import { formatErrors } from './utils';
+import { formatErrors, getPossiblyRenamedFilePath } from './utils';
 
 export function getConfigFile(
   compiler: typeof typescript,
@@ -122,11 +122,12 @@ export function getConfigParseResult(
   compiler: typeof typescript,
   configFile: ConfigFile,
   basePath: string,
-  configFilePath: string | undefined
+  configFilePath: string | undefined,
+  loaderOptions: LoaderOptions
 ) {
   const configParseResult = compiler.parseJsonConfigFileContent(
     configFile.config,
-    compiler.sys,
+    getSuffixAppendingParseConfigHost(compiler.sys, loaderOptions),
     basePath
   );
 
@@ -139,3 +140,49 @@ export function getConfigParseResult(
 
   return configParseResult;
 }
+
+function getSuffixAppendingParseConfigHost(
+  sys: typescript.System,
+  loaderOptions: LoaderOptions
+): typescript.ParseConfigHost {
+  if (
+    !loaderOptions.appendTsSuffixTo.length &&
+    !loaderOptions.appendTsxSuffixTo.length
+  ) {
+    return sys;
+  }
+
+  return {
+    useCaseSensitiveFileNames: sys.useCaseSensitiveFileNames,
+    fileExists: mapArg(sys.fileExists, transformFileName),
+    readFile: mapArg(sys.readFile, transformFileName),
+    readDirectory: (rootDir, extensions, ...rest) => {
+      const allFiles = sys.readDirectory(rootDir);
+      const customExtensions = allFiles.reduce((exts: string[], fileName) => {
+        const renamed = transformFileName(fileName);
+        if (
+          renamed !== fileName &&
+          extensions.indexOf(path.extname(renamed).toLowerCase()) > -1
+        ) {
+          const ext = path.extname(fileName).toLowerCase();
+          if (ext) {
+            exts.push(ext);
+          }
+        }
+        return exts;
+      }, []);
+
+      return sys
+        .readDirectory(rootDir, extensions.concat(customExtensions), ...rest)
+        .map(transformFileName);
+    }
+  };
+
+  function transformFileName(rawFileName: string) {
+    return getPossiblyRenamedFilePath(rawFileName, loaderOptions);
+  }
+}
+
+function mapArg<T, U>(toWrap: (x: T) => U, wrapWith: (x: T) => T): (x: T) => U {
+  return x => toWrap(wrapWith(x));
+}
diff --git a/src/index.ts b/src/index.ts
index 5e189d3b5..1811a9672 100644
--- a/src/index.ts
+++ b/src/index.ts
@@ -18,11 +18,12 @@ import {
   TSInstance
 } from './interfaces';
 import {
-  appendSuffixesIfMatch,
   arrify,
   formatErrors,
   getAndCacheOutputJSFileName,
   getAndCacheProjectReference,
+  getPossiblyRenamedFilePath,
+  isRootFileOrExempt,
   validateSourceMapOncePerProject
 } from './utils';
 
@@ -62,35 +63,15 @@ function successLoader(
 ) {
   const rawFilePath = path.normalize(loaderContext.resourcePath);
 
-  const filePath =
-    options.appendTsSuffixTo.length > 0 || options.appendTsxSuffixTo.length > 0
-      ? appendSuffixesIfMatch(
-          {
-            '.ts': options.appendTsSuffixTo,
-            '.tsx': options.appendTsxSuffixTo
-          },
-          rawFilePath
-        )
-      : rawFilePath;
+  const filePath = getPossiblyRenamedFilePath(rawFilePath, options);
 
   const { version: fileVersion, changedFilesList } = updateFileInCache(
     filePath,
     contents,
-    instance
+    instance,
+    options
   );
 
-  if (changedFilesList && !instance.rootFileNames.has(filePath)) {
-    reloadRootFileNamesFromConfig(loaderContext, instance);
-    if (
-      !instance.rootFileNames.has(filePath) &&
-      !options.onlyCompileBundledFiles
-    ) {
-      throw new Error(
-        `The file ${filePath} is not part of the project specified in tsconfig.json. Make sure it is covered by the fields 'include', 'exclude' and 'files'.`
-      );
-    }
-  }
-
   const referencedProject = getAndCacheProjectReference(filePath, instance);
   if (referencedProject !== undefined) {
     const [relativeProjectConfigPath, relativeFilePath] = [
@@ -155,6 +136,18 @@ function successLoader(
       callback
     );
   } else {
+    if (changedFilesList && !isRootFileOrExempt(filePath, instance)) {
+      reloadRootFileNamesFromConfig(loaderContext, instance, options);
+      if (
+        !instance.rootFileNames.has(filePath) &&
+        !options.onlyCompileBundledFiles
+      ) {
+        throw new Error(
+          `The file ${filePath} is not part of the project specified in tsconfig.json. Make sure it is covered by the fields 'include', 'exclude' and 'files'.`
+        );
+      }
+    }
+
     const { outputText, sourceMapText } = options.transpileOnly
       ? getTranspilationEmit(filePath, contents, instance, loaderContext)
       : getEmit(rawFilePath, filePath, instance, loaderContext);
@@ -178,28 +171,23 @@ function successLoader(
  */
 function reloadRootFileNamesFromConfig(
   loaderContext: webpack.loader.LoaderContext,
-  instance: TSInstance
+  instance: TSInstance,
+  options: LoaderOptions
 ) {
-  const {
-    compiler,
-    basePath,
-    configFile,
-    configFilePath,
-    colors,
-    loaderOptions
-  } = instance;
+  const { compiler, basePath, configFile, configFilePath, colors } = instance;
 
   const configParseResult = getConfigParseResult(
     compiler,
     configFile,
     basePath,
-    configFilePath
+    configFilePath,
+    options
   );
 
-  if (configParseResult.errors.length > 0 && !loaderOptions.happyPackMode) {
+  if (configParseResult.errors.length > 0 && !options.happyPackMode) {
     const errors = formatErrors(
       configParseResult.errors,
-      loaderOptions,
+      options,
       colors,
       compiler,
       { file: configFilePath },
@@ -211,7 +199,7 @@ function reloadRootFileNamesFromConfig(
     throw new Error(colors.red('error while parsing tsconfig.json'));
   }
 
-  updateInstanceRootFileNames(loaderOptions, instance, configParseResult);
+  updateInstanceRootFileNames(options, instance, configParseResult);
 
   return;
 }
@@ -400,7 +388,8 @@ function makeLoaderOptions(instanceName: string, loaderOptions: LoaderOptions) {
 function updateFileInCache(
   filePath: string,
   contents: string,
-  instance: TSInstance
+  instance: TSInstance,
+  options: LoaderOptions
 ) {
   let fileWatcherEventKind: typescript.FileWatcherEventKind | undefined;
   let changedFilesList = false;
@@ -432,6 +421,9 @@ function updateFileInCache(
   //
   if (!instance.rootFileNames.has(filePath)) {
     instance.version!++;
+    if (options.onlyCompileBundledFiles) {
+      instance.rootFileNames.add(filePath);
+    }
   }
 
   if (instance.watchHost !== undefined && contents === undefined) {
diff --git a/src/instances.ts b/src/instances.ts
index 820e83e7a..5401f2bbe 100644
--- a/src/instances.ts
+++ b/src/instances.ts
@@ -22,6 +22,7 @@ import {
   appendSuffixesIfMatch,
   ensureProgram,
   formatErrors,
+  getOriginalFilePath,
   isUsingProjectReferences,
   makeError
 } from './utils';
@@ -100,7 +101,8 @@ function successfulTypeScriptInstance(
     compiler,
     configFile,
     basePath,
-    configFilePath
+    configFilePath,
+    loaderOptions
   );
 
   if (configParseResult.errors.length > 0 && !loaderOptions.happyPackMode) {
@@ -254,7 +256,10 @@ function successfulTypeScriptInstance(
     instance.rootFileNames.forEach(filePath => {
       normalizedFilePath = path.normalize(filePath);
       files.set(normalizedFilePath, {
-        text: fs.readFileSync(normalizedFilePath, 'utf-8'),
+        text: fs.readFileSync(
+          getOriginalFilePath(normalizedFilePath, loaderOptions),
+          'utf-8'
+        ),
         version: 0
       });
     });
diff --git a/src/servicesHost.ts b/src/servicesHost.ts
index f54e9d71c..91fa9faf0 100644
--- a/src/servicesHost.ts
+++ b/src/servicesHost.ts
@@ -96,8 +96,7 @@ export function makeServicesHost(
 
     getProjectReferences: () => projectReferences,
 
-    getScriptFileNames: () =>
-      [...files.keys()].filter(filePath => filePath.match(scriptRegex)),
+    getScriptFileNames: () => Array.from(instance.rootFileNames),
 
     getScriptVersion: (fileName: string) => {
       fileName = path.normalize(fileName);
@@ -351,7 +350,7 @@ export function makeWatchHost(
   return watchHost;
 
   function getRootFileNames() {
-    return [...files.keys()].filter(filePath => filePath.match(scriptRegex));
+    return Array.from(instance.rootFileNames);
   }
 
   function readFileWithCachingText(fileName: string, encoding?: string) {
diff --git a/src/utils.ts b/src/utils.ts
index a28318ccb..05d739232 100644
--- a/src/utils.ts
+++ b/src/utils.ts
@@ -136,6 +136,67 @@ export function makeError(
   };
 }
 
+export function getPossiblyRenamedFilePath(
+  rawFilePath: string,
+  loaderOptions: LoaderOptions
+) {
+  return loaderOptions.appendTsSuffixTo.length > 0 ||
+    loaderOptions.appendTsxSuffixTo.length > 0
+    ? appendSuffixesIfMatch(
+        {
+          '.ts': loaderOptions.appendTsSuffixTo,
+          '.tsx': loaderOptions.appendTsxSuffixTo
+        },
+        rawFilePath
+      )
+    : rawFilePath;
+}
+
+export function getOriginalFilePath(
+  possiblyRenamedFilePath: string,
+  loaderOptions: LoaderOptions
+) {
+  if (
+    loaderOptions.appendTsSuffixTo.length &&
+    possiblyRenamedFilePath.endsWith(typescript.Extension.Ts)
+  ) {
+    const maybeOriginal = stripEnd(
+      possiblyRenamedFilePath,
+      typescript.Extension.Ts.length
+    );
+    const renamedAgain = appendSuffixIfMatch(
+      loaderOptions.appendTsSuffixTo,
+      maybeOriginal,
+      typescript.Extension.Ts
+    );
+    if (renamedAgain === possiblyRenamedFilePath) {
+      return maybeOriginal;
+    }
+  }
+  if (
+    loaderOptions.appendTsxSuffixTo.length &&
+    possiblyRenamedFilePath.endsWith(typescript.Extension.Tsx)
+  ) {
+    const maybeOriginal = stripEnd(
+      possiblyRenamedFilePath,
+      typescript.Extension.Tsx.length
+    );
+    const renamedAgain = appendSuffixIfMatch(
+      loaderOptions.appendTsxSuffixTo,
+      maybeOriginal,
+      typescript.Extension.Tsx
+    );
+    if (renamedAgain === possiblyRenamedFilePath) {
+      return maybeOriginal;
+    }
+  }
+  return possiblyRenamedFilePath;
+}
+
+export function stripEnd(str: string, lengthToRemove: number) {
+  return str.slice(0, str.length - lengthToRemove);
+}
+
 export function appendSuffixIfMatch(
   patterns: RegExp[],
   filePath: string,
@@ -255,6 +316,21 @@ export function ensureProgram(instance: TSInstance) {
   return instance.program;
 }
 
+export function isRootFileOrExempt(
+  fileName: string,
+  instance: TSInstance
+): boolean {
+  // node_modules checking handled separately, later
+  if (
+    instance.rootFileNames.has(fileName) ||
+    fileName.indexOf('node_modules') > -1
+  ) {
+    return true;
+  }
+
+  return false;
+}
+
 export function supportsProjectReferences(instance: TSInstance) {
   const program = ensureProgram(instance);
   return program && !!program.getProjectReferences;
diff --git a/test/comparison-tests/appendSuffixTo/tsconfig.json b/test/comparison-tests/appendSuffixTo/tsconfig.json
index 1db219bc0..b71270932 100644
--- a/test/comparison-tests/appendSuffixTo/tsconfig.json
+++ b/test/comparison-tests/appendSuffixTo/tsconfig.json
@@ -1,7 +1,4 @@
 {
 	"compilerOptions": {
-	},
-    "files": [
-        "index.vue.ts"
-    ]
+	}
 }
diff --git a/test/comparison-tests/nodeModulesMeaningfulErrorWhenImportingTs/tsconfig.json b/test/comparison-tests/nodeModulesMeaningfulErrorWhenImportingTs/tsconfig.json
index 0fa41fd51..0967ef424 100644
--- a/test/comparison-tests/nodeModulesMeaningfulErrorWhenImportingTs/tsconfig.json
+++ b/test/comparison-tests/nodeModulesMeaningfulErrorWhenImportingTs/tsconfig.json
@@ -1,8 +1 @@
-{
-	"compilerOptions": {
-	    "include": [
-            "node_modules",
-            "app.ts"
-        ]
-	}
-}
+{}
diff --git a/test/execution-tests/3.0.1_projectReferences/tsconfig.json b/test/execution-tests/3.0.1_projectReferences/tsconfig.json
index 57ce99826..b05bc05cd 100644
--- a/test/execution-tests/3.0.1_projectReferences/tsconfig.json
+++ b/test/execution-tests/3.0.1_projectReferences/tsconfig.json
@@ -1,6 +1,7 @@
 {
   "files": [
-    "./src/app.ts"
+    "./src/app.ts",
+    "./test/app.tests.ts"
   ],
   "references": [
     { "path": "./lib" }
diff --git a/test/execution-tests/3.0.1_projectReferences/yarn.lock b/test/execution-tests/3.0.1_projectReferences/yarn.lock
index 2bf33ec6c..c83148e75 100644
--- a/test/execution-tests/3.0.1_projectReferences/yarn.lock
+++ b/test/execution-tests/3.0.1_projectReferences/yarn.lock
@@ -5,7 +5,9 @@
 "@types/jasmine@^2.5.35":
   version "2.8.5"
   resolved "https://registry.yarnpkg.com/@types/jasmine/-/jasmine-2.8.5.tgz#96e58872583fa80c7ea0dd29024b180d5e133678"
+  integrity sha512-mkrHFZTgOXkZhau36K628iKFkjbp11t/bHCkY4Mefu4R6McMg2FD9P3naBv/0Ygyn4sz8baColJp2gdmSekgiw==
 
 jasmine-core@^2.3.4:
   version "2.9.1"
   resolved "https://registry.yarnpkg.com/jasmine-core/-/jasmine-core-2.9.1.tgz#b6bbc1d8e65250d56f5888461705ebeeeb88f22f"
+  integrity sha1-trvB2OZSUNVvWIhGFwXr7uuI8i8=
diff --git a/test/execution-tests/allowTsInNodeModules/tsconfig.json b/test/execution-tests/allowTsInNodeModules/tsconfig.json
index 5d1fcc937..f1ef41bdc 100644
--- a/test/execution-tests/allowTsInNodeModules/tsconfig.json
+++ b/test/execution-tests/allowTsInNodeModules/tsconfig.json
@@ -3,9 +3,9 @@
     "noEmitOnError": true
   },
   "include": [
-    "./node_modules/whitelistedModule"
-  ],
-  "files": [
-    "./node_modules/whitelistedFiles/file.ts"
+    "./node_modules/whitelistedModule",
+    "./node_modules/whitelistedFiles",
+    "./src",
+    "./test"
   ]
 }
\ No newline at end of file
diff --git a/test/execution-tests/allowTsInNodeModules/yarn.lock b/test/execution-tests/allowTsInNodeModules/yarn.lock
index a8e06fe04..74f4532c9 100644
--- a/test/execution-tests/allowTsInNodeModules/yarn.lock
+++ b/test/execution-tests/allowTsInNodeModules/yarn.lock
@@ -5,10 +5,12 @@
 "@types/jasmine@^2.5.35":
   version "2.8.6"
   resolved "https://registry.yarnpkg.com/@types/jasmine/-/jasmine-2.8.6.tgz#14445b6a1613cf4e05dd61c3c3256d0e95c0421e"
+  integrity sha512-clg9raJTY0EOo5pVZKX3ZlMjlYzVU73L71q5OV1jhE2Uezb7oF94jh4CvwrW6wInquQAdhOxJz5VDF2TLUGmmA==
 
 jasmine-core@^2.3.4:
   version "2.99.1"
   resolved "https://registry.yarnpkg.com/jasmine-core/-/jasmine-core-2.99.1.tgz#e6400df1e6b56e130b61c4bcd093daa7f6e8ca15"
+  integrity sha1-5kAN8ea1bhMLYcS80JPap/boyhU=
 
 "whitelistedFiles@file:../../testPackages/whitelistedFiles":
   version "1.0.0"
diff --git a/test/execution-tests/optionsCaching/tsconfig.json b/test/execution-tests/optionsCaching/tsconfig.json
index e61308eb4..ea813c904 100644
--- a/test/execution-tests/optionsCaching/tsconfig.json
+++ b/test/execution-tests/optionsCaching/tsconfig.json
@@ -3,5 +3,8 @@
     "target": "esnext",
     "jsx": "react",
     "noEmitOnError": true
-  }
+  },
+  "include": [
+    "*"
+  ]
 }
diff --git a/test/execution-tests/run-tests.js b/test/execution-tests/run-tests.js
index 40daab4dd..ac6732b88 100644
--- a/test/execution-tests/run-tests.js
+++ b/test/execution-tests/run-tests.js
@@ -140,7 +140,7 @@ function runTests(testName) {
             console.log('running webpack compilation');
             var webpackPath = path.resolve(__dirname, '../../node_modules/webpack/bin/webpack.js');
             var program = debug ? 'node --inspect-brk=5858 ' + webpackPath : 'webpack';
-            execSync(webpackPath + ' --bail', { cwd: testPath, stdio: 'inherit' });
+            execSync(program + ' --bail', { cwd: testPath, stdio: 'inherit' });
             passingTests.push(testName);
         }
     }
diff --git a/yarn.lock b/yarn.lock
index 7a3a94b91..d8c6ffc16 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -1353,8 +1353,9 @@ class-utils@^0.3.5:
     static-extend "^0.1.1"
 
 clean-css@4.1.x:
-  version "4.1.9"
-  resolved "https://registry.yarnpkg.com/clean-css/-/clean-css-4.1.9.tgz#35cee8ae7687a49b98034f70de00c4edd3826301"
+  version "4.1.11"
+  resolved "https://registry.yarnpkg.com/clean-css/-/clean-css-4.1.11.tgz#2ecdf145aba38f54740f26cefd0ff3e03e125d6a"
+  integrity sha1-Ls3xRaujj1R0DybO/Q/z4D4SXWo=
   dependencies:
     source-map "0.5.x"
 
@@ -2941,7 +2942,7 @@ js-tokens@^4.0.0:
   resolved "https://registry.yarnpkg.com/js-tokens/-/js-tokens-4.0.0.tgz#19203fb59991df98e3a287050d4647cdeaf32499"
   integrity sha512-RdJUflcE3cUzKiMqQgsCu06FPu9UdIJO0beYbPhHN4k6apgJtifcoCtT9bcxOpYBtpD2kCM6Sbzg4CausW/PKQ==
 
-js-yaml@3.13.1, js-yaml@^3.13.0:
+js-yaml@3.13.1, js-yaml@^3.9.0:
   version "3.13.1"
   resolved "https://registry.yarnpkg.com/js-yaml/-/js-yaml-3.13.1.tgz#aff151b30bfdfa8e49e05da22e7415e9dfa37847"
   integrity sha512-YfbcO7jXDdyj0DGxYVSlSeQNHbD7XPWvrVWeVUujrQEoZzWJIRrCPoyk6kL6IAjAG2IolMK4T0hNUe0HOUs5Jw==
@@ -2949,10 +2950,10 @@ js-yaml@3.13.1, js-yaml@^3.13.0:
     argparse "^1.0.7"
     esprima "^4.0.0"
 
-js-yaml@^3.9.0:
-  version "3.12.0"
-  resolved "https://registry.yarnpkg.com/js-yaml/-/js-yaml-3.12.0.tgz#eaed656ec8344f10f527c6bfa1b6e2244de167d1"
-  integrity sha512-PIt2cnwmPfL4hKNwqeiuz4bKfnzHTBv6HyVgjahA6mPLwPDzjDWrplJBMjHUFxku/N3FlmrbyPclad+I+4mJ3A==
+js-yaml@^3.13.0:
+  version "3.13.1"
+  resolved "https://registry.yarnpkg.com/js-yaml/-/js-yaml-3.13.1.tgz#aff151b30bfdfa8e49e05da22e7415e9dfa37847"
+  integrity sha512-YfbcO7jXDdyj0DGxYVSlSeQNHbD7XPWvrVWeVUujrQEoZzWJIRrCPoyk6kL6IAjAG2IolMK4T0hNUe0HOUs5Jw==
   dependencies:
     argparse "^1.0.7"
     esprima "^4.0.0"